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Attorney Grievance Commission of Maryland v. Pennington6/22/2005
that reliance on advice of counsel is a defense in a fraud case as it bears on scienter. VF Corp., 112 Md. App. At 716, 686 A.2d at 654. "Scienter is the intent to defraud or deceive." Id. at 715, 686 A.2d at 653. Writing for the unanimous panel, Chief Judge Robert Murphy, later Chief Judge of this Court, stated as follows:
"To prevail on an advice of counsel defense, however, appellants were required to persuade the jury (1) that they communicated to counsel all facts they knew or reasonably should have known; and (2) that they relied in good faith upon the advice given."
Id. at 716, 686 A.2d at 654; see also United States v. Butler, 211 F.3d 826, 833 (4th Cir. 2000). Common expressions of the necessary elements to establish an advice of counsel defense have fleshed out the requirements stated by the VF Corp. court as follows:
"To establish the advice-of-counsel defense, the party raising it must show that: (1) he is acting in good faith in the belief that he has good cause for his action and is not seeking an opinion in order to shelter himself; (2) he has made a full and honest disclosure of all the material facts within his knowledge or belief; (3) he is doubtful of his legal rights; (4) he has reason to know that his counsel is competent; (5) he honestly complied with his counsel's advice; and (6) his counsel is of such training and experience that he is able to exercise prudent judgment in such matters."
G.S. Enterprises, Inc. v. Falmouth Marine, Inc., 571 N.E.2d 1363, 1371 (Mass. 1991); see also Liss v. United States, 915 F.2d 287, 291 (7th Cir. 1990).
The affirmative defense of reliance on the advice of counsel arises most commonly in tax cases and in cases which require specific intent. Many courts have held that the defense is only available as against specific intent crimes. See e.g., United States v. Cross, 113 F. Supp. 2d 1253, 1264 (S.D. Ind. 2000) (holding that advice of counsel is no defense to the general intent crime of operating an illegal gambling business because the defendant's specific intent or knowledge was not an essential element of crime); United States v. Dyer, 750 F. Supp. 1278, 1293 (E.D. Va. 1990) (stating that " n general, an advice of counsel defense applies only where the violation requires proof of specific intent, that is, proof that a defendant has actual knowledge that his conduct is illegal"); United States v. Soares, 998 F.2d 671 (9th Cir. 1993) (affirming the district court's decision that an offense under 18 U.S.C. ยง 1954 was not a specific intent crime and, therefore, the defendant could not offer an advice of counsel defense); United States v. Carr, 740 F.2d 339, 346 n.11 (5th Cir. 1984) (stating that " trictly speaking, good faith reliance on advice of counsel is not really a defense to an allegation of fraud but is the basis for a jury instruction on whether or not the defendant possessed the requisite specific intent"). The reason given as underlying this limitation is that the defense is deemed relevant to negate proof of a defendant's intent to violate the law.
The defense of reliance on advice of counsel was raised by an attorney in a disciplinary matter in Colorado. See People v. Katz, 58 P.3d 1176 (Col. 2002). The attorney was charged with violating Colo. R. Prof. Conduct 8.4(c), based on allegations that he withdrew money from a joint account without the knowledge or consent of the firm with whom he collaborated. Katz argued, inter alia, that he relied on the advice of counsel that he could withdraw the funds in question, and that in so doing, he could not be held to have violated the Rules of Professional Conduct. Id. at 1187. Disbarring the errant attorney, the Colorado Supreme Court re
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