[textbook]Traversing the Ethical Minefield Problems, Law, and Professional Responsibility by Susan R. Martyn (z-lib.org)(1) (1)

fraud, deceit, and dishonesty, 17 four more that prohibit counseling or assisting client
fraud, 18 and three others that grant lawyers discretion in carefully defined situations to
disclosure facts necessary to prevent some client frauds. 19
Lawyer Fraud and Dishonesty Lawyers can be disciplined if they make any false statement
of material fact to tribunals 20 or third persons 21 while representing clients, whether or not
the statement is relied on or causes harm. Lawyers also can be disciplined for any conduct
(while representing a client or not) “involving dishonesty, fraud, deceit or
misrepresentation.” 22 These rules also encompass criminal fraud. 23 Together, these
provisions include all intentional, reckless, and negligent misrepresentations. 24 Judge
Posner no doubt had these rules in mind when he referred Proud to the Illinois
Disciplinary Commission.
Client Fraud and Dishonesty Lawyers who refrain from fraud themselves nevertheless can
be disciplined for knowingly counseling or assisting a client’s fraudulent or criminal
conduct. 25 Model Rule 1.2(d) prohibits lawyers from counseling or assisting clients in
conduct the lawyer knows to be criminal or fraudulent. Model Rule 1.16 requires lawyers
to withdraw from representing clients when the “representation will result in violation of
the rules of professional conduct,” such as Model Rule 1.2(d), and allows withdrawal when
“the client persists in a course of action involving the lawyer’s services that the lawyer
reasonably believes is criminal or fraudulent.” Model Rules 3.3 and 4.1(b) further require
lawyers to disclose information where necessary to avoid knowingly assisting a criminal or
fraudulent act by a client on a tribunal or third person. 26
Lawyers have discretion under Model Rule 1.6(b)(2) and (3) to disclose facts necessary
to prevent assisting a substantial client fraud. Model Rule 1.13 further gives lawyers who
represent organizations discretion to disclose serious violations of law (including fraud) to
those outside the entity, but “only if and to the extent the lawyer reasonably believes
necessary to prevent substantial injury to the organization.” 27
A lawyer’s obligations under Model Rules 1.2(d), 1.13, 3.3, and 4.1 are triggered by
knowledge of the client’s conduct. Most courts do not require that the lawyer understand
that the client’s conduct constitutes a crime or fraud. 28 If the client refrains from or stops
the wrongful activity after the lawyer learns of it, the lawyer will not have assisted or
counseled it. However, if a client continues the conduct or expresses an intent to undertake
the activity, the lawyer will have to withdraw from or decline the representation to avoid
violating Rule 1.2(d).
The knowledge requirement raises the question whether a lawyer who suspects but does
not know of client wrongdoing should investigate further. Not investigating the facts may
seem to avoid the knowledge obligations found in these rules. But failing to inquire also
creates risks, such as later allegations of complicity (as in Cruze and Stratos) or incompetent
representation (as in Greycas). Further, not “knowing” can mean a lost opportunity for the
lawyer to counsel the client in some manner that would avoid a crime or a fraud, such as by
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