Legal Advice May Be a Client’s “Property”

Guest post by Nussin Fogel.

It has long been recognized that the value of a lawyer’s services depends upon the lawyer’s reputation for giving sound advice. Some of history’s first defamation cases were brought by16th century lawyers accused of being “ambidexters” (having a conflict of interest).

The Second Circuit has now held that the ability to give sound legal advice is actually a property right.

In a June 22 opinion, the court upheld the conviction of Giridhar Sekhar, an investment adviser who tried to blackmail Luke Bierman, the former general counsel for the New York State Comptroller, into recommending that the Comptroller invest $35 million of the state’s employee pension funds in a fund managed by Sekhar’s venture capital and private equity company, FA Technology Ventures. FA Technology was to receive over $7 million in fees if the deal went through.

After learning that the placement agent involved with other FA Tech funds was being investigated, Bierman had recommended that the Comptroller not move forward with the investment. The First Deputy Comptroller conveyed this decision to George Hulecki, a managing partner of FA Technology. Hulecki had previously heard that Bierman was opposed to the investment and had heard rumors that he was having an extramarital affair with another lawyer in the Comptroller’s office. (The Comptroller’s office later said rumors of the alleged affair were unfounded.)

A few days later, Bierman received an anonymous email requesting a personal email address to report a “a serious ethical issue.” Bierman advised the sender to report the matter to the Inspector General, but also provided his personal email address.

The e-mailer then accused Bierman of “blackball[ing] a recommendation on a fund,” and threatened that if Bierman didn’t tell the Comptroller that he had had a “change of heart” the e-mailer would disclose that Bierman was having an office affair.

Similar emails followed, invoking the Tiger Woods scandal and giving Bierman a deadline to comply.

Bierman reported the threat to law enforcement. The FBI traced some of the emails to the Boston-area home of Sekhar, a managing partner of FA Technology, and he admitted to sending the emails.

Sekhar was charged with attempted extortion under the Hobbs Act, which subjects to criminal liability

[w]hoever in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by robbery or extortion or attempts or conspires so to do.

The Act defines “extortion” as:

obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.

Sekhar moved to dismiss the charges against him on the grounds that a lawyer’s recommendation is not “property.”

The district court denied the motion, ruling that “the General Counsel’s right to make professional decisions without outside pressure is an intangible property right.”

Sekhar represented himself at trial. Before his opening statement, he placed a photo of a child and two pairs of children’s sneakers on his desk, then suggested to the jury that he couldn’t both pay for a lawyer and provide for his family.

In April, 2011, the jury convicted Sekhar of one count of attempted extortion and five counts of interstate transmission of an extortionate threat. He was sentenced to 15 months in prison.

Sekhar argued on appeal that Bierman’s recommendation to the Comptroller could not be considered “property” because it was not a source of wealth for Bierman.

The Second Circuit disagreed, noting that the right to pursue a lawful business “has long been recognized as a property right” and that there is also a property right to “conduct a business free from threats” and to make business decisions “free from outside pressure.”

The court noted that Bierman’s job was to provide legal advice to the Comptroller, and that a “lawyer’s stock in trade is the sale of legal services.”

Accordingly, the General Counsel had a property right in rendering sound legal advice to the Comptroller and, specifically, to recommend–free from threats–whether the Comptroller should issue a Commitment for FA Tech III.

The value and worth of a lawyer’s services may be said generally to depend on freedom from conflict, including a conflict created by personal blackmail. Accordingly, the General Counsel’s ability to give legal advice free from threats–and, specifically, to make a recommendation on FA Tech III–can be seen as a “source or element of wealth” for the General Counsel.

This appears to be the first case in which a lawyer’s advice was deemed to be “property.”

Nussin S. Fogel has been practicing for over 25 years as a New York slip and fall lawyer.

(photo: http://www.flickr.com/photos/alancleaver/4105747756/)

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