July 3, 2014

From Law360

By Brian Mahoney

BNP Paribas SA relied on allegedly incorrect advice from Cleary Gottlieb Steen & Hamilton LLP when the bank took steps to hide its criminal avoidance of U.S. sanctions, which might raise public relations headaches for the firm but probably won’t rise to malpractice, experts say.

In a statement of facts filed with the blockbuster criminal settlement Monday, federal prosecutors say the bank relied on a 2004 legal opinion from outside counsel “incorrectly” suggesting it could protect itself from U.S. authorities by processing prohibited transactions from countries like Sudan through nonaffiliate U.S. banks.

What's more, giving advice later deemed incorrect by regulators wouldn’t necessarily mean that advice constitutes malpractice, according to Stacy Carpenter, a shareholder at Polsinelli PC and a professional liability expert.

“Just because it’s wrong or just because the agency comes in later and declares it's wrong doesn’t necessarily mean that it’s malpractice,” said Carpenter, who did not comment either way on the firm's liability in the BNP case.

“At the end of the day, the client makes their own business decision of what to do and how to do it” she said. “There are a lot of times that clients do things that lead to liability or lead to criminal issues or lead to regulatory issues, and it’s not that the lawyer told them to do it. The lawyer laid out their options, and they made the decision what to do.”


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