Thursday, December 19, 2002 11:40 AM
17 CFR Part 205, proceeding 33-8150
Re:     Standards of Attorney Professional Conduct.

I apologize for being a day late in my comment. I did not know of the proceeding until I saw a CNN report after midnight.

I have been in a position where I was legally and ethically obligated under the rules of conduct adopted by the Mississippi State Bar to report the ongoing theft of $200 million from a federally financed and regulated cooperative 20 years ago. The case included an attempt by the Mississippi State Bar to disbar me for obeying its rules. I have spent the last 20 years researching the issues and finding substantial support in the law for my actions and your proposed requirements.

Contrary to what was presenting by CNN as the American Bar Association's "position" "A client who consults an attorney for advice that will serve him in the commission of a fraud will have no help in the law. He must let the truth be told." Clark v. United States, 289 US 1, 15 (1933). The ABA position that ethical rules can punish a lawyer who is obeying legal rules is as absurd as accounting society rules that there is a duty of confidentiality for accountants that overrides the legal duty they have. That conflict was clearly tested in my case and I won.

A more colorful statement came out of Missouri, "The law does not make a law office a nest of vipers in which to hatch out frauds and perjuries." Gebhardt v. United Railways Co., 220 SW 67 (Mo. 1920).

Your rule is on target to require attorneys to come forward. However, be aware that coming forward will destroy them professionally, because with the pervasive corruption in our corporate culture, those who do come forward will never work again. I am attaching an article with endnotes that I authored with Frank E. Watkins. I believe it may help.

Respectfully presented,

Franklin V. Anderson, Attorney at Law
951 Government St., Ste 119
Mobile AL 36604

It takes years to become an accountant, engineer, or lawyer, and one brief encounter to end a professional career. Suppose an attorney is consulted by an internal auditor for a federally guaranteed and regulated electric cooperative. The auditor has discovered:

  1. The contractor mining coal on cooperative land is operating without independent verification or effective control of the quantity of coal removed. Coal from cooperative land is being sold to an investor owned utility for approximately twenty percent less than the cooperative is paying. The mining contractor's CPA audited profit is almost triple the "fixed" amount reported two years earlier to the Rural Electrification Administration (REA) for contract approval. The contractor is paying exorbitant commissions, wages, salaries and bonuses to hide its true profit. In addition to the coal price, the cooperative is reimbursing a profit sharing bonus to contractor employees based on the contractor's profit from the cooperative, as well as uncontrolled truck and equipment expenses. The cooperative is in the process of "giving" the contractor, over seven years, an asset mortgaged to the federal government for thirty years; in the process giving away the last vestige of monitoring the quantity of coal removed.

  2. Cooperative management is receiving "gratuities" from the contractor in the form of transportation on the contractor's airplane and use of a vacation retreat. This "payment in kind" is not reported on any tax return.

  3. The cooperative's books do not reflect the loss of control over the coal mine asset and expenses, substantially understating the damage to its financial position. False financial statements are being sent through the United States mail to present and prospective lenders, and federal regulators.


Why should the auditor be interested in making a report to anyone? What, if any, crimes are presently being committed in the hypothetical case? Property, in the form of irreplaceable fuel and excess electric rate charges to consumers, is being taken (converted) from the federally insured institution by the contractor with the aid and comfort of cooperative management and directors; the possible charge is embezzlement.1 Failing to report taxable "gratuity" income and improperly claiming expenses associated with the converted property on the supposedly non-profit cooperative's tax return both constitute endeavors to conceal or to supply misleading material information to agencies of the United States government, in the normal course of their duties, in violation of a statutory prohibition.2 Sending statements through the United States mail in furtherance of a fraudulent scheme or purpose is illegal, whether or not the statements are, taken by themselves, false.3

At this point in the hypothetical, law enforcement authorities are unaware of either the commission of any crime or the identity of any alleged perpetrator. How could the auditor be prosecuted for failing to report facts suggesting the commission of a crime prior to being served with a subpoena? For example, the American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct Rule 301, and Standards of Field Work Section AU317.23 require licensed member CPA's to remain silent to law enforcement authorities until served with a subpoena and receiving ". . .advice from an informed expert . . . or . . .final determination by a court of law." Upon every citizen, the law imposes a duty to report ongoing criminal conduct to proper authority.4 The Supreme Court wrote in Quarles that the duty, and corresponding right, predate the Bill of Rights and arise from the very creation of government under the Constitution itself, without the necessity of any specific provision therein. Justice Cardozo traced that duty back to time immemorial.5

If the fundamental law of our society imposes upon every ordinary citizen such a duty, how could a grant of licensed professional status provide any justification or excuse to escape it? Applying the logic of the AICPA example, emulated by the American Bar Association (ABA), Institute Management Accountants (IMA) and Institute of Internal Auditors (IIA), murder, embezzlement, fraud, and obstruction of justice in the presence of its members are not crimes until someone is caught and convicted, so that a person with a professional license is free to aid killing, stealing, cheating and lying, and to refrain from reporting anyone, until someone is identified, arrested, tried, convicted, and the conviction unsuccessfully appealed to finality. By this reasoning, and possibly, in practical truth, "Nothing is illegal until a judge says so." But, how could the people charged with the state's authority to enforce its laws blithely claim to be authorized to directly or indirectly break them.

The oath taken by every professional when receiving a license, a statement of voucher for character, competence and fitness pursuant to governmental authority, is a commitment to "uphold" the law. That commitment necessarily involves not one, but two duties: To obey the law, and; To demand that clients obey the law when in the presence of the professional.6 The professional's presence can be either personal, or it can be constructive, such as when representations are made to others using the professional's imprimatur on behalf of the client. In either case, a client cannot involve a professional in the commission of criminal conduct without imposing upon the professional a risk of civil and criminal prosecution, and ethical discipline at the hands of licensing authorities. In the hypothetical, if a professional accountant can't recognize these forms of wrongdoing, who can; If an ordinary citizen, who is aware of this criminal conduct, can be prosecuted for performing the slightest act in furtherance of its success, why should any professional be excused from legal responsibility when preparing, or concealing, financial statements which are, or should be, intended as sufficiently trustworthy to induce others to rely upon their accuracy, completeness, and independence in judgment. Those who claim that excuse pervert the rule of professional confidentiality to suit their personal interests over professional and societal interests. Society is interested in promoting adherence to its legal and ethical rules, instead of finding ways to avoid or undermine them. Professional counsel is intended, under rules of confidentiality, to aid in that compliance and in the avoidance of violations.

However, a specific federal statute declares anyone who aids, abets, counsels, or acts in furtherance of any federal crime to be equally guilty with all other participants.7 Federal law, and that of many states, including Alabama, recognize no accountant-client privilege whatever: The term "privilege" means legal permission to withhold information that in the absence of privilege must be produced, to law enforcement authority, to opposing litigants and to the courts. The purpose of the profession is, ultimately, communication of material representations to others.8 Federal decisions state that attorney-client privilege, possibly the most important legal privilege to withhold information, dies in the presence of fraud; and once dead, privilege cannot be resurrected.9 A prosecutor or civil claimant can convincingly argue that a professional who prepares inaccurate reports concealing, by silence or affirmative misrepresentation, the improprieties of a client aids, abets, and acts, whether encouraging the impropriety or not.10 Being aware of the commission of a federal felony and doing any affirmative act in its concealment, however slight, and failing to report the crime to proper authorities, is itself a federal felony.11

The legal definition of conspiracy is an agreement involving two or more persons, whether successful or not, to act illegally, or to use legal means for an illegal purpose, and any overt act by any participant in furtherance thereof: A conspiracy charge is possible whenever an express agreement exists, or one that can be implied by separate actions directed to a common and known goal.12 Under general rules a conspiracy cannot exist solely within a corporation. Yet, the pursuit of non-corporate purposes, such as personal enrichment, or the participation of an outsider, such as a professional, another corporation, or regulatory agents who are acting to further illegal rather than legal ends, adds the possibility of a conspiracy prosecution.13 Under federal law all participants in any part of a conspiracy to violate any federal law are equally guilty with all other participants and can be fined and imprisoned on the conspiracy charge, even when not convicted of any other charge.14 As a conspirator, the professional can be charged with any charge brought against any other conspirator for wrongs in the course of the conspiracy: The acts of one are the acts of all.

If the hypothetical accountant consults one of the corporation's attorneys, the attorney is immediately placed in the same dilemma as the accountant: Keep silent, and permit violations of law which are required by law and conflicting ethical rules to be reported; Report those violations and end personal and professional life as known before.15 Advising the accountant to remain silent violates ethical requirements pertaining to witnesses16 and assists wrongful conduct.17 Also, federal law prohibits as an obstruction of justice any influence used to silence a witness who would report wrongful conduct to an administrative agency or Congress in the normal course of its business.18 A classic case states "The law does not make a law office a nest of vipers in which to hatch out frauds and perjuries."19 Yet, advising the accountant to expose himself to the fury of management, which will almost certainly result in their destruction, assists wrongful conduct in the result, just as surely as if the in-house attorney did the harm himself.

The old ABA Model Code of Professional Responsibility clearly stated that corporate management was not the attorney's client when acting in hostility to the entity.20 When a lawyer learned someone other than his client planned a crime or fraud, the lawyer was required to report it to the affected tribunal.21 In Mississippi, the ABA's Model Code was modified to require specifically that an attorney shall reveal his client's unresponsive intention to commit crime or fraud, without regard to the severity of the offense, to the affected person or tribunal.22 That modification removing any distinction for severity of criminal conduct was continued in Mississippi's adaptation of the Model Rules of Professional Conduct.23 The new ABA Rules of Professional Conduct blur the ethical definition of corporate client to include corporate management, and direct an attorney to make a self-destructive and almost certainly futile stand when aware of ongoing or planned corporate misconduct by management.24

The Supreme Court has, perhaps by accident, erected several precedents that can be argued in support of a dissenting professional. It has written that while a state has extensive authority to regulate professional conduct, that authority is limited by the individual Constitutional rights of the professional.25 A state cannot enforce by its legal authority any rule, regardless of the rule's origin, regardless of whether the dispute involves private or public parties, which interferes with individual Constitutional rights.26 A state which, by its official actions, intrudes into an area of intense, but not necessarily exclusive, federal interest thereby waives sovereign immunity.27 Protection of federal informants is an area of intense federal interest.28 Where a state uses its disciplinary authority over a professional to violate Federal law, the state, and its agency, waives and loses sovereign immunity, and thereby becomes liable for damages.29 A licensed professional under the rules of the ABA, AICPA, IMA or IIA who is confronted with ongoing or planned criminal or fraudulent conduct is at extreme risk. At least, when conscious of the danger, basic defenses can be prepared, in addition to the most prudent move of commencement of a search for new employment.

The United States Supreme Court has held that a person who is not willingly involved in the planning and commission of a crime has the duty and right to report it.30 In exchange for the performance of that duty, the Court held the person making the report is entitled to immunity from civil and criminal prosecution, and to anonymity, to protect against "private" retaliation.31 However, once the informant's identity is known to the subjects of the report, the right of anonymity becomes moot, and is lost forever.32 When the informant's identity is exposed, retaliation is swift, certain and usually devastating: The only difference between the response of a traditional criminal organization, and a corporation whose management is engaged in criminal activity is the nature of the weapons used against the person exposing the wrongdoing; the essential result is the same. People who are "out of step" will not last. To illustrate the extent of an employer's authority to "fire at will" the Alabama Supreme Court observed the following undisputed facts as it denied relief for an employee's wrongful discharge:

[The employee's] superior. . .attempted to [seek the sexual favors of the discharged employee's] wife. . . .[O]ut of a spirit of revenge. . .[the supervisor] wrongfully and maliciously caused the [company] to terminate [the employee]. . .The discharge [was] legal. . .regardless of the motive or malice which actuated it.33

This decision was cited and reaffirmed more than 40 years later.34 At one time, Mississippi allowed a man to be fired without court relief for filing an admittedly valid worker's compensation claim.35 The United States Supreme Court has written that hiring an attorney and filing a worker's compensation claim is an exercise of the Constitutional rights of free speech, association and petition for the redress of grievances.36 After nearly seven years of this tyrannical Mississippi decision as "good law", the Mississippi Supreme Court saw fit to reverse it.37 In a landmark case, the New York Court of Appeals, the state's highest court, has ruled that an associate attorney cannot be fired from his law firm for forcing the report of an associate's misconduct.38 The New York case is the exception, and cost its victor more than most people can afford. Another, less expensive, avenue of performing a basic duty is needed.


The options for relief from the ethical and legal quandary appear terribly limited:

  1. Persuade the executive to cease his improper conduct.

  2. Call upon in-house attorneys for support and assistance.

  3. Report the matter to directors, outside auditors or regulatory authorities.

  4. Obtain independent legal assistance and prepare defenses.

  5. Do nothing to aid the conduct while seeking other employment.

Persuading a corrupt top manager to change is unlikely. Personal corruption starts early in a management career and becomes a natural way of life as one rises through an organization. As authority increases, so also does the knowledge of internal and regulatory control weaknesses, and, much more importantly, the power to overrule those controls to change, evade or ignore the rules accepted in an ethical environment.

A corporate attorney theoretically has the duty of siding with a truthful employee against a manager engaged in fraud.39 However, the ABA Model Rules of Professional Conduct, in a flagrant exercise of self-serving avoidance of Constitutional duty, gives a corporate attorney many ethical excuses to argue before a disciplinary proceeding, in the process of evading a legal duty imposed by the courts, upon other citizens.40 Even that recently adopted rule blithely advocates nothing less than personal and professional suicide when faced with irreconcilable wrongdoing within a corporation. The debate and process accompanying the adoption of these rules by the ABA and many states clearly illuminate the compromised position occupied by a corporate attorney: The position is maintained by compatibility with management; not by exhibiting any willingness to frustrate their unlawful plans and desires. And, outside attorneys are no better inclined or protected if they wish to continue receiving their fees. Who, but corporate attorneys, prepare "confidentiality agreements" which are extorted from employees at various vulnerable stages of employment, which purport to silence the employee. To the extent such an agreement purports to limit the employee's duty, and right, to communicate with lawful authority, it is an agreement for an unlawful purpose, obstruction of justice.41 An agreement for an unlawful purpose is void ab initio.42

Directors become and remain directors of problem corporations because they are blind to, tolerant of, or actively participating in the corrupt activities which cause the problems. Members of a board are nominated by a committee, usually at the suggestion of an "inner circle", to be compatible with things as they are. On occasion, mistakes can be made when a diligent director is nominated to a lax board, triggering serious control problems far exceeding those caused by a diligent professional; it's harder to fire a director. Outside auditors who serve at the pleasure of the board can easily become blind, deaf and dumb at the approach of danger to their annual fees. Directors and professionals who willingly remain ignorant are charged by the courts with knowledge of the truth: deliberate ignorance constitutes knowledge.43 A recent Supreme Court case exonerated such an outside auditor in RICO claims arising from its extremely convenient ignorance of flagrant mismanagement.44 However, in the case of Lincoln Savings and Loan, a clean audit was signed about three weeks before takeover by the federal government. The senior partner of Ernst & Whinney, which became Ernst & Young as a result of the debacle, who signed the audit, went to work for Lincoln at three times his previous earnings during those three weeks, and cost his former accounting firm approximately $300 million in settlement of claims.

Federal regulators can hardly claim white hats in this scenario. Their day to day dealing more closely with the subjects of their regulation, who have all the money, all of the political influence and power, and the potential of employment upon leaving government, instead of the "beneficiaries" of their regulation, who are personally absent, financially weak and politically powerless, easily converts the agents to the wisdom of catering to the corrupt.

In a Mississippi case, two federal agents received information pertaining to a fraud being perpetrated by the management and directors of a federally financed electric cooperative. If continued over the life of a twenty year contract, the member/owner/consumers would be defrauded by much more than $200 million. Under Rural Electrification Administration (REA) Staff Instructions, each of those agents, their supervisors, and all other persons employed by REA who were aware of the allegations had the duty to trigger an investigation.45 A web of regulatory conspiracy became a wall of silence to prevent the people who pay for management wrongdoing from ever learning that they are being taken. After identifying six similar contract schemes nationwide, involving over a Billion dollars of federal loan guarantees, William E. Davis, the single federal official who opposed the wrongdoing, was removed from his position as head of the Borrower Accounting Division, and placed under an administrative "gag" order prohibiting him from communicating with anyone, including Congress. Until June 3, 1993, Davis supervised 58 professionally trained and qualified accountants, in their audit function of almost $65 Billion in federal loans and guarantees to roughly 1,000 electric cooperatives and 1,000 telephone borrowers. Prior to Davis' removal, the Administrator of REA engineered a "gift" to a telephone borrower of $8.8 million from federal trust funds in the first ever management override of a Davis supervised audit.

Davis was replaced by an engineer with no accounting credentials whatever in preparation for National Rural Electric Cooperative Association (NRECA) supported abolition of the REA oversight function. NRECA is the national trade and lobbying organization of the cooperative borrowers from REA. One of the federal agents, who failed to properly report the allegations to Davis, received a performance bonus for preventing publication of the story, prior to leaving federal service and becoming a high management official of the cooperative he once "regulated". Upon the agent's employment with the cooperative, he delivered the ritual ultimatum, "How much to 'get on the team'?", to the internal auditor prior to the auditor's firing. The other agent participated in the REA internal campaign to remove his former department head. While Davis has been exiled to a bureaucratic Siberia, and the auditor richly rewarded for his post-firing confidentiality agreement, upper management in REA have showered each other with bonuses and praise.

In an ethical organization every level is ethical. In a corrupt organization, corruption increases with authority. Each level sets an example for its subordinates, and is not only responsible for its own corruption, if any, but also that of all subordinate levels. A corrupt supervisor or regulator can, and will, hardly give directions to act ethically, except in a hypocritical show for the unsuspecting public. Especially at higher levels of management, one person alone cannot be corrupt without others seeing indications if good accounting and corporate controls are in effect. Many must act in concert to defeat those controls. In the process of defeating those controls they are converted into discovering, isolating and destroying any person who would oppose the corruption. The concerted action of multiple participants is the essence of the danger a conspiracy poses to society. Multiple, highly placed, and credible, conspirators multiply the credibility of the conspiracy to discourage opposition and encourage the recruitment of new participants for yet more strength and credibility. The more potent the conspiracy; the less likely it can be successfully opposed with the limited credibility and resources of any one person.


Approaching authorities has pitfalls to the unwary prospective informant. Prosecutors have complete discretion over the law they will enforce, or ignore, and the persons they will protect, or destroy. Often, a groundless prosecution resulting in acquittal can destroy a person more completely by depletion of resources than would a conviction with the imposition of criminal and civil penalties. A person accused on the prosecutor's credibility of a drug crime, or the rarely prosecuted case of public corruption, is virtually assured of conviction for something when entering the courtroom. Due process in the form of a fair trial is a wishful illusion in many cases when the massive power of the state and the force of public attitudes are brought to bear against a lone person with little power or influence.

But a different prosecutorial environment applies when going after an influential, rich and powerful person with organizational support who has spent years gaining skill and experience in exercising that power. As long as organizational support is granted, the power of the person who should be accused is equal in public credibility and in excess of the financial resources that a prosecutor would be willing to allocate to all but the rarest of cases. The person making the accusation to, and rarely through, the prosecutor, is probably unrecognized to the general public, lacking in resources, and carefully painted by the organized wrongdoer as a disgruntled, vengeful "non-conformist". If the prosecutor wishes to run for public office, campaign contributions are more likely from the powerful than the powerless, who are at or near financial ruin themselves. An almost irrebutable presumption, supported by an entourage of influential friends, that the accused is innocent, is also the essentially irrebutable presumption that his accuser is guilty of perjury. In that environment, why should a prosecutor risk a political career on behalf of an unconcerned society because an unknown person has already lost his. Our society suffers from a critical shortage at all levels of "Untouchables" who seek the rule of law on all occasions, in the popular example of Chicago's Elliot Ness.

More significantly, federal obstruction of justice law was substantially weakened in the Iran-Contra scandal.46 Who should accept the blame is a question that matters little to anyone except a potential witness who should be able to depend on enforcement of those laws for protection. But, with the key appellate ruling dismissing the charges against John Poindexter, federal prosecutors have all the excuse they need to evade public criticism for refusing to perform their "duty" of prosecuting blatant violations of federal law.47 In the Mississippi case previously described, the FBI's Special Agent in Charge of the Jackson office was speaking for the United States Attorney for the Southern District of Mississippi in 1986, prior to the Iran-Contra rulings, to the effect:

I don't care what the witness reported, or how many agents he assisted. I don't care if he has been threatened, fired, and destroyed. I have no duty to protect him and I will do nothing to that purpose.

All normal corporate communication channels exist to detect and discourage "ethical resistance" or more popularly, "Whistleblowing".48 For example, the Alabama Legislature enacted a law requiring all reports of misconduct of public officials in the state shall be made to an ethics commission.49 Under the statute, the ethics commission cannot receive a report which protects the informant's identity from disclosure.50 On the contrary, any report must be written, signed with the name, address and place of employment of its maker; and a copy shall be delivered to the state official within 72 hours of receipt in the ethics commission.51 In the federal bureaucracy, the abusive hostility encountered by William C. Bush, who "blew the whistle" on his supervisor for padding the seventeen person department with fourteen unnecessary employees to maintain his supervisory position, extended from NASA, the agency employing them, to the Department of Justice, which defended the supervisor, and the present Chief Justice of the Supreme Court, who viciously attacked Bush during oral argument for seeking judicial relief for the wrongs and injuries he suffered.52 An ethical person who wishes to perform duties that are fundamental to our society in the midst of corruption faces a paradox, not unlike "Catch 22":

An ethical person is not compatible with corruption, and will be abandoned to his fate if he speaks; while a corrupt person is compatible: His loyalty to the group and silence to those who would oppose corruption will be rewarded by the vast power he supports.53


There are two battles that illustrate the probable outcomes of this hypothetical situation. In all three, the battles and hypothetical, the individual combatants have little or no choice over whether or not they engage in truly life and death combat. The fight is dictated by rules "from on high" in management and professional societies, as well as legal requirements and prosecutorial discretion. In the Battle of Little Bighorn, or "Custer's Last Stand", about 200 United States Army cavalrymen charged into an encampment of nearly 10,000 hostile American Indians, were surrounded in an open field, cut off from retreat or reinforcement, and killed to the last man. They went in, stood courageously and died. The afternoon of January 22, 1879, almost three years later, a force of 30,000 Zulu warriors attacked and destroyed almost 1,500 British soldiers and local allies in South Africa. Two Zulu formations, "Impi's", numbering 2,000 roughly 40 year old men each, were late in reaching the action because of their relatively poorer physical condition. Their leaders needed more battle to assure a favorable reception upon returning to their leader's camp. In two hours they ran ten miles to the river crossing and supply encampment at Rorke's Drift, where 137 British soldiers prepared defenses with available materials. Throughout the remainder of the afternoon and into the night repeated Zulu charges failed to overrun the camp. The next morning exhausted Zulu warriors, short about 1,600 killed and dying, passed within sight of another British formation as it approached Rorke's Drift. Bravery, discipline and preparation saved the lives of 114 soldiers and earned 11 Victoria Crosses.54. The unsuccessful Zulu's who made the attack were received in disgrace. A point worth pondering is what would have happened if the Zulu's could not find the camp to attack it.

A whistleblower can expect no Victoria Crosses or other rewards. To call corruption openly to answer is to invite self destruction. To remain silent, to "sell one's soul" to corruption, is to gain the favor of the rich and powerful as long as they find that person's presence and support amusing. The fundamental reason for codified "ethics" should be to provide a guide of duties, which should be performed by everyone to foster the order and progress of society; to mandate meaningful and adequate protection for those who perform the duties, and; to impose penalties for those who breach them. Self destruction is inherently "unethical", as is the normal, inescapable and devastating "collateral" damage to the family of the person who would resist in the modes propounded by the various professional societies.


Review the facts, preserve the evidence, obtain reinforcement, and operate the defenses. Twelve words describe the only viable alternative to either joining the wrongdoing or making a heroic but futile stand against the corrupt and powerful. Make sure of the existence of wrongdoing within the limits of available resources. If the controversy is indeed "imaginary" the price of resistance is certainly all out of proportion to the wrong. If it is "real" and well-founded, is the wrong substantial enough that reporting it is worth the cost? What risks are taken by remaining silent and "uninvolved"? What can be done to reduce the risks? A good start is to preserve evidence, usually narratives, diaries, memos, invoices or other written records, from loss, concealment or destruction. Copies are sufficient to support a report or a prosecution should the originals become unavailable. The next step is to obtain personal legal support from an attorney outside the corporation. If the corporation learns of an informant's identity, the right of anonymity is moot and lost. The corporate attorney is just that: anything learned by the corporate attorney might just as well be told to the corrupt management in most situations.

A personal attorney has a duty of loyalty to the sole client, limited only by duties to uphold the law and professional standards. The personal attorney should be concerned with avoiding instead of instituting a lawsuit. An employee attempting alone to resist corruption lacks resources to start legal action that would not easily be overwhelmed. It is unlikely that an attorney can be found who is willing and able to advance the money to support litigation in the face of the historically very low probability that money will ultimately be recovered.


If the informant's employment is worth protecting, or the risk of prosecution is substantial whenever the ongoing fraud is uncovered, the next step is to take advantage of the key rule of privilege that permits a lawyer to protect the identity of his client when revealing it would expose the client to harm. In order to increase the difficulty of tracing the employee through the lawyer, a second lawyer is needed, who will maintain secret the identity of both the first lawyer and the client employee.55 This "cloak and dagger" arrangement may appear ludicrous until a candid evaluation of the opposition is made: If they are already conspiring to commit numerous crimes, what incentive exists to refrain from one or even several more? Wire-tapping is illegal without a court order.57 Obstruction of justice is always illegal.57 Interfering with Congressional inquiry is illegal.58 But with financial and investigatorial resources unlimited in relation to the task of finding a resisting employee, the will to apply those resources unchecked, and the advantage of routine prosecutorial indifference, SO WHAT?59.

In the cited account, Wackenhut Corporation, a private investigation company, was hired by Alyeska, which operates the Trans-Alaska pipeline, to shadow two Congressmen and one known source to locate unknown informants within the company. More recently, Brown and Williamson Tobacco Company sued Congressmen Henry Waxman and Ron Wyden to learn the identity of their informant who supplied a 1963 internal memo describing the addictive properties of tobacco, which had days before the 1994 suit been denied under oath by executives of all major tobacco companies before Waxman's committee.60 The arrogance of multi-billion dollar corporations has no limit. Smaller companies follow the example of the larger because their management believe arrogance, as a substitute for ethically constrained boldness and innovation, is the way to become large. Eventually, some "unknown terrorist revolutionary" must teach all a harsh, expensive, and painful lesson, that the pen and truth are indeed mightier than the sword of corruption; possibly in more than one classroom.

The function of proposed legal assistance to the shielded employee is to attempt to obtain a commitment of immunity and anonymity for their client in exchange for cooperation. In the event, such a grant is purely a matter of prosecutorial discretion. Should protection be denied, extensive documentation of the employee's effort to obtain distance from the wrongdoing and to bring it to the attention of proper authority will strengthen arguments for defense before a jury. The Nuremberg defense, "I was acting under orders", has been rejected by the 1945 United Nations treaty; that rejection has probably been incorporated into United States law under the Supremacy Clause of the Constitution; and the courts have expressed no willingness to accept it in the workplace:

The fact [the manager] might well have fired [the employee] had he disobeyed . . . [unlawful] instructions . . . does not make [the employee] any less responsible.61

The employee's determined efforts according to the proposed defensive scheme could be the factual distinction between blindly following orders, and giving sufficient resistance, to avoid penalties. It could also be the difference between occupying a position which is well-known to the enemy and one which is unknown until the enemy's opportunity of attack has passed.


A professional's prospects of remaining peacefully employed any substantial time in a corrupt environment are just about nil. In fact, the reasonable response is to find another job as quickly as possible while executing the Rorke's Drift Plan. Once identified as a dissident employee, future employment is unlikely in any professional capacity. Prospective employers are concerned that they could be next, and would not risk being reported for their own transgressions. "On the other hand", Oliver North has illustrated graphically the benefit of organizational loyalty when concealing evidence of illegal action. Thus, "business as usual" extends far beyond any corporate or governmental boundaries, and justifies covert rather than overt action by those who would oppose corruption. The inefficiency of this systematic corruption costs our society incalculable billions in waste, possibly more than illegal and legal drug abuse. It costs jobs and opportunity for the most vulnerable component of our society, the individual employee and the employee's family. Corruption should be resisted by law abiding citizens to prevent collapse of our society, as we have seen the Soviet Union collapse under its own corruption. The call of this article is for protection of people who make honest, even unintentionally inaccurate, reports of unlawful conduct.

The cases cited giving rise to the protections advocated do not in any way authorize or protect those who abuse the legal system by knowingly making false or fraudulent reports.62. We hope this article will fuel debate of the incredible arrogance displayed by the self-serving rules adopted by the American Bar Association, American Institute of Certified Public Accountants, Institute of Management Accountants and Institute of Internal Auditors, in flagrant defiance of fundamental Constitutional duties of all citizens, including professionals. Join us in our call.

1 18 U.S.C. section 656
2 18 U.S.C. section 1001
3 18 U.S.C. section 1341. See, e.g. US v. Otto, 742 F.2d 104 (3rd Cir. 1984), cert den, 469 U.S. 1196. See also, US v. Snowden, 770 F.2d 393 (4th Cir. 1985), cert den, 474 U.S. 1011 ("lulling letters").
4 In Re Quarles, 158 U.S. 532 (1895) (The duty and right to assist law enforcement is so fundamental to the essential function of Constitutional government that it existed at the original creation of the governing authority, long before the adoption of the Bill of Rights.) See also, U.S. v. New York Tel.Co., 434 U.S. 159 (1975) (traces duty of assistance to time of Magna Carta and before).
5 Babington v. Yellow Taxi Corp., 250 N.Y. 14, 17, 164 N.E. 727, 727 (1928).
6 Nix v. Whiteside, 475 U.S. 157 (1986).
7 18 U.S.C. section 2(a), U.S. v. Dawson, 576 F.2d 656, cert den, 439 U.S. 1127.
8 See, e.g., U.S. v. Jaskiewicz, 278 F.Supp 525 (1968).
9 See, e.g., In Re Grand Jury, 640 F.2d 49 (7th Cir. 1980) (presence of fraud or crime waives privilege). See also, U.S. v. Krasnov, 143 F.Supp 184 (E.D. Pa. 1951), aff'd sub nom, Oppenheimer v. U.S., 355 U.S. 5 (1957) (once privilege has been waived it cannot be reclaimed).
10 18 U.S.C. section 4, U.S. v. Perlstein, 126 F.2d 789 (3rd Cir. 1942), cert den 439 U.S. 1127 (1942). See also, U.S. v. Baez, 732 F.2d 780 (10th Cir. 1984).
11 See,e.g., Lancey v. U.S., 356 F.2d 407 (9th Cir. 1966)
12 See, e.g., Wagley v. Colonial Baking Co., 45 So.2d 717 (Miss. 1950).
13 See, e.g., Union Pacific Coal Co. v. U.S., 173 F. 737 (8th Cir. 1909). See also, LaFave and Scott, Criminal Law, sections 61-62 (West Publishing 1972).
14 See, e.g., 18 U.S.C. section 241 (10 yrs./$10,000), 18 U.S.C. section 242 (1 yr./$1,000), 18 U.S.C. section 371 (5 yrs./$10,000), 18 U.S.C. section 372 (6 yrs./$5,000), 18 U.S.C. sections 1951, et seq, (Hobbs Act, 20 yrs./$10,000), 18 U.S.C. sections 1963, et seq, (RICO, 20 yrs, forfeiture, plus civil remedies), 18 U.S.C. section 3571 (enhancement of federal fines).
15 DR7-102(b)(1-2) ABA Model Code of Professional Responsibility (CPR), Rule 3.3 Alabama Rules of Professional Conduct (ARPC), [ARPC closely adapted from ABA Model Rules of Professional Conduct], Rule 4.1 ARPC (states client crime or fraud is subject to conflicting "substantive" rules, enforced in the courts, and "disciplinary requirements", enforced under the same court authority in disciplinary proceedings), and Rule 1.6(b)(1) ARPC which states:

A lawyer may reveal. . .information to the extent the lawyer reasonably believes necessary. . . to prevent the client from committing a criminal act that the lawyer believes is likely to result in imminent death or substantial bodily harm.

16 DR7-109 CPR, Rules 3.3, 3.4 ARPC.
17 DR7-102(a) CPR, Rules 1.2, 3.1, 3.3, 4.1, 8.4 ARPC
18 18 U.S.C. section 1505, Taran v. U.S., 266 F.2d 561 (8th Cir. 1959) (equivalence of prohibited conduct under sections 1503 and 1505 in judicial and administrative situations). See also, U.S. v. Murray, 751 F.2d 1528 (9th Cir. 1985). See also, 67 C.J.S. Obstructing Justice, sections 16, et seq.
19 Gebhardt v. United Railways Co., 220 S.W. 67 (Mo. 1920)
20 EC5-18 CPR.
21 DR7-102(b)(2) CPR.
22 DR7-102(b)(1) Mississippi Code of Professional Responsibility:

A lawyer who receives information clearly establishing that:

(1) His client has, in the course of the representation, perpetrated a fraud upon a person or tribunal shall promptly call upon his client to rectify same, and if his client refuses or is unable to do so, he shall reveal the fraud to the affected person or tribunal. [ABA Model Code phrase omitted: "except when the information is protected as a privileged communication."]

23 "[T]he option of a lawyer to disclose information necessary to prevent crime exists regardless of the seriousness of the proposed crime, whether it be a felony or a misdemeanor." Michael B. Martz, General Counsel, Mississippi State Bar, General Counsel's Report, (Mississippi Lawyer, Sept.-Oct. 1987).
24 (b) If a lawyer for an organization knows that an officer, employee or other person associated with the organization is engaged in action, intends to act or refuses to act in a matter related to the organization that is a violation of a legal obligation to the organization, or a violation of law which reasonably might be imputed to the organization, and is likely to result in substantial injury to the organization, the lawyer shall proceed as is reasonably necessary in the best interest of the organization. In determining how to proceed, the lawyer shall give due consideration to the seriousness of the violation and its consequences, the scope and nature of the lawyer's representation, the responsibility in the organization and the apparent motivation of the person involved, the policies of the organization concerning such matters, and any other relevant considerations. Any measures taken shall be designed to minimize disruption of the organization and the risk of revealing information relating to the representation to persons outside the organization. Such measures may include among others:

    (1) asking reconsideration of the matter;

    (2) advising that a separate legal opinion on the matter be sought for presentation to appropriate authority in the organization; and

    (3) referring the matter to higher authority in the organization, including, if warranted by the seriousness of the matter, referral to the highest authority that can act in behalf of the organization as determined by applicable law.

    (c) If, despite the lawyer's efforts in accordance with paragraph (b), the highest authority that can act on behalf of the organization insists upon action, or a refusal to act, that is clearly a violation of law and is likely to result in substantial injury to the organization, the lawyer may resign . . . Rule 1.13 (b-c) ARPC.

25 Brotherhood of Railway Trainmen v. State Bar of Virginia, 377 U.S. 1 (1963).
26 New York Times v. Sullivan, 376 U.S. 254 (1964). NAACP v. Claiborne Hardware, 458 U.S. 886 (1983).
27 Parden v. Terminal Railway of the Alabama State Docks, 377 U.S. 184 (1964)
28 See, e.g., Sugarman v. Dougall, 413 U.S. 634 (1973) (There are certain attributes peculiar to the status of federal citizen which cannot be limited by the state-including informing federal authorities of criminal conduct). See also, Oregon v. Mitchell, 400 U.S. 112 (1970) (The right to inform federal authority is a privilege and immunity of national citizenship). See also, U.S. v. Williams, 341 U.S. 70 (1951) (The right to inform federal authorities of illegal conduct is protected against individual as well as state action).
29 Goldfarb v. State Bar of Virginia, 421 U.S. 657 (1975).
30 Roviaro v. U.S., 353 U.S. 53 (1956) (informant and rights described).
31 U.S. v. Moreno, 588 F.2d 490 (5th Cir. 1979), cert den, 441 U.S. 936, 947 (1979) (identity of non-participating informant protected from disclosure). U.S. v. Alonzo, 571 F.2d 1384 (5th Cir. 1978), cert den, 439 U.S. 847 (1978) (identity of "background tipster" protected).
32 U.S. v. De Los Santos, 810 F.2d 1326 (5th Cir. 1987), reh den, en banc, w/opn 819 F.2d 94 (5th Cir. 1987), cert den, 484 U.S. 978 (1987) (informant's identity unprotected if already known).
33 Comerford v. International Harvester, 235 Ala. 376, 178 So. 894 (1938).
34 Meredith v. C.E.Walther, 422 So.2d 761 (Ala. 1982).
35 Kelly v. Mississippi Valley Gas Co., 397 So.2d 874 (Miss. 1981).
36 United Mine Workers v. Illinois State Bar, 389 U.S. 217 (1967).
37 Perry v. Sears, 508 So.2d 1086 (Miss. 1987).
38 Wieder v. Skala, 80 N.Y.2d 628, 593 N.Y.S.2d 281 (Ct.App.N.Y. 1992).
39 See, e.g., Nix v. Whiteside, 475 U.S. 157 (1986). See also, Rule 1.2(d) ARPC:

(d) A lawyer shall not counsel a client to engage, or to assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.

40 Rule 1.13 ARPC, supra.
41 Smith v. U.S., 234 F.2d 385 (5th. Cir. 1956). See also, U.S. v. Brand, 775 F.2d 1460 (11th Cir. 1985) (1982 changes to obstruction of justice law did not make lawful previously unlawful conduct).
42 U.S. v. Biloxi Mun. Sch. Dist., 219 F.Supp 691 (DC Miss. 1963), aff'd, 326 F.2d 237 (5th Cir. 1964), cert den 379 U.S. 929 (1965)
43 Wyle v. R.J. Reynolds, 709 F.2d 585 (9th Cir. 1983).
44 Reves v. Ernst & Young, 507 U.S. ___, 122 L.Ed2d 525, 113 S.Ct. ____(1993).
45 REA Staff Instruction 1-3 (Electric): 300-3 (Telephone)
46 See, Ralph Drury Martin, "Poindexter and the Truth About Lying", Legal Times, Vol XIV No. 28 Page 25 (Washington, D.C. Dec. 2, 1991)
47 U.S. v. Poindexter, 951 F.2d 369 (DC Cir. 1991).
48 Term "ethical resistance" credited to William C. Bush, Huntsville, Alabama.
49 Section 36-25-1, et seq, Code of Alabama (1975).
50 Section 36-25-4(14), Code of Alabama (1975).
51 Internal rules of the Alabama State Ethics Commission (1992).
52 Bush v. Lucas, 462 U.S. 367 (1983).
53 A sane person is not compatible with war, and cannot go home because he is not insane; Yet, an insane person could go home if he asked, but never asks. Only the sane person asks, disclosing his sanity. [paraphrased] Joseph Heller, Catch 22, (Simon & Schuster, NY, 1961).
54 See, Robert B. Edgerton, Like Lions They Fought (Ballentine 1988).
55 See, Baird v. Koerner, 279 F.2d 623 (9th Cir. 1969), Colton v. U.S., 306 F.2d 633 (2nd Cir. 1962). See, e.g., EC7-16, EC8-5, DR7-106(B)(2) CPR, Rules 3.3, 3.9 ARPC.
56 Omnibus Crime Control and Safe Streets Act of 1968, 18 U.S.C. section 2511.
57 See, e.g., 18 U.S.C. sections 1001 (concealing or supplying misleading material information), 1503 (obstruction of federal judicial proceedings), 1505 (obstruction of federal administrative or Congressional proceedings), 1512 (threatening federal witness or party with injury to person or tangible property), 1513 (causing injury to federal witness or party in person or tangible property) and 1515 (definitions under Victims and Witnesses Protection Act of 1982).
58 18 U.S.C. section 1505.
59 See, "Oversight Hearings before the Committee on Interior and Insular Affairs, House of Representatives: Alyeska Pipeline Service Company Covert Operation", Serial No. 102-13 (Supt. of Documents, 1992)
60 Robert L. Maddox, et al v. Merrell Williams, 94-171-HHG (DC DC 1994)
61 Howard v. United States, 711 F.2d 729, 734 (5th Cir. 1983).


NLRB v. Sure-Tan, 467 U.S. 883 (1984) (no informer's privilege for retaliatory complaint). See also, Adickes v. S.H.Kress, 398 U.S. 144 (1970) (no privilege when complaint made for purpose of violating Constitutional rights).