Lawyers Fight Law Requiring Naming Clients : Privacy: Defense attorneys say clients who pay in cash have constitutional right to secrecy. Government claims it needs information to track drug dealers and tax evaders.

One day last year, a man facing big trouble with the law came to the Sausalito office of veteran criminal defense attorney Michael H. Metzger and plunked down $100,000 in cash.

Metzger deposited the legal fee in a local bank. Then he filed a form with the Internal Revenue Service reporting that he had received more than $10,000 in cash, as he is required to do under a 1984 federal law.

But Metzger declined to give the IRS the name of his client, who was the subject of a tax evasion investigation. Now Metzger is part of a brewing legal battle over the right of lawyers to keep secret the names of their clients.

Metzger is one of at least 10 criminal defense attorneys in California--including eight in Los Angeles--who recently received IRS summons ordering them to name clients who have paid them fees of $10,000 or more in cash. Nationwide, the IRS has sent similar summonses--the IRS equivalent of a subpoena--to at least three dozen lawyers, federal officials said.

Federal officials said more summonses are expected to be issued to other lawyers who have not complied fully with the reporting law. The officials said that as many as 15,000 lawyers nationwide have submitted incomplete reporting forms.

Government officials have made it clear they believe that obtaining compliance with the law will help them wage war against drug dealers, money launderers and tax evaders--criminals who deal in cash and try to keep their activities cloaked in secrecy.

Among the Los Angeles lawyers who have received summonses are Anthony Brooklier, who has represented several major drug defendants, and his partner, Donald Marks, who represented reputed organized crime boss Peter John Milano in a criminal case here. Under a court agreement in 1988, Milano pleaded guilty to racketeering and extortion and was sentenced to six years in jail.

Other Los Angeles lawyers targeted by the summonses were partners Janet Levine and Alvin Michaelson, both of whom have handled major drug cases.

If the lawyers resist the summonses, Justice Department officials have said they plan to file suit against them seeking to compel the attorneys to turn over the names of clients and other information that has been withheld.

The looming legal battle involves two important issues: whether an individual can consult confidentially with an attorney and under what circumstances a lawyer can be compelled to reveal the identity of a client.

The defense lawyers say that if they provide the information the IRS is seeking they would be violating the attorney-client privilege and jeopardizing their client’s constitutional rights. By law, attorneys have a right not to disclose the content of conversations they have had with clients, just as a doctor cannot be required to discuss a conversation he has had with a patient, or a priest with a parishioner.

The reporting law “has a very serious detrimental impact on the lawyer-client relationship,” said Miami attorney Neal Sonnett, president of the Criminal Defense Lawyers group. “It threatens the right to counsel, the ability of a person to consult with a lawyer in confidence without the lawyer being turned into an informant or a witness against the client.”

Justice Department and IRS officials call this a bogus argument, maintaining that the government is entitled to the cash transaction information as a tool in fighting tax evasion, drug sales and money laundering.

“This is a commercial transaction, a business relationship,” said James A. Bruton, deputy assistant attorney general in the Justice Department’s tax division. “It has nothing to do with the confidential discussions between a lawyer and a client.”

Legal ethics experts are divided on the controversy.

“On this issue I am not sympathetic with the defense lawyers,” said Stephen Gillers, a professor at New York University Law School. “If the defense lawyer’s position was accepted, we’d be in the unfortunate and professionally embarrassing position of having lawyers be the only safe depository of dirty money,” he said.

But Paul Rothstein, a professor at Georgetown Law School, disagrees. He said compelling lawyers to provide the information sought by the IRS represents a threat to an individual’s constitutional right to choose a lawyer and to have that relationship kept confidential.

Earlier this month, this issue reached a New York federal court, and it was resolved in favor of the government.

The controversy has its genesis in the 1984 Deficit Reduction Act. The law mandates that anyone engaged in a “trade or business” has to give the IRS in writing the name and other information about a client who pays $10,000 or more in cash.

The law had two goals: increasing tax revenue and aiding authorities in pursuit of criminals, according to William G. Gilligan, IRS criminal investigations chief in Los Angeles. Congress was told the law could help the IRS garner taxes on billions of dollars of unreported income.

Gilligan said the information on the IRS forms provides “leads to the people who have had these large cash transactions,” in the same way that reports of cash deposits exceeding $10,000 from financial institutions are required under the Bank Secrecy Act of 1970. “These are ways we can trace illegal income,” he said.

In many instances, lawyers have returned partially completed forms, reporting receipt of the cash fees but declining to name the client. At other times, lawyers, including Metzger, said they provided the name after seeking the client’s permission and determining that disclosure of an identity would not hurt the client.

“Like most lawyers today, I recognize that the fact that an individual pays you a cash fee is not necessarily privileged on every occasion,” Metzger said.

However, Metzger said that if he were to turn over the name of a client who is the subject of a criminal tax investigation and who has paid a large fee in cash, that information could be used against the client.

“My position is very, very simple,” said Metzger. “In a situation where I believe in good faith that I should not disclose the name of the individual who gave me money because I believe it would be a violation of my responsibilities as an attorney, there is no way I will give it up unless a court orders me to.”

Some Los Angeles lawyers who have received an IRS summons expressed similar sentiments. “They’re asking for information that is potentially incriminatory or could link a client of mine to an ongoing criminal investigation,” Levine said. “As I understand the law of attorney-client privilege, that is precisely the kind of information I am not permitted to reveal.”

Levine said she and her partner, Michaelson, will resist the summons.

So did two other high-profile Los Angeles criminal lawyers--Brooklier and Marks.

“We are prepared to litigate this,” said Marks. “It goes to the very heart of the criminal justice system. Clients expect that information they give to a lawyer, including their name, will not be disclosed,” until a person is charged, goes to court and it becomes apparent who his lawyer is.

“I do think we have a duty to file the IRS forms and tell about the cash we have received,” said Brooklier, who has represented numerous defendants in major drug and money laundering cases and who is the attorney for Elizabeth Adams, accused of running a Los Angeles prostitution ring whose primary customers were wealthy and influential men.

But, he added, “I think that clients who have legal problems have a right to retain counsel and not have to worry about their lawyers being called as a witness against them. This action threatens a potential defendant’s right to effective assistance of counsel which is guaranteed by the Constitution.”

Four other Los Angeles lawyers acknowledged that they have received an IRS summons but spoke on condition of not being identified. One of the lawyers said that if he were identified it could have a “chilling effect” on his firm’s business. He said the IRS had asked him for information about nine separate cases, eight involving drugs.

Another of the lawyers said the IRS was asking him for information about who paid him cash fees in six drug cases, all of which are now concluded. He said in several instances the fees had been paid by family members or friends of a defendant who was incarcerated. The lawyer said that if his name was printed and one of the people who paid him got the impression that the lawyer might divulge the payor’s name, “this could not only be professionally dangerous but physically dangerous.”