Legal Ethics and Managing the
Risks of Corporate
Representation
A Case Study: United States v.
Anderson
S. Craig Holden
Ober Kaler
1
Relevant Rules of Ethics
• “A lawyer shall not counsel a client to
engage, or assist a client in conduct that the
lawyer knows is criminal or fraudulent …”
– ABA Model Rule of Professional Conduct
1.2(d)
2
1
Relevant Rules of Ethics (cont’d)
• “…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.”
– ABA Model Rule of Professional Conduct
1.2(d)
3
Relevant Rules of Ethics (cont’d)
• A lawyer shall withdraw if:
– “the representation will result in violation of
the Rules of Professional Conduct or other law”
• A lawyer may withdraw if:
– “the client persists in a course of action
involving the lawyer’s services that the lawyer
reasonably believes is criminal or fraudulent…”
– ABA Model Rule of Professional Conduct 1.16
4
2
Relevant Rules of Ethics (cont’d)
• A lawyer may disclose information related to the
representation of a client if the lawyer reasonably
believes it necessary 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”
– “to establish a …..defense to a criminal charge or civil
claim against the lawyer…”
ABA Model Rule of Professional Conduct 1.6
5
United States v Anderson, et al
• Alleged criminal violations of
Medicare/Medicaid Anti-Kickback Statute
arising from relationship between Hospital
and two referring physicians with a large
nursing home practice.
– Conduct occurred prior to the effective date of
the Stark self-referral prohibitions
6
3
United States v Anderson, et al
• Alleged Unlawful Transactions
– Hospital “loan” of employee to physicians’
practice
– Alleged “sham” consulting agreement
– Hospital purchase of physicians’ laboratory
– Hospital line of credit to physicians
7
U.S. v Anderson (cont’d)
• Defendants
– Two Physicians
– Three Hospital Executives
– Two Attorneys
• Three unindicted co-conspirators
8
4
U.S. v. Anderson timeline
• 1985 Gerontology Directorship
Agreement/ Hospital employee placed in
practice
• 1986 Consulting Agreements with
physicians
• 1991 Baptist Hospital/Research Medical
Center merger due diligence
• 11/92 Investigation begins
9
U.S. v. Anderson Timeline
(cont’d)
•
•
•
•
•
•
3/93
4/93
11/93
3/94
6/94
7/98
Employee withdrawn from practice
New consulting agreement signed
Agreement terminated
New consulting agreement signed
Agreement terminated
Indictment
10
5
U.S. v Anderson (cont’d)
• Trial outcome
–
–
–
–
–
Directed verdict of acquittal for both attorneys
Both doctors convicted
One hospital executive convicted
One executive acquitted by jury
One executive convicted by jury, later acquitted by
Judge, conviction reinstated by Court of Appeals
• Co-conspirator references expunged
– U.S. v. Anderson, 55 F. Supp. 2d 1163 (D. Kan. 1999)
11
U.S. v. Anderson
Case Against the Attorneys
• Origins:
– Grand Jury Subpoenas to attorneys
– Litigation regarding the crime fraud exception
to the attorney client privilege
• In re: Grand Jury Subpoenas, Jane Roe and John
Doe Intervenor v.U.S., 144 F 3d 653
(1998)(granting ex parte motion of government)
– Production of attorney records pursuant to
subpoena
12
6
U.S. v. Anderson
Case Against the Attorneys
• Problematic attorney comments in due
diligence and other documents:
– “Absolutely essential that there be no
documentation of any intent to refer patients”
– A “clean up” deal
– Doctors’ motive in deal with other hospital was
to “sell old folks referrals”
– “They are scum”
13
U.S. v. Anderson
Case Against the Attorneys
• Tactical benefits to the government of
naming attorneys
– Prove knowledge and intent through use of
“privileged” communications
– Neutralize advice-of-counsel defense
– Drive a wedge between attorney and client
– Force withdrawal of attorney from defense
– Evidentiary benefit re admissibility of coconspirator statements
14
7
U.S. v Anderson
Case Against the Attorneys
• Government Theory of Attorney Liability
– Attorneys acted solely in the capacity of
attorneys
– Crafted “sham” agreements to “paper over” a
fraud
– Knew services not rendered & payments not at
fair market value
15
U.S. v Anderson
Case Against the Attorneys
• “Original Sin” doctrine
• Modification of existing problematic arrangement
• Arrangement originally presented with improper
intent
– Impact of Safe Harbor regulations
– Impact of Advisory Opinion process
16
8
U.S. v Anderson (cont’d)
• Directed Verdict of Acquittal for Attorneys
– “[T]he only reasonable inference a jury could
draw is that the lawyers, each in their own turn,
attempted to advise their clients to engage in
legal transactions and that [the lawyers] did not
prepare sham agreements to paper over a fraud,
but rather tried their best to prepare agreements
that would reflect…. legal transactions…The
state of the law was in flux and the lawyers
adapted their advice to it as it changed.”
17
U.S. v Anderson (cont’d)
• Court response to Government allegation of
Attorney knowledge that services were not
rendered
– “[T]he lawyers relied on their clients, were not
engaged to monitor the activities of the
consultants, and each time it came to their
attention that there was a potential compliance
problem, they urged their clients to make sure
that fair market value for real services was
18
being required.”
9
Some Recent Developments
• U.S. v. Sulzbach (SD FL)
– Falsification of reports under CIA
• U.S. ex rel. Drakeford v. Tuomey (D SC)
• U.S. v. Lauren Stevens (D. MD)
– Obstruction
– Falsification of documents
– False statements
19
Some Recent Developments
• U.S. ex rel. Fair Laboratory Practice
Associates v. Quest Diagnostics, 2011 WL
1330542 (April 5, 2011)(appeal pending)
• Suit by former general counsel of an acquired
subsidiary of defendant based on
confidential/privileged information dismissed due to
taint of ethical violations.
20
10
Some Do’s and Don’ts
• Do:
– Document the information received from your
client and your advice
• avoid loose language: “it’s a clean-up deal” “I don’t
look good in stripes”, etc.
– Advise your client of your legal analysis
including good faith defenses and their
likelihood of success
– Make clear the need to monitor compliance and
21
who will do the monitoring
Some Do’s and Don’ts
• Don’t
– Advise on the risk of detection/prosecution
– Be an Ostrich
– Create documents to obscure or conceal the true
nature of a transaction
– Counsel or assist in the concealment of
evidence
22
11