Lawyers: How not to go to jail When Civil and Criminal Matters Overlap.

Yesterday, I gave the annual ethics speech to the Dallas Bar Association Health Law Section on “how not to go to jail when criminal and civil laws overlap.” Which, in health law is a bit of an inside joke. (There is no time when criminal and civil cases aren’t overlapping.)

First, I am no expert in ethics. I never get the questions right, for example, when they publish an ethics problem in the Texas Bar Journal. What I am, is an expert in “healthcare fraud.” Which is a crime under 18 USC 1347. Or at least what health insurance payers think healthcare fraud might be.

“Fraud” in health law usually is sort of a one-way street, 18 USC 1347 doesn’t say that Medicare, and private health insurance companies don’t get to lie, cheat and steal from patients and providers with impunity. Just take a look at the very first section of the Medicare Statute in 1965, which was included by Congress in order to get the program passed over AMA objections:

42 U.S. Code § 1395 – Prohibition against any Federal interference

Nothing in this subchapter shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided . . . or compensation of any . . . person providing health services. (Pub. L. 89–97, title I, § 102(a) July 30, 1965, 79 Stat. 291.)

Today, I have healthcare fraud cases going on the west coast, the east coast, from Minnesota all the way down to San Antonio, and many points in between, because CMS did precisely what it promised it would not. Almost all of them are due to the allegation that the provider didn’t practice medicine consistent with CMS’s “supervision or control over the practice of medicine or the manner in which medical services were provided or compensated.” Most every commercial payer also follows CMS guidelines. Then, unleashes “Special Investigation Units” to go after anyone who gets out of line.

As a defense lawyer, I am generally more forgiving when somebody “screws the pooch.” And that’s what Congress did with Medicare (and commercial insurance followed suit.) Congress simply had no idea what it was getting itself into in 1965, when it promised all the “Who’s down in Whoville,” practically free healthcare, while leaving in place, an “eat what you kill” system for providers. (What could possibly go wrong?)

CMS and Commercial insurance today, certainly know they are lying to providers and patients. What they can’t seem to do, is admit their mistake. It is very easy to promise an entitlement, but God help them, if they try to take a benefit away or raise taxes or premiums to pay for it.

What we are left with is a system, Maggie Mahar describes in her great book, “Money Driven Medicine,” (2006) as a “war of all against all, where insurers cheat patients, doctors cheat insurance and everybody cheats the government.”

So, what is a lawyer supposed to do with all this “fraud” flying around?

The State Bar Rules, by my count, use the word “fraud” 66 times. While I can’t cover all the ways clients can get into trouble, I can cover some of the ways lawyers can get into trouble. Obviously, if a lawyer is a “participant” in the crime (that is “in on it”), then he is independently responsible for a crime. (See, Cohen, Michael, & “**** Star.”)

1.02(c) Scope and Objectives of Representation. A lawyer shall not assist or counsel a client to engage in conduct that the lawyer knows in criminal or fraudulent. A lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel and represent a client in connection with the making of a good faith effort to determine the validity, scope, meaning or application of the law.

1.02(d) When a lawyer has confidential information clearly establishing that a client is likely to commit a criminal or fraudulent act that is likely to result in substantial injury to the financial interests or property of another, the lawyer shall promptly make reasonable efforts under the circumstances to dissuade the client from committing the crime or fraud.

1.02 (e) When a lawyer has confidential information clearly establishing that the lawyer’s client has committed a criminal or fraudulent act in the commission of which the lawyer’s services have been used, the lawyer shall make reasonable efforts under the circumstances to persuade the client to take corrective action.

Comment 7: The fact that a client uses advice in a course of action that is criminal or fraudulent does not, of itself, make a lawyer a party to the course of action. However, a lawyer may not knowingly assist a client in criminal or fraudulent conduct. There is a critical distinction between presenting an analysis of legal aspects of questionable conduct and recommending the means by which a crime or fraud might be committed with impunity.

Comment 8. When the client’s course of action has already begun and is continuing, the lawyer’s responsibility is especially delicate. The lawyer may not reveal the client’s wrongdoing, except as permitted or required by Rule 1.05. However, the lawyer also must avoid furthering the client’s unlawful purpose, for example, by suggesting how it might be concealed. A lawyer may not continue assisting a client in conduct that the lawyer originally supposes is legally proper but then discovers is criminal or fraudulent. Withdrawal from the representation, therefore, may be required.

Comment 9: Paragraph (c) does not, however, preclude undertaking a criminal defense incident to a general retainer for legal services to a lawful enterprise.

Taken together, these rules mean two things: (1) that a lawyer may not “participate” in an ongoing crime, but may counsel a client on what is, and is not withing the bounds of the law. The fact the client uses the advice to them go break the law, does not in itself, make the lawyer a party to the crime. When a lawyer begins innocently, but then discovers the client is doing illegal things, then the lawyer has a duty to not assist the client in continuing. The lawyer shouldn’t blow the whistle on the client, but should take steps to advise the client to take corrective action. (2) When the crime has already happened, and the lawyer is hired to defend the client, the lawyer may provide a defense of a past crime.

Crime Fraud Exception. There is nevertheless, a “Delta” between a lawyer’s ethical duty and the attorney-client privilege. Even when a lawyer has done nothing wrong, his advice and representation may be subject to discovery in a subsequent legal proceeding. The message then being, watch what you say in emails. Jokes don’t translate well when blown up on a big courtroom screen.