This was kind of my thinking. Take my hypothetical. I might feel like I have the data to prove that my works is not faked, but if it comes to light that a detractor has been paid off, nobody will believe me.
Also, I feel that for a lawyer to act this way brings discredit to the profession (I think somebody mentioned this aspect up thread). It is one thing to advise a client, and so long as the advice isn’t illegal, that’s ok. Even to facilitate the payment, again assuming it isn’t illegal, on the request of the client is ok. But to take unilateral action to pay for the silence with personal funds on a matter of potential embarrassment to a client just seems to cross a line in my mind.
As a lawyer (not an ethics specialist, mind you) this is the key issue that sticks out to me about this. I’m a professional, and that means that money comes in for services out. I do insurance defense, and at least on a couple of occasions I’ve taken cases to trial when I didn’t really want to because the parties were less than $1,000 apart in settlement negotiations. If the carrier had asked me if I’d be willing to kick in that money out of my own personal funds to spare myself a trial I didn’t feel good about, I would laugh myself to death on the spot. The client funds settlements, not me.
As such, a big ethics concern I’d see here is what the lawyer feels like they are going to be getting in the future that’s worth the initial outlay.
Follow up question, unworthy of its own thread, how do ethics investigations happen? Does that have to be a complaint made or can the professional board to which a lawyer belongs simply decide to review the matter? If a complaint must happen first, must it be from the client or can a watchdog group make a complaint?
Again, trying to avoid the real-world incident here. I’m just curious about how it all works.
In Ontario at least, and I assume elsewhere, the system is largely complaint-driven, but the Law Society can, and does, initiate its own investigations.
The complaint can come from anywhere - mostly of course it is clients complaining about their own lawyers, but it can be the other side as well, or even unrelated parties.
Not all complaints will result in investigations, and not all investigations will result in disciplinary hearings.
Pretty sure this is a business expense, so the lawyer could deduct it from his taxes. Even if he doesn’t receive reimbursement for this specific expense, it’s part of the cost of doing business.
The recipient would be required to report this on their taxes and pay what’s due on it. Though I do wonder about the mechanism of this - what actually informs the IRS that this payment was made? It’s a big chunk of money, is there a special form you have to fill out? It’s way over 10k as well, so would the bank auto-report it?
For USA taxation to be more than the honor system, obviously the IRS would have to be informed somehow.
Taxable lawsuit settlements are generally reported on Form 1099-MISC. Settlements of wage disputes would be reported on Form W-2. Similarly, if the dispute were over some other type of payment that had its own specific form, that form would be used.
Banks do not “auto-report” deposits or withdrawals even if they are way over 10k. However, if the deposit or withdrawal is in the form of cash (like brief cases or bags full of greenbacks or coins), they must fill out a Currency Transaction Report for amounts over $10k. If they have reason to believe some sort of illegal activity is occurring, they must fill out a Suspicious Activity Report. Non-suspicious transactions in the form of checks or electronic transfers are not reported.
Fun fact: The new tax bill eliminated the deduction for lawyer’s fees for personal settlements (except in civil rights cases). So, if in 2018 or later, if a plaintiff receives a settlement of $130,000 and the plaintiff’s lawyer gets $43,000 of the settlement, the plaintiff still has to pay taxes on the full $130,000.
That leaves a sour taste in my mouth. As it is right now, if a corporation or wealthy person wrongs you, yeah you can sue. But if you’re out $100k, and the lawyer is a 30% contingency, and let’s say you win for 100k. Now you only get ~60k even though you won?!
That sounds about right. In Trumps America, only the wealthy can sue.
The Netherlands saw a similar developement, though. A right-wing secretary of state made pro-deo legal assistance much harder to get for poor people, and admitted later to doing taht on purpose.
It’s really hard to discuss this situation without relying on the real world events. Facts matter in legal analysis. If you are making up a hypothetical, you need to make up enough facts for us to fairly assess the situation.
If we try to rely on the real facts but keep bias and prejudice out of it, we still have to rely on a bunch of supposition. Still, things we can reasonably suppose or infer make it look like the lawyer may have breached his ethical obligations one way or another.
In this case, the lawyer would like us to believe that he made the payment from his own pocket, with no reimbursement from his client and without his client’s knowledge. (This isn’t quite what he said and I’ll return to what he said later). Accepting this as true, this is likely a problem for the lawyer. I believe the attorney in question is admitted to the bar in New York. Accordingly, citations below are to the New York Rules of Professional Conduct. Among the provisions he might have broken are:
Rule 1.2(a): Lawyer must consult with his client about means to pursue the client’s objectives. It seems the lawyer did not. Lawyer could argue that he was pursuing his own interests and objectives rather than those of his client and thus didn’t violate this rule.
Rule 1.4(a)(1)(i): Lawyer must promptly inform the client of any decision that requires the client’s informed consent. If the agreement between the lawyer and the counterparty called for the lawyer’s client’s silence (that is if it tried to bind his client), it required the client’s informed consent. If the client didn’t know about the agreement, this was violated. If the agreement was solely binding between the lawyer and the counterparty, this would not have been violated.
Rule 1.4(a)(1)(2) and (3): The lawyer must reasonably consult with the client about the means by which the client’s objectives are to be accomplished and to keep the client informed about the status of the matter. If the lawyer is off on a frolic pursuing his client’s goals without consulting with the client, the lawyer has violated this. If the lawyer is pursuing his own objectives, no violation.
Rule 1.4(b): The lawyer must explain the matter well enough to allow the client to make informed decisions. Again, if the lawyer is pursuing only his own objectives, there is no violation but there is a clear violation if the lawyer was supposed to be representing his client’s interests but didn’t keep him informed.
Rule 1.7(a)(2): The lawyer can’t represent the client if there is a “significant risk that the lawyer’s professional judgment on behalf of the client will be adversely affected by the lawyer’s own financial, business, property or other personal interests.” If the lawyer is pursuing his own interests as we surmise he will say when we discussed Rule 1.2(a), we might conclude that his dealings with the counterparty might very well be adverse to those of his client. His client might not want his lawyer, a person that publicly represents him on many issues, to make a shady payment to the counterparty to hide the purported affair. The client can waive this conflict under Rule 1.7(b)(3) but only if the client gives informed consent. We are supposed to believe the client was not informed and thus that informed consent is impossible. Thus, there’s a good chance this was violated because the likely conduct created the risk of conflict of interest. However, most cases of conflicts of interest involve the client raising them and not third parties. If the lawyer’s client doesn’t care about the conflict, it’s unlikely the bar will.
Rule 1.8(f): The lawyer can’t accept anything of value related to the lawyer’s representation of the client, from one other than the client unless: (1) the client gives informed consent; (2) there is no interference with the lawyer’s independent professional judgment or with the client-lawyer relationship; and (3) the client’s confidential information is protected. If the lawyer in his separate dealings with the counterparty got something of value (i.e., her promise not to disclose the affair) in a matter related to the lawyer’s representation of the client (which seems to include covering his client’s ass), then he needed his client’s informed consent. Under our assumptions here, the lawyer seems to have lacked that consent.
Rule 1.8(h)(i): The lawyer can’t acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for the client. I don’t think this was violated because there doesn’t seem to be any litigation between the counterparty and the lawyer’s client but it’s dicey because if the counterparty discloses the affair that his client purports is false, both the lawyer and his client have potential grounds to sue for the disclosure.
Rule 8.4(b): The lawyer can’t engage in illegal conduct that adversely reflects on his honesty, trustworthiness, or fitness as a lawyer. If the lawyer made this payment to benefit the campaign, to avoid contribution limits, and to avoid the disclosure of the payment from campaign finance disclosures, he broke the law and this rule. If he made the payment for permissible reasons, such as to preserve his client’s marriage, then I don’t see how it was a violation of the law or this rule.
Rule 8.4(c): The lawyer can’t engage in conduct involving dishonesty, fraud, deceit, or misrepresentation. For example, the lawyer could not claim to the counterparty that he was representing his client when in fact he was only representing his own interests. No idea if this happened.
There are a lot of holes in this statement, including that the Trump Organization isn’t really a thing. There is no entity registered as the “Trump Organization” in any state. It means whatever the person saying it wants it to mean at the time they say it. It also refers to the “Trump campaign.” If you define the “Trump campaign” to include all the people and entities working with the campaign to elect Trump, it leaves out one key person - Donald Trump. So this leaves open the possibility that Donald Trump new about and authorized the payment and reimbursed the lawyer after. The second part of the statement is an opinion of law, not a statement of fact.
So, accepting that the lawyer’s facts are true but disregarding his opinion, it suggests that the lawyer advanced his money to facilitate his client’s instructions with his client’s knowledge and consent. This could imply other violations of his obligations, generally not overlapping with those above:
Rule 1.2(d): The lawyer can’t counsel his client to break the law or assist his client to break the law. If his client’s motivations were to protect his campaign from the harm of public disclosure, this could be deemed a campaign expenditure and the lawyer laundering the undisclosed expenditure through the shell companies is bad. If his client’s motivation was to protect his marriage, then it probably wasn’t a campaign finance violation. Unless their true motivations were revealed in negotiations with the counterparty, only the lawyer and the client are likely to ever know their real motivation.
Rule 1.8(e): The lawyer can’t advance or guarantee financial assistance to the client in contemplated or pending litigation, subject to certain exceptions not relevant here. The lawyer can’t use his personal funds to pay the counterparty and get reimbursed by his client later. This seems like a possible violation with some potential debate around whether the payment was in connection with “contemplated or pending litigation.”
Rule 3.4(a)(5): A lawyer can’t participate in the creation of false evidence. For example, the lawyer could not get an affidavit from the counterparty saying that she did not have an affair with the client if the lawyer knows from his client that he did in fact have that affair. No idea if that’s what happened here.
Relevant ABA Journal article. The issue here is that we don’t actually know whether Cohen paid off Stormy Daniels with his own money. All he’s said is that it wasn’t “Trump Organization” or “Trump campaign” money.
So the actual case is not necessarily on all fours with the OP’s question. That said, there’s no indication that the payment was made in connection with any possible litigation. Daniels wasn’t suing Trump, and he wasn’t suing her. Nor was anyone suing either of them (with regard to this specific issue; obviously lots of people are or will sue Trump).
I think Trump could pretty plausibly argue that any benefit to his campaign was incidental to the benefit to his reputation generally. It would be like saying that Roy Moore’s defense attorneys in the civil case filed by one of his underage victims were a “campaign expense.”
The confidentiality agreement explicitly said it was in settlement of tort claims and to avoid the expense of litigation. It’s hard for Trump’s attorney to argue that he didn’t advance money to his client in contemplation of pending litigation. This seems like a Rule 1.8(e) violation.
