Academic journal article Case Western Reserve Law Review

Behavioral Legal Ethics Lessons for Corporate Counsel

Academic journal article Case Western Reserve Law Review

Behavioral Legal Ethics Lessons for Corporate Counsel

Article excerpt

CONTENTS INTRODUCTION I.     CONSCIOUSLY HELD CONCEPTIONS AND MISCONCEPTIONS OF A        LAWYER'S DUTY WHEN ADVISING A CORPORATE CLIENT ABOUT        ITS (POSSIBLY) FRAUDULENT OR CRIMINAL PLANS II.    BEHAVIORAL LEGAL ETHICS EXPLANATIONS FOR WHY ATTORNEYS        MAY NOT ADVISE AGAINST CORPORATE CLIENT CRIME AND        FRAUD        A. The Role of Attorney Self-Interest        B. Obedience Pressure        C. Conformity Pressure        D. Partisan Bias III.   INFLUENCING BETTER CORPORATE LEGAL ADVICE THROUGH THE        LESSONS OF BEHAVIORAL LEGAL ETHICS        A. Interventions to Combat a Corporate Attorney's Wrongful           Obedience and Conformity        B. Priming Corporate Advisors to Protect the Corporation from           Liability        C. Educating Lawyers About Debiasing Techniques        D. Serious Consequences for Attorneys Who Fail to Protect           Corporate Clients from Crime and Fraud Liability CONCLUSION 


Attorney Timothy Muir served as inside general counsel, and later outside counsel, for Scott Tucker's payday loan business. (1) Tucker's payday loan enterprise, which did business under various names, (2) charged customers illegal interest rates of 600 percent and higher. (3) Loans were set up to automatically renew--a fact that was misrepresented in the required Truth in Lending Act (TILA) forms. (4) The loan payment plans resulted in a $300 loan costing a consumer $975, though the TILA forms represented it would cost $390. (5)

In an effort to escape prosecution and consumer class actions, Muir and Tucker entered transactions with Indian tribes to create the appearance that the tribes owned and operated the payday loan business. (6) The government described Muir as "the architect" of these transactions. (7) The goal was that the payday loan business would avoid liability because the tribes, as sovereigns, would not be subject to state civil and criminal usury laws. (8) In reality, the tribes would play no actual ownership role; they were well-paid for entering the "ownership" agreement and keeping a company computer on the reservation. (9)

Tucker and Muir misrepresented the tribes' interest in the business both in court filings and in interactions with customers. (10) To keep up the charade that the tribes actually owned and operated the business, Tucker and Muir went to elaborate lengths to create a fake record. (11) For example, payday loan employees working in company offices in Overland Park, Kansas were told to lie about where the company was located and were even given weather reports for the places where the tribes were located in case the weather came up during small talk on the phone with customers. (12)

Ultimately, their plan was unsuccessful. The Federal Trade Commission obtained its largest civil court judgment to date--$1.3 billion--against Scott Tucker and AMG Services, Inc. (13) Tucker and attorney Timothy Muir were charged with and convicted of conspiracy to collect unlawful debts, collection of unlawful debts, wire fraud, money laundering, and Truth in Lending Act (TILA) violations--all related to collection of usurious interest on payday loans. (14) Attorney Timothy Muir was sentenced to seven years in prison, (15) while Scott Tucker was sentenced to sixteen years and eight months. (16) As this Article goes to press in 2019, both Muir and Tucker have appealed their convictions. Their cases are pending before the Second Circuit. (17)

The field of behavioral legal ethics can provide insight into the thinking behind the advice that corporate attorneys like Muir provide or fail to provide their corporate clients. (18) Traditionally, legal ethics education has focused on the law governing lawyers. (19) Professional responsibility courses and required attorney ethics continuing legal education classes deal primarily with professional conduct rules and the law of professional liability. (20) The thinking behind this educational approach is that if lawyers know the law, they will act consistent with their ethical and legal obligations. …

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