By Samson Habte, Bloomberg BNA
A prominent attorney to whistle-blowers was admonished by a Washington disciplinary panel for helping a fired General Electric in-house attorney leak damaging information about GE to law enforcement officials and journalists.
The admonition — issued Aug. 30 by the District of Columbia Board of Professional Responsibility and directed at against plaintiffs’ lawyer Lynne Bernabei — could bring an end to a trio of consolidated discipline cases that has drawn the ire of the D.C. whistle-blower bar.
The proceedings arose out of Bernabei’s representation of Adriana Koeck, who was also a respondent in this case. The ethics charges against Bernabei, Koeck, and a third lawyer—Notre Dame Law Professor G. Robert Blakey—were tied to events that occurred after GE fired Koeck in 2006.
Koeck downloaded confidential GE documents that she used to support a whistle-blower retaliation claim against the company under the Sarbanes-Oxley Act (SOX). The documents purportedly showed that GE had engaged in tax fraud and fired Koeck for raising internal concerns about that activity.
Bernabei and Blakey allegedly advised Koeck to leak the GE documents to the New York Times and Washington Post as part of a “press strategy” during the whistle-blower litigation. Koeck also leaked those documents to the Securities and Exchange Commission, to federal prosecutors, and to Brazilian law enforcement.
The Office of Disciplinary Counsel brought charges against all three lawyers in 2013. The complaint accused Koeck of breaching her duty of confidentiality to GE, and it alleged that Bernabei and Blakey knowingly assisted those violations.
The ODC also accused Bernabei of engaging in conduct prejudicial to the administration of justice, in violation of D.C. Rule of Professional Conduct 8.4(d), by threatening to disclose the internal GE documents “to the press” if GE “refused to engage in mediation.”
The board found that Koeck breached her duty of confidentiality and that Bernabei assisted her in doing so. (The board did not address the charges against Blakey because he accepted an informal admonition in 2015).
The board did not, however, sustain the Rule 8.4(d) charge against Bernabei.
The District of Columbia Court of Appeals can review decisions from the BPR. But that will depend on whether the ODC pursues an appeal, as Bernabei indicated that that she would accept an admonition and Koeck did not participate in the BPR proceedings.
The ODC’s chief, Disciplinary Counsel Hamilton P. Fox III, told Bloomberg BNA that he has not yet determined whether to appeal.
Whistle-Blower Lawyers Under Attack?
Tom Devine, Legal Director of the Government Accountability Project, said the ODC’s decision to pursue disciplinary charges against Bernabei and Koeck was “an outrageous abuse of power by a rogue [bar] prosecutor” who is “asserting the authority to trump”
statutory protections in the Sarbanes-Oxley Act.
Devine told Bloomberg BNA that by bringing these cases, the ODC was also helping the corporate defense bar “engag[e] in an aggressive attack on whistle-blower rights lawyers.”
“It’s almost as if there isn’t just retaliation against whistle-blowers but against lawyers who represent them,” Devine said. “Corporations have been claiming that whenever whistle-blowers present evidence of corporate fraud, that evidence is stolen property that belonged to the company, and the lawyers were co-conspirators in this theft of corporate property,” Devine said.
“When I go to CLE programs, there are corporate employment lawyers who are warning the whistle-blower lawyers, saying, ‘We’re going to hold you accountable for helping people steal our client’s property,’” Devine said.
But in an interview with Bloomberg BNA, Fox said these disciplinary cases were brought to vindicate the importance of the ethics rules protecting client confidentiality.
“It’s fundamental to the operation of the attorney-client relationship that clients be assured their communications with their lawyers will be kept confidential,” Fox said.
“Clients can’t get good advice from their lawyers unless they know they can communicate with [them] in confidence,” Fox said. “And if they think their lawyer is going to go to the authorities and report them, they’re not going to communicate the facts they need to communicate, and they’re not going to get the kind of advice they need.”
SOX vs. Ethics Rules
The Government Accountability Project and the National Employment Lawyers Association filed an amicus brief on behalf of Koeck and Bernabei.
That brief argued that Sarbanes-Oxley protected the disclosures of GE documents that triggered these ethics complaints—and that any “conflicting state law,” including the D.C. Rules of Professional Conduct, are preempted by the federal law to the extent that they conflict with it.
“Congress unanimously legislated that attorneys not only have the right but the duty to blow the whistle on corporate fraud that could threaten shareholders’ investments,” Devine told Bloomberg BNA.
“That is the law of the land,” Devine added. “My question to Mr. Fox is why does he think that as a disciplinary counsel he can trump Congress on the rules of the game for attorney whistle-blowing?”
But Fox told Bloomberg BNA that the preemption issue was “a red herring.”
“We didn’t argue [that there was no] preemption,” Fox said.
“There’s no case that has come down and said there is preemption, but I’m confident that if a court is ever faced with the issue, they will find preemption.”
“But that’s a red herring,” Fox added. “Because the issue is not whether there’s preemption—it’s whether these communications fell within the narrow exceptions that Sarbanes-Oxley creates to allow [whistle-blower] disclosures.”
And the answer to that question is “no,” Fox said.
“Sarbanes-Oxley provides that certain disclosures may be made under certain circumstances,” Fox said. But the law’s whistle-blower protection provisions are “narrow” and don’t allow “universal disclosures.”
“They don’t allow [whistle-blowers] to make disclosures to the New York Times,” Fox said. “They don’t allow them to make disclosures to the Department of Justice. They don’t allow them to make disclosures to the government of Brazil.”
In any case, the record doesn’t support the notion that Koeck was engaged in bona fide whistle-blowing, Fox said.
“This was a person who was being fired for incompetence,” Fox said. “And in order to preserve her job, she said they’re firing me because I’m a whistle-blower.”
Fox said the board’s decision also “kind of skates over” an argument his office made in its briefs: that Sarbanes-Oxley and the D.C. Rules of Professional Conduct require in-house lawyers to report their employers’ violations “up the internal chain of command” before going to outside authorities.
“Assume for the moment [Koeck] had legitimate information that GE employees were engaged in some kind of serious misconduct,” Fox said. “Before she went to the SEC or otherwise blew the whistle, what I think she’s required to do is to go up the ladder—to go to the highest level of the corporation, which is the board of directors—and give the client the opportunity to fix the problem before you disclose the client’s confidences and secrets.”
That “reporting up” procedure finds support in both Sarbanes-Oxley and variants of ABA Model Rule 1.13, Fox said.
“And it is a way of harmonizing—to some extent, not completely—the conflicting goals of keeping client confidences and secrets while at the same time, under very extraordinary circumstances, blowing the whistle on the client in the limited [circumstances] you’re allowed to do so,” Fox said.
The ODC also charged Bernabei with engaging in conduct prejudicial to the administration of justice, in violation of Rule 8.4(d), when she allegedly tried to use GE’s confidential information to coerce the company to settle Koeck’s retaliation suit.
That charge was based on a statement Bernabei made to the lawyer representing GE in the retaliation case, which was an administrative proceeding before the Department of Labor.
According to the board, Bernabei told that GE lawyer “that she had ‘marching orders’ from her client to go to the press if GE did not agree to mediation.”
The ODC said a “smaller defendant might succumb” if an “opposing counsel threatened to go public with embarrassing or detrimental attorney-client secrets,” and that the remark thus threatened to have an “adverse effect on the judicial process.”
The board was not convinced. “Ms. Bernabei never explicitly threatened to expose GE’s confidences, and the record indicates that her statement was literally true: If GE did not mediate, Ms. Koeck and Mr. Blakey intended to go to the press,” the board said.
The board said that although statements “such as that made by Ms. Bernabei do nothing to advance the legitimate interests of a client,” they do not rise to a violation of Rule 8.4(d).
Devine said that although he “wasn’t a fly on the wall” when Bernabei made the purportedly objectionable “threat,” the notion that her statement prejudiced the administration of justice was absurd.
“Lynne is a feisty, aggressive lawyer who is frequently in the professional equivalent of fisticuffs with opposing counsel,” said Devine. “But if that were grounds for disciplining an attorney, the professional landscape would be worse than after a black plague.”
But Fox said Bernabei’s comment had to be assessed in light of the circumstances.
“GE was winning the administrative case that Bernabei had brought,” Fox said, nothing that Koeck’s whistle-blower claim had been already been dismissed as untimely and hinged on an uphill appeal of that statute of limitations ruling.
“At that point GE had no incentive whatsoever to mediate or try to settle the case,” Fox said. “So faced with a losing hand, they pull out the threat to go to the press. And this threat to go to the press is on behalf of a former GE lawyer who knows GE’s confidences and secrets. So what I saw it as was a way of disrupting the normal litigation process to try to blackmail GE into entering settlement discussions.”
“It was very unfair to raise the specter of disclosing GE’s client confidences and secrets in order to try to coerce GE into entering settlement discussions in a case it was winning,” he said.
Harris, Wiltshire & Grannis LLP represented Bernabei. Fox represented his office.
The case is: In re Koeck, D.C. Ct. App. Bd. on Prof’l Responsibility, No. 14-BD-061, 8/30/16
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