New York Ethics Opinion Warns Lawyers Against Directing Deceptive Investigations in False Claims Act Cases

The New York State Bar Association’s Committee on Professional Ethics recently issued an opinion concluding that a private attorney may not induce, assist, or supervise a client’s use of deception to gather evidence for a potential False Claims Act (FCA) lawsuit.

The opinion addresses an important issue for attorneys representing prospective whistleblowers: although covert investigative techniques may sometimes produce valuable evidence, lawyers cannot assume that the public interest in uncovering fraud creates an exception to their professional obligations concerning dishonesty and misrepresentation.

The Proposed Investigation

The attorney requesting the opinion represented a prospective FCA relator who believed that certain companies had fraudulently obtained federal funds. The client wanted additional evidence before filing a qui tam complaint. To obtain that information, the client proposed contacting representatives, employees, or owners of the companies while pretending to be a prospective customer. The client also planned to falsely claim that grant funding might be available to purchase the companies’ services.

The attorney asked whether a lawyer could advise the client regarding the use of those false statements to gather evidence supporting an FCA case. The Committee concluded that the lawyer could not.

Lawyers May Not Direct Deceptive Conduct Through a Client

New York Rule of Professional Conduct 8.4(c) – identical to the corresponding Model Rule – prohibits lawyers from engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation. Rule 8.4(a) also prevents a lawyer from violating the professional rules through the actions of another person. In addition, Rule 1.2(d) prohibits a lawyer from counseling or assisting a client in conduct the lawyer knows is illegal or fraudulent. A lawyer may discuss the legal consequences of a proposed course of conduct, but may not encourage or facilitate the conduct itself.

Reading those rules together, the Committee determined that a lawyer could not help design the client’s ruse, advise the client on how to make the deception more effective, or supervise the client’s deceptive communications. The Committee found no authority under the current New York rules creating a general exception for deceptive conduct used to investigate possible FCA violations.

Limited Undercover Exceptions Did Not Apply

The Committee acknowledged that courts and ethics authorities have sometimes permitted narrowly tailored undercover investigations. For example, deceptive techniques have been accepted in certain intellectual property and civil rights matters, including the use of investigators posing as ordinary customers, tenants, homebuyers, or job applicants. Those cases generally involved limited misrepresentations concerning identity or purpose and activities that otherwise resembled ordinary transactions available to members of the public.

The Committee distinguished those situations from the proposed FCA investigation. The client did not merely plan to conceal the purpose of an inquiry. The client intended to make affirmative false statements about needing the companies’ services and potentially qualifying for grant funding. The Committee also noted that some jurisdictions (e.g., Colorado and Oregon) have expressly amended their professional-conduct rules to permit lawyers to advise or supervise otherwise lawful covert investigations. New York has not adopted such an exception. Although prior New York decisions have discussed the permissible use of undercover investigators, the Committee concluded that those decisions did not authorize a private lawyer to direct the proposed conduct in an FCA investigation.

Deceptive Investigations Can Jeopardize the Underlying Case

The opinion is not limited to attorney discipline. Improper investigative methods can also create significant problems for the prospective relator and the underlying FCA case. The Committee cited a federal case in which a court dismissed an FCA action following deceptive investigative practices by the relator’s counsel. Those practices resulted in physicians disclosing protected health information (PHI) to individuals who had misrepresented the purpose of their communications.

Depending on the circumstances, an improper investigation may lead to disputes over the admissibility of evidence, disqualification of counsel, sanctions, privacy violations, or dismissal of potentially viable claims. It may also undermine the relator’s credibility with the government during the intervention process.

Lawyers May Explain the Risks and Consequences

The Committee drew an important distinction between facilitating deceptive conduct and advising a client about its consequences. When a client intends to proceed—or has already proceeded—with deceptive conduct, the lawyer may research and explain the potential legal risks. The opinion suggests that providing such advice may be required by the lawyer’s duties of competence and diligence.

The lawyer may therefore discuss how the conduct could affect the FCA case, expose the client to liability, compromise evidence, or create other legal consequences. What the lawyer may not do is assist the client in carrying out the deception.

GWB represents healthcare providers in connection with government investigations and False Claims Act litigation. If you need assistance with such a matter, contact us today.