Perhaps the most unshakable tenant of the legal profession is attorney-client privilege. Without that sacred bond of trust, many people would be reluctant to tell a lawyer anything, and that would make it quite difficult for attorneys to do their job. 

Just as criminal attorneys often hear information about criminal activity that they might be tempted to share, corporate attorneys learn about wrongdoing as well. But, in both cases, lawyers should know what their ethical duty is. However, any time you introduce large sums of money into an equation, things can get a bit… murky. Thus, in light of the whistleblower awards that have been introduced as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, many lawyers face the temptation to blow the whistle. But should they?

One way to look at this topic is to explore how it has been addressed in a particular state. According to Michael N. Westheimer of Buchalter Nemer, the issue has come up in the state of California. After whistleblower protections were written into laws like Dodd-Frank and Sarbanes-Oxley, the California bar acknowledged the difficulties involved in these cases by creating an ethics hotline. In the 10 years since the hotline was created, the divide between client confidences and the desire to blow the whistle has not been bridged.

“It's an age-old question, one that attorneys have dealt with, representing a client who has been accused of a crime. You have confidential information, so what do you do?” Westheimer asks. “Now you can collect a bounty, which creates a whole new host of issues.”

Westheimer notes that legal opinions have not taken a position one way or another, and that there is some case law suggesting that it may be possible for a lawyer to blow the whistle without violating ethical obligations. One issue at hand is whether national rules, like those put down by the SEC, preempt state obligations. To date, this has not been decided, so this matter remains an ethical tightrope to walk. 

One case that addressed this issue to some extent was the Second Circuit case United States ex rel. Fair Labor Practices Associates v. Quest Diagnostics Inc., et al. In the case, a group of people at a company that was eventually taken over by Quest were aware of a pricing scheme that involved kickbacks. The scheme was later brought back, and these former employees decided to sue. Several officers who were not lawyers spoke out but that group brought in the general counsel, who spilled his guts about the legal work he had done for the company regarding the kickbacks.

Timothy P. O'Toole of Miller & Chevalier, sees this case as important in the grand scheme of things. “The court assumes that the lawyer would have been allowed to talk about some aspects of the scheme in order to prevent a future crime, but other courts have rejected this as being too close to the ethical line,” he says. In this case, the inclusion of the GC in the mix tainted the information presented by other C-suite executives.

What's the message here? “Steer clear of lawyers,” O'Toole says. “If you involve a lawyer and get it wrong, you mess the whole case up. 

Thus, in the grand scheme of things, though there has not been a definitive ruling that lawyers cannot be whistleblowers, there are certainly enough potential pitfalls out there to make them think twice about whether or not the bounty involved is worth ruining their practice – or even the case at hand.

For more whistleblower news, check out the following:

SEC whistleblower program still in its infancy

JPMorgan whistleblower receives massive $63.9 million award

Facts & Figures: SEC says whistleblower activity increasing