by Guy O. Kornblum
Recently I met with a group of professionals who I am representing in connection with potential claims they may have against a corporate insurance broker, investment houses, an insurance company, as well as lawyers and tax professionals arising out of various tax exempt and tax deferred programs which have become challenged by the government. It is not clear that this challenge has merit, but my clients are concerned. Initially, one of them came to me for guidance, and I started by assessing what the problem was. Just what was it that was being challenged and why? I realized I really did not know nor did I have the expertise to find out. As is often the case with lawyers who handle litigated matters, I needed the help of experts in the various financial and tax fields. I made contacts and put together a "team."
Meanwhile, my client talked with other professionals who had invested in the same programs, and they wanted me to help them, as well. I decided that would be a good idea since this was going to be a relatively expensive venture, and if I could jointly represent them, they could share the fees and costs. This is not an easy task to undertake. I knew about some of the issues, which were apparent to me. For one, I was representing joint clients, so I had to be careful that there were no conflicts among them, or if there were potential conflicts, the clients understood what those were and what would happen if they became "real" conflicts at some point. I also needed to explain how this was all going t o work.
What I did not realize is that my clients were totally unsophisticated about what had to be done. As in the case of many professionals, they were naive about the potential for dishonesty in the arena of financial services, tax deferred programs and investments. As busy professionals, they worked long hours, spent much of their business day involved in their respective practices, and relied on others, whom they trusted, to carry out a financial plan. They had little experience with lawyers, and frankly, some of their experiences were not positive. They feared that all the lawyer would do would eat up their funds, recommend filing lawsuits and ask for more money, all of this resulting in a "black hole" for them to deposit more.
I really did not realize this, since I did not know any of them but the one client who originally came to me. I initially had a couple of meetings to discuss their problems. What I found out later was that the clients still did not quite understand the nature and extent of the issues regarding the challenged investments. They were either too embarrassed to ask more questions or did not understand well enough what the problems were. We were mis-communicating, and neither they nor I realized it! Not a good situation for a lawyer trying his best to provide legal services. I had more or less met with these clients in the initial phases without charge. They had agreed to reimburse me for my time once we agreed that I would quarterback the inquiry into the status of their investments. There were questions about the safety of their funds, how they were handled by the broker and intermediaries, where the funds were deposited (an off shore site emerged!), and a host of questions about the taxability.
Finally, through a lead member of the client group, I discovered there were misperceptions of what I was proposing my firm do, how I was going to go about helping them get information and when the information would be evaluated and by whom. They were also still concerned about just getting into more lawsuits. When this came to my attention, I knew we had to have another meeting, but this time I was going to listen more and search out the areas where they were uncertain, confused or had misperceptions. We had that meeting. It was a basic Q&A session, as I explored these areas. I explained the plan, the role of each professional who was on the "team" (whom they had met at a prior meeting), and that I was trying to reach a goal to minimize any adverse tax consequences of them and avoid litigation. However, the further course would be influenced by what our outside professionals found out and recommended.
They were key to making my recommendations, so the clients could make some important personal decisions for themselves and their families about their assets. Granted, this was a unique situation. It was for them and for me. Representing several professionals as clients in an investment and tax situation such as this was unusual. For them, it was a first time venture. But they were not bashful once we got into the intimate setting of a law office, and we sat down and communicated in a way that allowed each of them to ask the questions they had been reluctant to ask previously, and for me to question them on what they thought was the goal of what we were doing. It took some time and patience, on both sides, to get to the point where we could have this level of communication. But we are there.
We are now an attorney-client team, with a common goal of preserving the assets of my clients and avoiding litigation. We hope the favorable tax treatment will be preserved. If that is not the case, then we will be ready to assess the potential for recouping any losses my clients suffer from any person or entity responsible for bad advice. Without eventual, complete communication between lawyer and clients, this would not be possible. In the normal circumstances of client representation, in less complex situations, the problem I have described may not have arisen. It is a lot less complicated to communicate with one or two or a business representatives than a group as we had here. But it is still critical to maintain full and complete communications with your lawyer to allow him or her to provide the legal representation that you need.
