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When Things Go Wrong:

When Things Go Wrong:. SELECTED ABA MODEL RULES OF PROFESSIONAL CONDUCT AND COMMENTS. The Ethics of Internal Investigations. By: Cecil E. Morris, Jr. Pendleton, Wilson, Hennessey & Crow, P.C. 1875 Lawrence St., 10th Flr . Denver, Colorado 80202-1898

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When Things Go Wrong:

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  1. When Things Go Wrong: SELECTED ABA MODEL RULES OF PROFESSIONAL CONDUCT AND COMMENTS The Ethics of Internal Investigations By: Cecil E. Morris, Jr. Pendleton, Wilson, Hennessey & Crow, P.C. 1875 Lawrence St., 10th Flr. Denver, Colorado 80202-1898 Tel: 303-839-1204 • Fax: 303-831-0786 cmorris@penberg.com • www.penberg.com

  2. When Things Go Wrong:The Ethics of Internal Investigations Rule 1.6: Client-Lawyer Relationship Confidentiality of Information (a) A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b).

  3. When Things Go Wrong:The Ethics of Internal Investigations (b) A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary: …(2) to prevent the client from committing a crime or fraud that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer's services; (3) to prevent, mitigate or rectify substantial injury to the financial interests or property of another that is reasonably certain to result or has resulted from the client's commission of a crime or fraud in furtherance of which the client has used the lawyer's services;… Rule 1.6: Client-Lawyer Relationship Confidentiality of Information

  4. When Things Go Wrong:The Ethics of Internal Investigations Rule 1.7: Client-Lawyer Relationship Conflict of Interest: Current Clients (a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if: (1) the representation of one client will be directly adverse to another client; or (2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.

  5. When Things Go Wrong:The Ethics of Internal Investigations Rule 1.7: Client-Lawyer Relationship Conflict of Interest: Current Clients (b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if: (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and (4) each affected client gives informed consent, confirmed in writing.

  6. When Things Go Wrong:The Ethics of Internal Investigations Rule 1.7: Client-Lawyer Relationship Conflict of Interest: Current Clients -- Comment General Principles [1] Loyalty and independent judgment are essential elements in the lawyer's relationship to a client. Concurrent conflicts of interest can arise from the lawyer's responsibilities to another client, a former client or a third person or from the lawyer's own interests. For specific Rules regarding certain concurrent conflicts of interest, see Rule 1.8. For former client conflicts of interest, see Rule 1.9. For conflicts of interest involving prospective clients, see Rule 1.18. For definitions of "informed consent" and "confirmed in writing," see Rule 1.0(e) and (b).

  7. When Things Go Wrong:The Ethics of Internal Investigations Rule 1.7: Client-Lawyer Relationship Conflict of Interest: Current Clients -- Comment General Principles [2] Resolution of a conflict of interest problem under this Rule requires the lawyer to: 1) clearly identify the client or clients; 2) determine whether a conflict of interest exists; 3) decide whether the representation may be undertaken despite the existence of a conflict, i.e., whether the conflict is consentable; and 4) if so, consult with the clients affected under paragraph (a) and obtain their informed consent, confirmed in writing. The clients affected under paragraph (a) include both of the clients referred to in paragraph (a)(1) and the one or more clients whose representa-tionmight be materially limited under paragraph (a)(2).

  8. When Things Go Wrong:The Ethics of Internal Investigations Rule 1.7: Client-Lawyer Relationship Conflict of Interest: Current Clients -- Comment Organizational Clients [34] A lawyer who represents a corporation or other organization does not, by virtue of that representation, necessarily represent any constituent or affiliated organization, such as a parent or subsidiary. See Rule 1.13(a). Thus, the lawyer for an organization is not barred from accepting representation adverse to an affiliate in an unrelated matter, unless the circumstances are such that the affiliate should also be considered a client of the lawyer, there is an understanding between the lawyer and the organizational client that the lawyer will avoid representation adverse to the client's affiliates, or the lawyer's obligations to either the organizational client or the new client are likely to limit materially the lawyer's representation of the other client.

  9. When Things Go Wrong:The Ethics of Internal Investigations Rule 1.13: Client-Lawyer Relationship Organization as Client (a) A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents. (b) If a lawyer for an organization knows that an officer, employee or other person associated with the organization is engaged in action, intends to act or refuses to act in a matter related to the representation that is a violation of a legal obligation to the organization, or a violation of law that reasonably might be imputed to the organization, and that is likely to result in substantial injury to the organization, then the lawyer shall proceed as is reasonably necessary in the best interest of the organization. Unless the lawyer reasonably believes that it is not necessary in the best interest of the organization to do so, the lawyer shall refer the matter to higher authority in the

  10. When Things Go Wrong:The Ethics of Internal Investigations Rule 1.13: Client-Lawyer Relationship Organization as Client (b)(cont’d.)organization, including, if warranted by the circumstances to the highest authority that can act on behalf of the organization as determined by applicable law. (c) Except as provided in paragraph (d), if (1) despite the lawyer's efforts in accordance with paragraph (b) the highest authority that can act on behalf of the organization insists upon or fails to address in a timely and appropriate manner an action, or a refusal to act, that is clearly a violation of law, and (2) the lawyer reasonably believes that the violation is reasonably certain to result in substantial injury to the organization,

  11. When Things Go Wrong:The Ethics of Internal Investigations Rule 1.13: Client-Lawyer Relationship Organization as Client (cont’d.)then the lawyer may reveal information relating to the representation whether or not Rule 1.6 permits such disclosure, but only if and to the extent the lawyer reasonably believes necessary to prevent substantial injury to the organization. (d) Paragraph (c) shall not apply with respect to information relating to a lawyer's representation of an organization to investigate an alleged violation of law, or to defend the organization or an officer, employee or other constituent associated with the organization against a claim arising out of an alleged violation of law.

  12. When Things Go Wrong:The Ethics of Internal Investigations Rule 1.13: Client-Lawyer Relationship Organization as Client (e) A lawyer who reasonably believes that he or she has been discharged because of the lawyer's actions taken pursuant to paragraphs (b) or (c), or who withdraws under circumstances that require or permit the lawyer to take action under either of those paragraphs, shall proceed as the lawyer reasonably believes necessary to assure that the organization's highest authority is informed of the lawyer's discharge or withdrawal.

  13. When Things Go Wrong:The Ethics of Internal Investigations Rule 1.13: Client-Lawyer Relationship Organization as Client -- Comment The Entity as the Client [3] When constituents of the organization make decisions for it, the decisions ordinarily must be accepted by the lawyer even if their utility or prudence is doubtful. Decisions concerning policy and operations, including ones entailing serious risk, are not as such in the lawyer's province. Paragraph (b) makes clear, however, that when the lawyer knows that the organization is likely to be substantially injured by action of an officer or other constituent that violates a legal obligation to the organization or is in violation of law that might be imputed to the organization, the lawyer must proceed as is reasonably necessary in the best interest of the organization. As defined in Rule1.0(f), knowledge can be inferred from circumstances, and a lawyer cannot ignore the obvious.

  14. When Things Go Wrong:The Ethics of Internal Investigations Rule 1.13: Client-Lawyer Relationship Organization as Client -- Comment The Entity as the Client [4] In determining how to proceed under paragraph (b), the lawyer should give due consideration to the seriousness of the violation and its consequences, the responsibility in the organization and the apparent motivation of the person involved, the policies of the organization concerning such matters, and any other relevant considerations. Ordinarily, referral to a higher authority would be necessary. In some circumstances, however, it may be appropriate for the lawyer to ask the constituent to reconsider the matter; for example, if the circumstances involve a constituent's innocent misunderstanding of law and subsequent acceptance of the lawyer's advice, the lawyer may reasonably conclude that the best interest of the organization does not require that the matter be referred to higher authority. If a constituent persists in conduct contrary to the lawyer's advice, it will be necessary for the lawyer to take steps to have the matter reviewed by a higher authority in the organization. If the matter is of sufficient seriousness and importance or urgency to the

  15. When Things Go Wrong:The Ethics of Internal Investigations Rule 1.13: Client-Lawyer Relationship Organization as Client -- Comment The Entity as the Client organization, referral to higher authority in the organization may be necessary even if the lawyer has not communicated with the constituent. Any measures taken should, to the extent practicable, minimize the risk of revealing information relating to the representation to persons outside the organization. Even in circumstances where a lawyer is not obligated by Rule 1.13 to proceed, a lawyer may bring to the attention of an organizational client, including its highest authority, matters that the lawyer reasonably believes to be of sufficient importance to warrant doing so in the best interest of the organization.

  16. When Things Go Wrong:The Ethics of Internal Investigations Rule 1.13: Client-Lawyer Relationship Organization as Client -- Comment The Entity as the Client [5] Paragraph (b) also makes clear that when it is reasonably necessary to enable the organization to address the matter in a timely and appropriate manner, the lawyer must refer the matter to higher authority, including, if warranted by the circumstances, the highest authority that can act on behalf of the organization under applicable law. The organization's highest authority to whom a matter may be referred ordinarily will be the board of directors or similar governing body. However, applicable law may prescribe that under certain conditions the highest authority reposes elsewhere, for example, in the independent directors of a corporation.

  17. When Things Go Wrong:The Ethics of Internal Investigations Rule 4.1: Transactions With Persons Other Than Clients Truthfulness in Statements to Others In the course of representing a client a lawyer shall not knowingly: (a) make a false statement of material fact or law to a third person; or (b) fail to disclose a material fact to a third person when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule 1.6.

  18. When Things Go Wrong:The Ethics of Internal Investigations Rule 4.3: Transactions With Persons Other Than Clients Dealing With Unrepresented Person In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer’s role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding. The lawyer shall not give legal advice to an unrepresented person, other than the advice to secure counsel, if the lawyer knows or reasonably should know that the interests of such a person are or have a reasonable possibility of being in conflict with the interests of the client.

  19. When Things Go Wrong:The Ethics of Internal Investigations Rule 4.3: Transactions With Persons Other Than Clients Dealing With Unrepresented Person--Comment [1] An unrepresented person, particularly one not experienced in dealing with legal matters, might assume that a lawyer is disinterested in loyalties or is a disinterested authority on the law even when the lawyer represents a client. In order to avoid a misunderstanding, a lawyer will typically need to identify the lawyer’s client and, where necessary, explain that the client has interests opposed to those of the unrepre-sented person. For misunder-standings that sometimes arise when a lawyer for an organization deals with an unrepresented constituent, see Rule 1.13(f).

  20. When Things Go Wrong:The Ethics of Internal Investigations Rule 4.3: Transactions With Persons Other Than Clients Dealing With Unrepresented Person--Comment [2] The Rule distinguishes between situations involving unrepresented persons whose interests may be adverse to those of the lawyer’s client and those in which the person’s interests are not in conflict with the client’s. In the former situation, the possibility that the lawyer will compromise the unrepresented person’s interests is so great that the Rule prohibits the giving of any advice, apart from the advice to obtain counsel. Whether a lawyer is giving impermissible advice may depend on the experience and sophistication of the unrepresented person, as well as the setting in which the behavior and comments occur. This Rule does not prohibit a lawyer from negotiating the terms of a transaction or settling a dispute with an unrepresented person. So long as the lawyer has explained that the lawyer represents an adverse party and is not representing the person, the lawyer may inform the person of the terms on which the lawyer's client will enter into an agreement or settle a matter, prepare documents that require the person's signature and explain the lawyer's own view of the meaning of the document or the lawyer's view of the underlying legal obligations.

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