Attorneys employed by the Stroock Stroock & Lavan law firm often are hired after careers in state and federal law enforcement and regulatory agencies like the Securities & Exchange Commission and California Department of Justice.
In a story this week for the East Bay Express I detailed how Benjamin Diehl, a Supervising Deputy Attorney General for the California Department of Justice, quit his post last year, and immediately joined a private law firm that represents many of the same financial corporations he was previously tasked with investigating and prosecuting.
By switching sides, by going from the DOJ’s mortgage fraud strike force, and consumer protection section, to Stroock Stroock & Lavan’s Government Relations group—Stroock is one of the most aggressive defense firms backing banks, mortgage lenders and servicers, and credit card companies in disputes against consumers and state law enforcement—Mr. Diehl is walking a fine line with respect to the law and professional ethics. Of course there’s nothing wrong with a lawyer taking a new job, and shifting gears in their career. But when a government lawyer contemplates switching sides, they must navigate a complex set of ethical and legal questions so that they don’t do harm to the public.
Public perception in recent years is that top federal lawyers in the U.S. DOJ, the Securities and Exchange Commission, and other enforcement agencies are simply cashing in on their connections and knowledge, and perhaps even going soft on Wall Street while in government, all in order to secure lucrative post-government jobs defending and lobbying for the financial sector. The revolving door between Covington & Burling and the DOJ has gotten a lot of press, for example. Much of the public has lost faith in the effectiveness of the justice system.
I inquired with Stroock as to what sort of systems and procedures the firm has in place to ensure that Mr. Diehl will be separated and recused from cases that he might have worked on as a member of the California Attorney General’s staff, and how the firm will ensure he does not breach his duty of confidentiality to the State of California with respect to detailed legal information he surely has about California’s prosecution strategies, but the law firm declined to comment. I also inquired with the California DOJ about Diehl’s exit, but received no response.
I asked in part because of the timing of Mr. Diehl’s departure from the DOJ and his hiring by Stroock. Mr. Diehl announced his resignation from the DOJ in October, 2013 and joined Stroock as special counsel in November of 2013. But e-mails I obtained indicate that he was having private conversations with Stroock attorneys at least as early as April of 2013, a period in which he presumably had significant influence over multiple financial fraud and consumer protection investigations and lawsuits, including enforcement actions directed against clients of Stroock. The subject of the conversations between Diehl and the Stroock partners isn’t clear, but you can read the email exchanges yourself.
Diehl was a frequent speaker and attendee at financial industry conferences put on by the American Conference Institute, and a legal education group called the Practicing Law Institute. These conferences are geared toward educating in-house counsel and defense firms that work for financial corporations, many of which specialize in defending banks from consumer protection lawsuits. Attending these conferences, alongside Mr. Diehl, were several partners of the Stroock Stroock & Lavan law firm.
Attorneys are supposed to zealously represent their clients. They have a duty of loyalty and confidentiality to their current and past clients. Attorneys shouldn’t allow the interests of any other party, or their own personal interests, including future career opportunities they’re hoping to pursue, to interfere with the duties of loyalty and confidentiality they owe a client. And the information clients share with their lawyers, as well as information attorneys generate through investigation, and work products such as prosecution and defense strategies, should be maintained in confidentiality under most circumstances. Sharing this information with oppositional parties is especially problematic.
If the information a former government attorney shares is general in nature, that is, if it isn’t confidential information related to specific investigations or lawsuits, or specific government regulatory and litigation strategies, then it’s usually considered legal and ethical for a lawyer to share with new clients.
Part of Diehl’s new job is sharing information about state attorney general enforcement actions against the financial industry. For example, last April Diehl spoke at an ACI conference offering: “Expert defense strategies for in-house and outside counsel on navigating class actions, litigation, and government enforcement actions in the consumer finance industry.”
Government attorneys in California have added layers of responsibility to uphold. All attorneys practicing in California must follow the California State Bar’s rules to “maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client.”
Attorneys employed by the State of California to represent the interest of the state’s offices, agencies, and ultimately the people of California, must follow the same rules as other government servants. The Political Reform Act puts several restrictions on state attorneys who leave government employment and go to work for the private sector. Specifically, California law bars government lawyers from switching sides and representing new clients in proceedings (court cases, negotiations, administrative hearings, etc.) that they previously worked on as government attorneys. This is a very specific prohibition with lifetime duration.
Government attorneys are also prohibited from making decisions that might materially affect a person or company with whom they’re negotiating with for a job. The law’s exact wording is:
“No public official shall make, participate in making, or use his or her official position to influence, any governmental decision directly relating to any person with whom he or she is negotiating, or has any arrangement concerning, prospective employment.”
Of course the exactitude of these laws leaves plenty of big loopholes. And the secrecy that lawyers can easily maintain, including government lawyers whose records, for the most part, are not subject to disclosure under the California Public Records Act, makes it hard for the public to keep tabs on what crucial decisions an attorney is making, and how they might relate to post-government employment pursuits.