Postings by Peter Henning at White Collar Crime Blog and Alan Childress at Legal Profession Blog prompted me to think of reasons why a hypothetical California lawyer might choose to disclose client confidences after learning that the client had been running a (hypothetical) Ponzi scheme. I don't suggest that any real lawyer drew the following conclusions or that any of these reasons is legal justified, but here's my list:
1. The lawyer concluded that the SEC ethics rules governed and were "supreme law of the land."
2. The lawyer concluded that some other state's rules governed.
3. The lawyer concluded he/she was under criminal investigation and/or a legal threat from the client and felt that California case law gave leeway to disclose.
4. The lawyer weighed up the risks of being held financially responsible for the Ponzi scheme and decided they out-weighed the risks of state bar discipline. Imagine, for example, that the lawyer is near retirement, has a modest nest egg, and knows that the lawsuits about to come fast and furious. While I don't applaud the thinking, a lawyer might vote his/her own pocketbook.
5. The Ponzi scheme entity had at least one "good" officer/director who authorized the disclosure in order to escape civil and criminal liability.