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

out of Lewis’s office, his legs heavy and wooden, his hands clammy, his forehead beaded
with sweat, and his psyche a battlefield of conflicting emotions — remorse, anger, regret,
dismay. How difficult it was to be a lawyer, an ethical lawyer, the conscientious lawyer he
always wanted to be.
Problem
7-8. What may (must) Martyn & Fox do if at a celebration dinner the night before the
initial public offering (IPO), the CEO tells us, “Sure glad we didn’t have to disclose that
letter threatening a patent infringement suit we got yesterday”? Or the CFO tells us, “I sure
am glad the auditors didn’t insist we footnote the $65 million in off-balance-sheet
financing we arranged. How clever!”? May we withdraw? Will Client have a claim against
us if we do? What if we learn these things a week after the IPO?
2. Privilege and Work Product: Client Crime or Fraud Model Rules 1.6(b)(6)
RLGL §§ 82, 93
United States v. Chen
99 F.3d 1495 (9th Cir. 1996), cert. denied, 520 U.S. 1167 (1997)
KLEINFELD, Circuit Judge:
This case deals with the scope of the crime-fraud exception to the attorney-client
privilege, where the attorney is innocent of any wrongdoing or guilty knowledge.
Mr. Chen and his wife own Sunrider Corporation and operate TF Chen Products, Inc.,
a subsidiary of Sunrider. The companies manufacture health food and skin care products
and import from Taiwan, Hong Kong, Japan, and other countries. The importation tariffs
the companies pay depend on the price they declare they paid for the goods.
Undervaluation may result in administrative, civil, and criminal penalties. A statutory
procedure allows an importer to mitigate or avoid penalties by filing a disclosure statement
before the Customs Service learns of the undervaluation independently. See U.S.C.
§1592(c)(4).
Of course an importer also pays taxes on profits. The higher the cost of goods sold,
then, other things being equal, the lower the level of income taxes. Thus, an importer saves
money on tariffs to the extent the goods are cheap, but pays more in income tax.
Conversely, the company saves money on taxes, but pays higher tariffs, to the extent its cost
of goods is higher.
The Customs duties on the higher values are much less than the additional taxes which
would be due based on the true values. Thus an importer can come out ahead by
overpaying tariffs and underpaying income taxes, by overstating the cost of the goods
imported.
Mr. and Mrs. Chen and Sunrider were indicted for conspiracy, tax evasion, and other
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