Lawyer's duties upon notice of possible crime
February 12, 2007 10:15 AM   Subscribe

LawyerHive: If I send to the condo lawyer a copy of a letter wherein I suggest to my condo association that it has an improper independent contractor on site who may not be paying the proper taxes, social security withholding and/or workers compensation does the lawyer have a legal obligation to act to make sure this is not the case and if the lawyer fails to act is the lawyer in trouble? Can the lawyer ignore this notification of a possible crime?
posted by Freedomboy to Law & Government (13 answers total)
Generally, no, the lawyer is not going to have a legal obligation to act on that information absent specific statute requiring him or her to act on such information, which is unlikely to be the case given these facts. Depending on the scope of the lawyer's representation of the condo association and the related engagement letter, the lawyer may have an obligation to notify the condo association or members thereof of this information. However, you may very well be confusing a lawyer who is in some way associated with the condo association (or did something for it in the past, or is a member of the condo association) with the "condo lawyer" or someone who has an obligation to protect the interests of the condo association and/or its members.

My take: Why involve the lawyer? Just report your suspicions/concerns directly to the members of the condo association and/or your state's department of labor or similar authorities. The violations, if true, might not be criminal, by the way, and even if they are, they might not be something that the condo association should concern itself with provided that it has an appropriate contract with the contractor.
posted by jcwagner at 11:16 AM on February 12, 2007

IANAL, but I'm somewhat confident that yes, the lawyer can ignore it. A lawyer is not a government representative; s/he may choose whom s/he decides to take as a client and/or sue. If you are bothered by the contractor, you would probably be better off contacting the proper authorities (the IRS, the SSA, your state Department of Labor); although you should know that they will act according to their own discretion as well.
posted by AV at 11:20 AM on February 12, 2007

IANAL, but think of it this way- if you're just some nutjob who's making wack-ass claims about a contractor, why is it the lawyer's responsibility to follow up on it? Lawyers are not enforcement agents.
posted by mkultra at 11:22 AM on February 12, 2007

So as an officer of the court. the Association lawyer, who handles all the business of the Association [ a state regulated corporation in WA state] , can know of a crime or a possible ongoing crime [tax fraud is a crime right?] and not act and be then held blameless? Just checking, wondering if by not acting the lawyer violates any required actions that supersede the obligation to the client? And is it not the lawyer's obligation to correct an ongoing crime when it has been reported? I have told the Association of my concerns and was shined on like "it can't be true", no paperwork is given this contractor yearly to file with the IRS, I know this for a fact. This has been ongoing for 30 years plus. If this becomes known to the agencies involved and IS TRUE are the owners liable for the unpaid amounts to those agenices? Just wondering, hmmmm 30 years...
posted by Freedomboy at 11:31 AM on February 12, 2007

I still don't understand why your reaction to this situation is to go to your lawyer instead of the police/IRS/whomever. If you feel like something shady is going on, do something about it and don't hand it off to someone else to deal with.

If this becomes known to the agencies involved and IS TRUE are the owners liable for the unpaid amounts to those agenices?

THAT is an entirely appropriate question for your lawyer. My unqualified answer is probably yes for things like payroll taxes. HE would be responsible for paying income tax, since they would obsentsibly come out of whatever money you've paid him; whether or not your employer files paperwork, it's everyone's responsibility to file a tax return.
posted by mkultra at 11:42 AM on February 12, 2007

If he is truly an independent contractor, the condo association is only required to issue an annual 1099-MISC for his services (assuming he isn't incorporated). They have no obligation to pay his Social Security or tax withholding. If he fails to pay his taxes, that is not a problem for the condo association.

If the condo association fails to file a 1099-MISC for their contractors, that is a problem. The lawyer should advise his clients to file the correct IRS forms.

The attorney's duty to report a crime is a complicated matter that differs from state to state. If he absolutely knew that a crime was going to be committed and he didn't have any competing duty, he might be obligated to report. Some random person telling him a crime might be committed almost certainly doesn't rise to that level.
posted by Lame_username at 11:42 AM on February 12, 2007

Yes, no, no it's not, probably not.

You have some incorrect ideas about the obligations of lawyers and those employing independent contractors.
posted by jcwagner at 11:44 AM on February 12, 2007

BTW, the key concept here is attorney-client privilege. There are two exceptions that deal tangentially with this issue, neither of which directly apply:

- Conversations between accountants and clients are not privileged. If you ask a tax lawyer for advice on the best way to hide the records of an illegal employee (accounting advice rather than legal advice), it's not priviledged.

- Involving your lawyer in the scheme is not privileged. If you ask your lawyer to assist you in evading paying payroll taxes for this guy, he's obligated to report it.
posted by mkultra at 11:48 AM on February 12, 2007

(Actually, I believe in the second case, he's technically not obligated to report it, but can't claim privilege when questioned)
posted by mkultra at 12:02 PM on February 12, 2007

"Officer of the court" is more or less a term of art and is not the same thing as a law enforcement officer. Lawyers can't advise their clients to commit crimes, but they don't have an obligation to go around policing the public at large, even those they are in a tangental business relationship with. Part of the point of having independent contractors is for entities like your condo association to be able to avoid getting bogged down in things like tax withholding -- it's solely the contractor's responsibility. Possible liability is something that you could bring up with the lawyer, but it's not his or her duty to enforce the law.
posted by AV at 12:22 PM on February 12, 2007

Good input thanks to everyone so far, this person, who uses his children to work on site as well, fails at least 8 of the 20 condtions for an independant contractor status per IRS lists.

My concern is if he or the kids get hurt "on the job" can they come back at us [me], and as a shareholder in the corporation, which is bound by all the laws covering any other business, can I lose my house in a settlement, that kind of concern.

Not going straight to the agencies has been the course taken so far so I am seeking a little information to tip that one way or the other.

And I do think if this is an improper hiring situation we WOULD be held up for the missing payments otherwise what enforcement power does Social Security really have?

Good opinions though.
posted by Freedomboy at 12:27 PM on February 12, 2007

Maybe I'm missing something, but if you're hiring him as an independent contractor, you ought to be insulated from his accounting practices (viz Social Security, Workman's Comp., etc.).

If somebody was severely injured on the job, enough to warrant lawsuits, the condo association probably would get sued, but that's neither here nor there. As someone with 'deep pockets,' you're going to get named regardless. This is just how these things work -- they begin by casting a broad net over anyone who might be involved and have some cash, and then get pared down later.

The only problem I can see, might spring from the fact that you apparently have knowledge of his poor accounting practices, and if you then continue to do business with him you might harm your future position in a lawsuit. I'm not sure exactly how the law works on that, but it might be worth bringing up with your (the condo association's) lawyer. Since you know, or think you know, that something is going on, it may adversely impact the plausible deniability of the Association. This is a question for a legal professional, though.

Also, don't expect to make any friends when you point this sort of thing out. The contractor is going to, in all likelihood, hate you, and the other members of the Association may well see it as you "causing trouble," even if your intention was just to look out for everyone's best interests. Good deeds rarely go unpunished.
posted by Kadin2048 at 12:42 PM on February 12, 2007

"My concern is if he or the kids get hurt "on the job" can they come back at us [me], and as a shareholder in the corporation, which is bound by all the laws covering any other business, can I lose my house in a settlement, that kind of concern."

This is definitely a risk - you should consult your own insurance policies, the condo association's insurance policies, consider whether an umbrella policy is needed, look at the agreement with the independent contractor, etc., and if the answers aren't satisfactory, address it through the condo association's process or perhaps by getting out of that association (i.e. selling that real estate).

"And I do think if this is an improper hiring situation we WOULD be held up for the missing payments otherwise what enforcement power does Social Security really have?"

Well, it's sounding more and more like this is some maintenance guy who only does work for the condo association and no one else, if he is failing 8 of the 20 tests, etc. That's a little different. Since you said he was an independent contractor, I think that the discussion shifted away from that issue. If the question is about whether your condo association has an employee or an independent contractor, then, yes, you might very well have an issue. If your/the condo association's lawyer is really ignoring that issue, you should address it with the other members of the condo association.

IANYL, etc.
posted by jcwagner at 12:46 PM on February 12, 2007

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