Legal Ethics Opinion No. 1367

  Confidences and Secrets - Fraud - Obligation to Third
  Parties: Propriety of Informing Third Party's
  Counsel and Government Agency of Client's
  Potential Misrepresentation.

    The following is a summary of the pertinent facts as stated
in your inquiry upon which the Committee will base its opinion.
An attorney represents a firm/client which exports materials
overseas under United States government programs which require
that the exported materials be made in this country. In 1984,
client exported certain materials overseas which were
subsequently returned in 1987, and initially held by United
States Customs for payment of duties imposed on items of foreign
origin. You indicate that the client advised the customs service
that the items were American-manufactured and, as a result, the
duty was thereupon waived.

  You have also advised that in late 1989, client contacted
attorney to represent him on a penalty imposed by the customs
service in the amount of $10,000 as a result of the shipping
agent having failed to file proper forms upon the re-entry of the
items into the United States. You indicate that the attorney then
advised the shipping agent that it would have to take care of the
problem caused by its failure to file the necessary forms.
Subsequently, counsel to the shipping agent sought to nullify or
reduce the proposed penalty on the grounds that the items were
manufactured in the United States which representation had been
made by the attorney's client. You also have stated that recently
the attorney met with United States government officials
regarding potential charges made against the client for allegedly
selling foreign-made items as American-made. The attorney learned
at that meeting that, according to the government, the items in
question, which are the subject of the penalty imposed on his
client, were not of American manufacture as the client had

  You wish to know whether, under the facts of your inquiry, the
attorney is under an obligation to the ship or the United States
customs service to alert them to the recent charges or
investigation made by other United States government officials
and that the representations made by the client may be incorrect.
Secondly, if the client continues to insist that the goods are
American-made and, if customs requires a sworn statement by the
client stating the same, you ask if the attorney may forward such
an affidavit by his client to the shipping agent's counsel
without advising them that, according to other government
sources, that information is incorrect.

  The appropriate and controlling disciplinary rules relative to
your inquiry are  DR:4-101(C) (3) and  DR:4-101(D) (1) and (2).
The rules provide that a lawyer may reveal information which
clearly establishes that his client has, in the course of the
representation, perpetrated upon a third party a fraud related to
the subject matter of the representation. (See  DR:4-101(C) (3))
Disciplinary Rule 4-101(D) (1) also provides that a lawyer shall
reveal the intention of his client, as stated by his client, to
commit a crime and the information necessary to prevent the
crime. The attorney will where feasible advise his client of
possible legal consequences, urge the client not to commit the
crime and advise the client that the attorney must reveal such
information unless thereupon abandoned. Furthermore, if the crime
involves perjury, the attorney must seek to withdraw. Likewise,
under  DR:4-101(D) (2), an attorney must reveal information which
clearly establishes that his client has, during the course of the
representation, perpetrated a fraud related to the subject matter
of the representation upon a tribunal. The attorney must first
request that his client advise the tribunal of the fraud. The
pertinent Rule indicates that information is clearly established
when the client acknowl  edges to the attorney that he has
perpetrated a fraud upon a tribunal. 

  The Committee has previously interpreted the limits of "clearly
established," in any Dh the term appears, to mean only when the
client has acknowledged or stated to his attorney that he/she
perpetrated a fraud. (See LE Op. 1347 The Committee believes the
application of this definition is necessary to permit consistency
since to "subscribe to a less stringent determination would
create the anomalous situation where the attorney would be
allowed to tell the third party of the fraud but, in the same
situation, the attorney would be proscribed from revealing the
same to the court." (See Doe v. Federal Grievance Committee, 847
F.2d 57, 62 (2d Cir. 1988))

  In addition, the Committee is of the view that an attorney's
obligation to preserve the confidences and secrets of his client
is paramount to the basic principles on which the attorney-client
relationship is established. The Committee has previously opined
that even information which may be public or known to third
parties may be construed as a "secret" if the client has
specifically requested that it be held inviolate or if the
attorney should know that disclosure would be embarrassing or
would be likely to be detrimental to the client. (See LE Op. 1147
LE Op. 1207 LE Op. 1349 Furthermore, the responsibility to
preserve a client's confidences and secrets survives beyond the
termination of the professional relationship or the demise of a
client. (See  EC:4-6, LE Op. 1207 LE Op. 1307 

  The Committee opines that, absent an actual statement or
acknowledgment by the client that the goods (which are the
subject of the penalty imposed by the United States Customs
Service, as well as the subject of an investigation by U.S.
government officials) are not of American manufacture, an
attorney may not assume that any criminal charges brought against
his client contrary to his client's statement present a clear
indication of fraudulent activity on the part of his client.
Therefore, it would be improper for the attorney to alert either
the shipping agent's counsel or the customs service of the
potential charges against his client for alleg-made items as
American manufactured. Likewise, if the attorney knows, by
statements made by the client, that his client will commit
perjury by executing a sworn affidavit that the items in question
are American-manufactured, the attorney must advise his client of
the legal consequences of such action and advise him that unless
thereupon abandoned, he will have to reveal the client's criminal
intention to the appropriate tribunal to which it is directed. In
addition, the attorney would have to seek to withdraw from the
representation. (See  DR:4-101(D) (1) and  DR:7-102(A) (3)
through (8))

  Committee Opinion
  July 24, 1990