Discovering Unreported Income: Ethical Issues

This entry and the three to follow summarize an article titled, "Discovering Unreported Income" by Carlton R. Marcyan, published in the ABA Section to Family Law publication "Family Advocate"

Ethical Issues

The strict confidentiality that exists between an attorney and client is one of the primary traits that make the attorney-client relationship so unique. The ability of a client to be able to tell his or her attorney the "whole story" is imperative in enabling an attorney to represent his or client's interest to the fullest. It is important, however, for clients to understand that their attorney must also answer to the Rules of Professional Ethics.

Attorneys must walk a fine line under Model Rule 1.2 which provides, in part, that "A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent." At the same time, this same Rule also says, "...but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law."

Where Does This Issue Arise in Family Law?

These ethical issues may more quickly be associated with criminal law or tax law, for example. However,family law attorneys face similar ethical dilemmas regularly as a result of the full and complete financial disclosure requirements. During the disclosure process it is not uncommon to suspect that the other spouse is hiding or undervaluing assets, or perhaps that the attorney's own client is the one not fully disclosing all financial information.

This puts an attorney is a compromising situation. If an attorney discovers, for example, that her client is guilty of tax evasion, she must realize that, pursuant to the United States Code, she "...may be charged with conspiracy to impede collection of a federal tax as well as with a separate charge of impeding." So, what should an attorney do if she becomes aware that her client is engaging in fraudulent activity? Model Rule 1.6 provides that, with some exceptions, a lawyer "shall withdraw" if the representation will result in violation of the rules of professional conduct or other law.

What's an Attorney to do?

Marcyan advises in the article that, "At the beginning of each new case, it is good practice to advise your client that his or her disclosure to you of 'hidden' assets or income places you in an ethical dilemma. A client's incomplete financial disclosure, inaccurate interrogatory response, or deposition or trial testimony may not be ignored." In essence, an attorney would be wise to warn her client about the ethical constraints imposed by the Model Code before any ethical issues even have a chance of arising.