New Zealand Law Society - Maybe I shouldn't have done that...

Maybe I shouldn't have done that...

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1. Actually, Facebook isn’t all that private

In 2013 a Mareva injunction was awarded against lawyer Gabriele Giambrone. This followed proceedings against him related to failed investments made through his law firm. After one hearing Giambrone posted the following comments on his Facebook site:

“They thought they knocked me down, now they will see the full scale of my reaction. F*** them, just f*** them. They will be left with nothing.”

The plaintiffs spotted the post. Because the Mareva injunction restricted Giambrone from dissipating his assets, they sought to make use of the Facebook comments in their proceedings. They were included in the plaintiffs’ List of Documents. Giambrone sought an order that they could not be used and could not be disclosed to the judge dealing with the Mareva injunction.

He claimed that his comments were confidential as his Facebook site was restricted to communications to his friends only, and those friends would have known that it was confidential.

“He claims that use of the document would constitute a breach of confidence. He told the court that he had deliberately instructed his colleague, Ian Buchan, who has some experience in software matters to ensure that only his friends could access his comments,” Justice Horner stated in his decision on the matter in Northern Ireland’s Queens’ Bench Division (Martin v Giambrone p/a Giambrone & Law, Solicitors and European Lawyers, [2013] NIQB 48).

The essence of the court’s decision was as succinct as Mr Giambrone’s comments.

“I should say that anyone who uses Facebook does so at his or her peril,” said Justice Horner.

“There is no guarantee that any comments posted to be viewed by friends will only be seen by those friends. Furthermore it is difficult to see how information can remain confidential if a Facebook user shares it with all his friends and yet no control is placed on the further dissemination of that information by those friends.

“If there was any argument that it was confidential or private, that argument was destroyed by the posting on Facebook to which the general public had, I find, unfettered access.”

2. Careful with that bean bag, Christopher…

Rhode Island lawyer Christopher Millea may have thought he had a brilliant way of making his point in his closing address. However, his words and actions ended with him accused of contempt of court.

The Providence Journal of 25 February 2014 reports that Millea threw two bean bags (small ones, it is assumed) at a box placed before the courtroom door while addressing the jury as follows:

“You see, all of this has to do with the throwing of faeces. The state want to throw as much against the wall to see what sticks, just like Michael Drepaul throwing his faeces…” (Mr Drepaul was a key state witness and prison inmate who had cast offensive matter at a prison guard).

Millea then continued: “I would suggest to you, ladies and gentlemen, that after the state has thrown the faeces against the wall …”

That was as far as he got. Counsel for the other side objected, the judge ordered the jury from the room and advised that he was initiating a contempt action against Millea. However, after a hearing on the matter and an apology, the judge decided not to hold Millea in contempt – but stressed how important it was to maintain decorum in court.

3. Thoroughly check your client’s identity

A scam which started with a forged information request from the Inland Revenue Department almost resulted in the sale of a house in New Zealand unbeknown to the overseas-based owner. This happened at the end of 2013. The facts are given to warn lawyers that the scammers are active, and also to stress the need to thoroughly check client identity. Names and identifying details have been changed.

The prelude

Jill Smith lived in Canada but owned some rental properties in New Zealand. She employed a property manager to administer one. The manager received a scam fax purporting to be from IRD. This asked customers to complete and return a property disclosure form. Ignorant of warnings from IRD (see “Inland Revenue warns customers to ignore fraudulent faxes”, IRD website, 30 July 2013) the manager sent the form to Jill.

Jill filled out the form and faxed it with a copy of her passport to the fax number on the form (not IRD, of course). A few weeks later the property manager advised her that it had discovered that the fax was a scam and she shouldn’t respond. Too late, but Jill wasn’t worried as she could not see any dangers.

The action

Jill’s New Zealand bank rang her, asking what she wanted to do with the proceeds from the sale of her house. When Jill said the house had not been sold, the bank said that it had, and settlement was in three days’ time. The bank told her to contact the property manager, and said they would not release the mortgage to let the sale go through.

A quick phone call to the property manager brought the news that they had received instructions to sell the house and had managed to do so after an auction. The manager had been a bit surprised at the low price Jill was asking, and also at being advised that Jill had shifted to the United States and was now at a new address. The tenants had been moved out pending settlement.

The property manager referred Jill to WXYZ Lawyers who were acting for the “vendor”. Jill rang WXYZ Lawyers who confirmed they were acting for the “vendor” and the purchaser. After some anxious discussion they agreed not to settle the transaction.

A key lesson here is the need to ensure clients are properly identified. The LINZ Standard for verification of identity for a high risk transaction is relevant.

4. Do you really think you should put this in email?

Email is a wonderful invention, but it’s recognised that if you want to keep something quiet it’s best not to email it to someone. The United States Securities and Exchange Commission (SEC) is alleging that some of the people in the failed global law firm Dewey & LeBoeuf were surprisingly careless with their emailings.

The 1,000-lawyer Dewey & LeBoeuf was the result of a merger in 2007 between well-established New York firms Dewey Ballantine and LeBoeuf Lamb. The timing was poor and the new firm was quickly in trouble from the merger costs and the global financial crisis. It filed for bankruptcy on 28 May 2012.

Earlier this month the SEC charged five executives and finance professionals from the former firm with facilitating a $150 million fraudulent bond offering.

The SEC alleges the fraud arose when the firm needed money to keep credit lines open in the face of declining revenues. It says those charged went through the financial statements line by line and devised ways to artificially inflate income and distort financial performance.

Investors were led to believe that they were purchasing bonds in a prestigious law firm which was poised for growth and had come through the financial crisis unscathed.

“Dewey & LeBoeuf’s senior-most finance personnel used a grab bag of accounting gimmicks to create that illusion and top executives green-lighted the decision to sell $150 million in bonds to investors as a desperate grasp for cash on the basis of blatantly falsified financial results,” an SEC statement says.

The proceedings will be fascinating. What is also interesting is the civil complaint filed by the SEC in the United States District Court. Some extracts:

“So pervasive was the culture of financial chicanery at Dewey’s top levels that its highest ranking officials – including the defendants – had no qualms about referring among themselves in various emails to ‘fake income’, ‘accounting tricks’, ‘cooking the books’, and deceiving what they described as a ‘clueless auditor’.”

The SEC says a scheme was hatched to falsify numerous entries in Dewey’s books and records to increase net profit. The strategy was outlined in a detailed spreadsheet entitled “Master Plan”. After the fraudulent adjustments were made, the SEC says an (unnamed) collections manager who had been promised a bonus emailed one of the defendants: “Hey man, I don’t know where you come up with some of this stuff, but you save the day. It’s been a rough year but it’s been damn good. Nice work dude. Let’s get paid!” The subject line of the email was apparently “Great job dude. We kicked ass! Time to get paid.”

The SEC says the defendants “took a certain degree of comfort in what they viewed to be the ineptitude of the auditors”. When the regular auditor was fired (for reasons unrelated to the audit work at Dewey & LeBoeuf) one of the defendants emailed the news to another, adding “I assume you [k]new this but just in case. Can you find another clueless auditor for next year?” The response was: “That’s the plan. Worked perfect this year.”

If the trial proceeds, defence lawyers are tipped to attack the prosecution’s reliance on emails.

5. Don’t take the argument outside the courthouse: it could cost your life

Respectful and reasoned argument in court is fine, but letting it escalate cost one of New Zealand’s first lawyers his life. Just over 170 years ago William Brewer and Hugh Ross apparently had a difference of opinion on the law while appearing in court.

The New Zealand Gazette and Wellington Spectator of 6 March 1844 carried a short account of the unfortunate outcome: “On Monday week last, a meeting took place, in Wellington, between W V Brewer Esq and H Ross Esq, both members of the legal profession. The quarrel originated in some legal difference which arose in the County Court. Upon the first exchange of shots Mr Brewer was seriously wounded; he was immediately conveyed to a friend’s house. During the first few days it was hoped that his life was safe, but appearances afterwards became unfavourable, and on Monday last, about six in the evening Mr Brewer breathed his last.”

In keeping with the discretion which surrounded “affairs of honour” (and ignoring the newspaper report), the subsequent coroner’s jury verdict was: “Died of a gunshot wound, by whom inflicted there is no evidence to prove.”

The duel was fought on 26 February 1844 in Wellington’s Sydney Street West, behind where Parliament Buildings now stand. Brewer and his brother Charles were among the first lawyers to come to New Zealand, arriving in the Bay of Islands in February 1840. Their names are among the first 12 lawyers deemed to be admitted to practice in New Zealand on 31 January 1842.

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