Just before 4:30, Goodman stubbed out his cigarette and entered the cluttered, high-ceilinged courtroom, where he proceeded to promise the judge: ”The wrongs I have done are behind me.” But when the sentences were pronounced, they were tough: 12 years in prison for Goodman, 10 years for Weissman. The judge had not been moved by Goodman’s promise, which had a familiar ring for some in the courtroom.

Over his years as O.P.M.’s executive vice president, Goodman had made the same promise again and again, sometimes in tears, to the group of men who served as the company’s attorneys. And over the years, they had believed him – or, at least, they had acted as though they believed him – while they carried out his directions. As a result, their firm, Singer Hutner Levine & Seeman, has been accused by some lenders of complicity in the leasing company’s fraud.

Because of the special nature of the case, the details of the O.P.M. fraud and of the relationship between the company and its law firm have become publicly available to an extraordinary extent. The following article is largely based upon the many thousands of pages of depositions taken in a sweeping bankruptcy investigation. In them, Myron Goodman is portrayed as a volatile, ingenious manipulator of men and money – purloining a letter that contained incriminating evidence, threatening to hurl himself from his ninth-floor office window.

Singer Hutner is shown confronting a painful dilemma. Warned that it might be in the midst of a massive fraud orchestrated by its most important client, the law firm sought the advice of respected legal experts, and with their approval proceeded to close new loans for O.P.M. Even after learning that more than $60 million of these new loans was fraudulent, Singer Hutner kept its silence while bowing out of the picture. Thus Goodman was able to use new lawyers to swindle lenders out of another $15 million before his house of cards collapsed early in 1981.

Rooted as they were in the traditional lawyer’s maxim – my client right or wrong – the firm’s conduct and the experts’ advice raise serious questions about the theory and practice of legal ethics in America. These questions are being asked with ever-greater frequency today.

This nation’s adversary system of justice requires that lawyers represent a client loyally and zealously, even if the client is a criminal. The model legal ethics code drawn up by the American Bar Association in 1969 and adopted by most state bars prominently commands that lawyers keep in strict confidence any knowledge of a client’s past crimes. At the same time, however, the ethics code reminds an attorney that he may not ”counsel or assist his client in conduct that the lawyer knows to be illegal or fraudulent.”

In practice, attorneys both inside and outside the courtroom are often forced to choose between these two broad principles. The line between what a lawyer must do to discharge his ethical obligation to his client and what he may not do without becoming his client’s accomplice in crime is sometimes so thin it seems invisible. Should a divorce lawyer go along when his clients conceal some of their assets to keep down the size of their alimony payments? Should a personalinjury lawyer go along when his clients fake or exaggerate their pain and suffering? Should a criminal-defense lawyer go along when his clients lie on the witness stand about their whereabouts on the night of the murder? On the face of it, the answer to all three questions may seem to most laymen to be a resounding ”no.” But to many lawyers it is not so clear. Suppose, for example, the attorney only suspects the truth. At what point should he stop giving his client the benefit of the doubt? What obligation does he have to investigate the facts? Under what circumstances should he resign from the case? At what point does he become responsible for preventing a client from performing criminal acts?

These issues – which figure dramatically in the O.P.M. case – have inspired fiery controversy within the profession. In fact, they have roiled the American Bar Association as it has sought to develop a new ethics code over the past five years. The latest version of the proposed new code is scheduled to be voted up or down at the annual meeting of the association in New Orleans next month. The decision will be made at a time when the profession is caught up in the process of change and re-examination.

Watergate, which found the nation’s leading law officers snared in the my-client-right-or-wrong web, helped get things going. It was followed by a stream of cases in which lawyers were charged with complicity in securities frauds. Meanwhile, traditions that were central to the profession’s self-image have been eroded, as lawyers advertise their wares publicly and show ever greater willingness to sue one another. A new self-consciousness has led to the establishment of courses in ethics at law schools, a spate of articles on ethics in law journals and increasing concern that unless the profession reforms itself the Government might take a hand.

Singer Hutner’s experience with the O.P.M. fraud represents a dramatic illustration of the conflicts and moral ambiguities that have troubled thoughtful lawyers for many years and have now become a focus of heated public debate. Aschildren, Mordecai Weissman and Myron Goodman went to the same yeshiva in Brooklyn. They attended Brooklyn College together. In 1969, Goodman ended up marrying Lydia Ganz, whose sister had recently married Weissman. It seemed logical that the two men would become business partners, and so they did.

Weissman started the company in 1970 in a small office on Church Avenue in Brooklyn, and Goodman joined him a few months later. Weissman handled the marketing end, Goodman was the inside man, in charge of finances; they each owned half of the business. O.P.M. was Weissman’s name for the company – short for ”other people’s money.”

The company would borrow money to purchase computers and other business equipment and then lease the equipment to corporate customers. In theory, the lease payments to O.P.M. would be large enough to allow the company to service its loans with enough left over to provide a handsome profit.

The formula seemed to work magically. By the late 1970’s, O.P.M. had become one of the nation’s five largest computer-leasing companies, with 250 employees in 11 offices across the country, including plush headquarters on Broadway in Manhattan. It was buying multimillion-dollar computers from the likes of I.B.M. and leasing them to such corporations as American Telephone and Telegraph, Revlon and Polaroid. Prestigious banks, insurance companies and other financial institutions were glad to lend O.P.M. money, secured as it was by the obligations of the lessees to make lease payments and by the value of the computers themselves. Many of these lenders were recruited by Lehman Brothers, the company’s investment banker. O.P.M. also raised cash by selling legal title to the computers to individual investors seeking tax shelters.

The two owners of O.P.M. lived well. Goodman purchased the baronial Wardwell Estate (currently valued at up to $750,000) in Lawrence, L.I., where he lived with his wife and two daughters. He decorated it lavishly, adding a disco and a small movie theater. He pledged $10 million to Yeshiva University and became the youngest trustee in its history.

In 1978, Goodman and Weissman bought a bank in Louisiana, savoring this traditional emblem of corporate success. Goodman soon found a special use for the bank, however – a kind of illegal interest-free borrowing called check-kiting. He was detected by bank officials within six months, and in March 1980 O.P.M. pleaded guilty to 22 felony counts and paid a $110,000 fine. A tearful Goodman promised his attorneys that he would never stray again.

It was the first public indication of serious legal trouble at the company, but the case attracted little notice. Not until a year later would O.P.M. go bankrupt and the story of the Goodman-Weissman machinations begin to emerge.

Almost from the start, the company was basically insolvent and survived by means of fraud and bribery. A single computer would be used as collateral for two or three loans with different banks; the value of a given piece of equipment would be inflated to obtain larger loans. (Judge Haight, at the time of sentencing, told how ”Mr. Goodman would crouch under a glass table with a flashlight and Mr. Weissman would trace the forged signatures.”)

To win a place in the competitive computer-leasing market, Weissman bribed employees of potential customers, and the company offered lease rates far below those of its competitors. Moreover, the company offered lessors a risky bonus. In return for granting O.P.M. a long lease of, say, seven years, customers were promised that they could cancel the contract in the event a technological breakthrough made the computers obsolete.

Goodman was pushing the company toward ever bigger loans, building the shaky pyramid ever higher, when I.B.M. announced in 1977 a forthcoming new line of computers that would revolutionize the business. O.P.M. customers soon started lining up to cancel their leases. To avoid bankruptcy, Goodman resorted to fraud on a much grander scale than ever before, as Weissman’s role in the illegal actions diminished. He relied almost totally on leases supposedly entered into by Rockwell International, the huge California aerospace company. He used forged signatures, documents falsified to overstate the value of leases and computers, and loans obtained upon equipment that did not exist. Between 1978 and 1981, O.P.M. obtained from 19 banks, pension funds and other lenders more than $196 million in loans secured by phony Rockwell leases. These new loans went to meet payments on old loans until the company finally came crashing down in March 1981. Within the next year, Goodman, Weissman and five O.P.M. vice presidents would plead guilty to charges of fraud.

Andrew B. Reinhard was 26 years old, an honors graduate of Harvard Law School, when he joined a small New York law firm in 1969. When the newly created O.P.M. Leasing Services Inc. started casting about for a law firm, Myron Goodman remembered Reinhard, older brother of a boyhood friend. That was the start of the long, tumultuous relationship between the company and Singer Hutner.

All through the decade of fraud at O.P.M., Singer Hutner handled the company’s legal work. That included closing loans and supplying the legal opinions that lenders relied on as to O.P.M.’s title to computers and as to the legality of O.P.M. leases. The firm also handled the personal legal affairs of ”Myron and Mordy,” as the owners of O.P.M. were known to Singer Hutner lawyers.

As the computer-leasing company grew, so did Singer Hutner. By 1980, it employed 29 lawyers, with offices in New York and New Orleans; in that year, it collected more than $3.2 million in fees and expenses from O.P.M. – about 60 percent of its total income. Reinhard was the third O.P.M. director, along with Weissman and Goodman, and several other Singer Hutner lawyers were company officers.

Today, looking back on that time, Singer Hutner lawyers who have testified insist that up until June 1980, they had no inkling that their chief client was engaged in large-scale fraud; they thought O.P.M. a booming, legitimate business. (According to Goodman, however, there was one partner who was a knowing, although reluctant, participant in the Rockwell fraud – Andrew Reinhard, whom Goodman described in his deposition as his closest friend aside from Weissman. Reinhard was a major target of a Federal grand jury investigation last year but was not indicted. He invoked the Fifth Amendment to avoid testifying in the sweeping bankruptcy investigation, but through his attorney, he has denied any involvement in the fraud.)

The relationship between Singer Hutner and O.P.M. took a dramatic turn on June 12, 1980, when Joseph L. Hutner, a senior partner in the law firm, received an extraordinary visit from Myron Goodman. The O.P.M. executive indicated that he was troubled, that he might have done something wrong in his stewardship of the company – something he could not set right because it involved millions of dollars more than he could raise. But during the meeting with Hutner, which lasted for several hours as Reinhard and others shuttled in and out of the room, Goodman indicated he had no intention of telling Hutner any details unless he could be sure the attorney would not tell them to anyone else. Hutner could not give him such an assurance since the law firm also represented O.P.M. itself and thus might have to inform Weissman.

One of the matters troubling Goodman was a letter that John A. Clifton, O.P.M.’s chief in-house accountant, had told Goodman he was preparing to send to Reinhard. Clifton had discovered evidence of the Rockwell lease fraud. After consulting his own lawyer, William J. Davis, Clifton decided to turn the information over to Singer Hutner and then resign. He hoped thereby to avoid criminal prosecution while putting the onus on Singer Hutner to decide whether to blow the whistle on O.P.M. While Goodman was in Hutner’s office, the letter was delivered to Reinhard’s room down the hall.

During a break in the meeting in Hutner’s office, Goodman and Reinhard strolled off, Goodman heading for the bathroom. Some time later they returned; Goodman had the letter. Accounts of how he obtained it differ. The lawyers say that Goodman snatched the letter unopened from Reinhard’s hand or seized it from the top of his desk. Goodman says this was a ”cover story” agreed upon between him and Reinhard – that in fact he found Reinhard reading the letter as he passed his office. By all accounts, Goodman took the Clifton letter with him when he left Singer Hutner that afternoon, still refusing to reveal what he had done wrong but insisting that it was all in the past.

Goodman was worried that Clifton might go to the authorities. He said he promised Clifton $50,000 to $100,000 in severance pay that, Goodman testified, was ”meant to induce him to keep his mouth shut.” Goodman also urged Hutner to talk with Clifton’s attorney, William J. Davis of Schulman Berlin & Davis.

In his description of their meetings, Davis said that Hutner seemed to be trying to persuade him that Clifton should keep silent and should take back his letter. Davis said the conversations were ”a kind of macabre dance around the issue,” so elliptical and hypothetical that ”nothing was fact, everything was possible.” He said Hutner seemed to know more than he let on, but seemed anxious to preserve a ”smoke screen” of deniability. Davis recalled: ”I had visions of him clamping his hands over his ears and running out of the office.”

Davis also said he had been prepared to give Hutner a copy of Clifton’s letter and would have told him ”as much as he wanted to know,” but that Hutner told him ”he didn’t want it, he didn’t want to know what was in it.”

Hutner gave a very different account of these meetings. He insisted he did not seek to have Clifton withdraw the letter, nor did he shrink from hearing about Clifton’s evidence. Yet Davis did give Hutner and Eli R. Mattioli, a younger Singer Hutner lawyer who attended one of the meetings, some crucial information. According to a memorandum prepared by Singer Hutner at the time, Davis said Clifton had evidence that O.P.M. had perpetrated a multimillion-dollar fraud and that the opinion letters Singer Hutner had drawn up to obtain loans for O.P.M. had been based upon false documents. And Davis also passed along, Mattioli recalled, an ominous opinion from Clifton – that O.P.M., ”in order to survive, would probably have to continue the same type of wrongful activity.”

Thus it was that in the middle of June 1980 Singer Hutner received what was tantamount to a stark warning that the law firm was deeply involved in a huge, ongoing fraud. Today, Davis recalls that he felt at the time that a turning point for Singer Hutner had arrived. ”Once you come into that kind of knowledge,” he says, ”a whole new set of rules drops on you.” Certain that Singer Hutner would have to resign and that O.P.M.’s fraud would soon be exposed, Davis says he ”just sat here waiting for the shoes to drop.”

It was a long wait.

The seriousness of the situation was not lost on Singer Hutner, which decided it needed some outside legal advice of its own. On June 18, the firm made an appointment with Joseph M. McLaughlin, who was dean of Fordham Law School at the time and is now a Federal Distict Court judge in New York. McLaughlin, one of Mattioli’s professors at Fordham, was a leading authority on the attorney-client privilege, under which lawyers are generally prohibited from revealing secrets confided to them by their clients.

According to McLaughlin’s deposition, Hutner, Mattioli and Carl J. Rubino, another Singer Hutner lawyer, arrived at his office on June 19 ”in a distressed state.” He said Hutner made it clear ”that he wanted to act in a way that would preserve the attorney-client confidence.”

But it soon became clear to McLaughlin that, given the apparent scope of the fraud and the law-firm’s close relationship with O.P.M., the central problem was one of ”ethics, professional responsibility.” He accepted a $5,000 check from Hutner as a retainer and proceeded to bring into the case a legal-ethics expert, Henry Putzel 3d, a former Federal prosecutor who had taught the subject at Fordham and who was practicing law in New York.

The next day, at a two-and-a-half-hour meeting in Hutner’s office, Hutner, Mattioli and Rubino gave McLaughlin and Putzel a detailed report on what they had learned from Goodman and Davis. The Singer Hutner lawyers stressed two major points, McLaughlin recalled in his deposition: they wanted to do the ethical thing, and they wanted to continue representing O.P.M. unless they were ethically and legally obliged to quit.

In conversations on June 25 and over the next few days, McLaughlin and Putzel gave Hutner and other members of the law firm the advice they wanted to hear. (The advice is described in detail in documents Putzel prepared at the time and in Putzel’s and McLaughlin’s depositions in the bankruptcy investigation.) Singer Hutner could ethically continue to represent O.P.M., giving the benefit of the doubt to Goodman’s assurances that there was no ongoing fraud. The firm could continue to close new loans for O.P.M. pending efforts to find out the details of Goodman’s past wrongdoing; such information would help them guard against any continuing fraud. Singer Hutner was bound to keep everything it had already learned secret, except from Weissman.

It was not necessary, Putzel advised, for Singer Hutner to check the authenticity of the computer-lease documents with third parties such as Rockwell before closing the new loans. As to the possibly false opinion letters and documents the firm had unwittingly provided to banks to obtain loans for O.P.M., Putzel offered another welcome opinion: Singer Hutner had no legal duty to withdraw them. He reasoned that leaving the victims of a past fraud in the dark was not an ongoing fraud.

McLaughlin and Putzel did recommend some steps aimed at stopping any efforts to commit new fraud. They said, for example, that O.P.M. should be required to certify in writing the legitimacy of each new transaction. Goodman was unfazed; he simply signed certifications he knew to be false. And he found ways to put off giving the law firm the kind of detailed description of his crimes that would have made the attorneys better able to judge the dangers of their position.

While McLaughlin and Putzel advised the law firm to press Goodman to confess to them and to his partner Weissman the details of his wrongdoing, they did not initially suggest that he be pressed too hard. One reason, as Putzel explained in a deposition, was his concern that the law firm’s obligations to O.P.M. might be inconsistent with giving Goodman’s secrets the fullest protection. Thus, a lawyer was found to represent Goodman’s personal best interests, while Singer Hutner theoretically concentrated on representing the best interests of the corporation – this though the corporation was virtually Goodman’s personal fiefdom.

Goodman’s new lawyer was Andrew M. Lawler, an old law-school friend of McLaughlin and, like Putzel, a former Federal prosecutor. In their depositions, McLaughlin and Putzel testified that they had placed great confidence in Lawler, and that Lawler had told Putzel that he knew of no ongoing fraud. This should, perhaps, not have been much of a surprise. Lawler’s information came from Goodman, and according to Goodman’s testimony, Hutner had given the executive a brief lesson in the attorney-client privilege, telling him that his disclosures to Lawler would be protected only so long as they did not indicate any ongoing fraud.

Meanwhile, as Goodman continued to stall, Lawler and Singer Hutner were dickering over the best way for Goodman to come clean about his past crimes. The object: to get at the truth but to do it in a way that would wrap it in the legal code of silence that is the attorneyclient privilege.

The advice offered by Putzel and McLaughlin in June and thereafter was predicated on Singer Hutner’s position that it did not ”know” of any ongoing fraud by O.P.M. McLaughlin testified in his deposition that ”it was basic black-letter law that they could not continue to represent O.P.M. if they were aware of an ongoing fraud, and that if they became aware, they would certainly have to resign.”

Thus a little too much knowledge can be a dangerous thing for a lawyer. Some criminal-defense lawyers, for example, privately acknowledge that they are careful not to ask defendants who come to them: ”Did you do it? Tell me everything.” One reason: The client might answer by confessing his guilt and then go on to insist upon giving a false alibi at the trial, and the lawyer could be deemed a knowing accessory to perjury for helping him give such testimony.

Whether or not Singer Hutner purposely shielded itself from knowledge of O.P.M.’s ongoing fraud is in dispute. In a ”memorandum to the file” after his meetings with Hutner in June, William Davis expressed concern about Hutner’s ”apparent willingness to stick his head in the sand and ignore these problems.” Hutner says Davis was lying.

Singer Hutner and Putzel discounted Clifton’s suspicions that the company would have to continue engaging in fraud to stay in business. As Putzel wrote in a later letter to Hutner, ”Your firm was in the possession of no fact which in any way indicated the commission of an ongoing fraud.” And he and Singer Hutner also accepted O.P.M.’s explanations of some strange happenings -bills of sale for computers that O.P.M. apparently did not have the money to buy; a signature on a document that looked to Mattioli like a forgery; the sudden resignation of an outside accounting firm because of its suspicion that Goodman and Weissman had been looting their corporation at a time when it was insolvent.

On July 15, for example, Alan S. Jacobs, a Singer Hutner partner who handled O.P.M.’s bank financings, discovered that O.P.M. had given the law firm two bills of sale, supposedly for different leases and different bank loans, that contained identical equipment descriptions and serial numbers. Jacobs consulted with Putzel and then checked with O.P.M., which told him there had been a typographical error. He accepted the explanation and a ”corrected” document. Both the original and the corrected version proved to be phony.

Meanwhile, the lawyers were becoming increasingly upset at Goodman’s continuing refusal to disclose the details of his wrongdoing. Late on the afternoon of July 22, in the middle of what Putzel recalled as ”the worst lightning and thunderstorm I have ever seen in New York over the East River,” Hutner telephoned Goodman and set a deadline for him to tell Weissman what he had done. Goodman responded with threats to hurl himself out the window of his huge, luxuriously appointed office.

”It was right out of a Grade C movie,” recalled Putzel, who was in the room with Hutner. ”There was wild lightning, claps of thunder, Hutner pleading with Goodman to be rational.”

All through this summer of nondisclosure, Singer Hutner continued closing loans for O.P.M. without checking the legitimacy of underlying Rockwell leases. Some were legitimate, but leases securing loans of $22 million in June, $17 million in July and $22 million in August proved to be fraudulent.

In the first week of September, Goodman finally told Hutner some of the details of the fraud he had first hinted at in June, and Hutner explained it all to Putzel over lunch at the Yale Club in New York. In his deposition, Hutner recalled the meeting. ”I wanted to get the hell out” of the connection with O.P.M., he said. ”I was just disgusted, and I wanted (Putzel’s) acquiescence.” The two men tentatively agreed that the law firm should quit as O.P.M.’s counsel – though Putzel advised that the firm was not ethically obliged to do so because, he still assumed, the fraud had ended before June.

”What struck me as so, frankly, evil about this,” Putzel said in his deposition, ”was that the lawyers had been manipulated in this fashion.” It was now apparent, he said, that ”the attorneys were the instruments, the unwitting instruments, of the fraud by Goodman.”

Over a period of two weeks, the members of the law firm discussed the question of quitting O.P.M. in a series of heated and emotional meetings. Meanwhile, Singer Hutner closed two more loans that proved to be fraudulent. For the first time, the law firm tried to check with Rockwell the legitimacy of the leases by mailing a verification form to a Rockwell executive in California. Goodman later recalled that when he heard the form was on its way, ”I just went totally bananas.” Goodman’s O.P.M. henchmen intercepted the document at Rockwell and forged the executive’s signature.

Singer Hutner voted formally to resign as O.P.M.’s general counsel on Sept. 23 in a daylong series of meetings punctuated by expressions of concern about the effect of a possible O.P.M. bankruptcy on the law firm’s fees. Goodman was in the firm’s offices that day and bitterly accused the lawyers of disloyalty, seemingly unabashed by their knowledge that he had used them to swindle banks out of tens of millions of dollars. He also described McLaughlin and Putzel as ”white-shoed and ultra-Fas-cist attorneys” and warned the Singer Hutner lawyers to ”keep their mouths shut.” Later that night, according to Mattioli, Goodman stood at the head of the law-firm’s staircase, shaking with anger, and shouted, ”If you do this and bring down the company, I will bring down this firm.” Weissman was also in the law-firm’s offices that night, incongruously assuring those who would listen that O.P.M.’s business was better than ever and that its prospects were excellent.

Singer Hutner quit O.P.M. gradually, completing the process in December 1980. The lawyers assumed that an abrupt withdrawal would cause O.P.M. to collapse; they would handle legal business until Goodman, who had vowed that he would eventually pay back the victims of the fraud, could find new counsel. Singer Hutner’s decision was in accord with Putzel’s advice that the law firm could not drop its client ”like a sack of potatoes.” The withdrawal, he said, ”had to be accomplished in a manner least likely to cause injury to the client.” Still, Singer Hutner had cause to worry about its own potential liability during the withdrawal period, and the firm took steps to prevent new fraud. Its lawyers refused to proceed with new loans unless Goodman authorized them to check out the collateral with third parties such as Rockwell. They also demanded that O.P.M. cease new ”tax-shelter” financings entirely, because they would almost certainly involve violations of the Federal securities laws.

Singer Hutner also moved to guard its income during the withdrawal period. Fearful that Goodman would refuse to pay its fees, and that they might be uncollectible if O.P.M. went bankrupt, the law firm announced in late September that it would do no more work for O.P.M. unless it received ”an advance retainer against our customary time charges.” It demanded and received $250,000 for the withdrawal period, along with $250,000 for services already performed.

Once the decision to quit O.P.M. was made, Singer Hutner had to determine what to do with its knowledge that it had been part of a giant fraud. On Putzel’s advice, the law firm kept the facts to itself, telling nothing to the corporations and bankers who had been defrauded. Based on Goodman’s increasingly implausible assurances that the days of fraud were over, Putzel said that the executive’s secrets were still protected by the attorney-client privilege. Singer Hutner accepted that view, even after Goodman acknowledged on Sept. 29 and 30 that the outstanding fraudulent loans totaled $80 million to $90 million, about three times the amount he had confessed earlier in the month. And the law firm held fast even after receiving the worst news of all, that Goodman had been using Singer Hutner to close fraudulent loans from June through September.

The law firm responded to inquiries from lenders and other interested parties by saying that Singer Hutner and O.P.M. had ”agreed” to part ways. (”Was that not a lie?” Hutner was asked, during the taking of his deposition. ”It was inaccurate,” he replied at first, later amending that to ”more accurate than not, if not totally accurate.”)

This stance played right into the hands of Goodman. He was able to continue obtaining fraudulent loans while spreading the suggestion that he had dismissed Singer Hutner and assuring business contacts that there was nothing wrong with the loans.

The close-mouthed stance was also called for by Putzel as the appropriate way of dealing with the lawyers who would fill Singer Hutner’s shoes – in spite of the considerable risk that Goodman would simply lie to the new attorneys. Thus he advised Singer Hutner that it must honor Goodman’s demand that Gary R. Simon, the O.P.M. inhouse lawyer who was preparing to handle new loan closings, be kept in the dark.

Fearing that Goodman would use Simon, who was inexperienced in closing loans, to commit new frauds, Singer Hutner in October prepared for Simon a memorandum specifying ”due diligence” verification procedures that should be used in all O.P.M. financings. But before the memorandum was delivered, it was shown to Goodman for editing; the final memo had nothing in it to make Simon suspect something was wrong with the Rockwell leases.

It soon became apparent that Simon was unlikely to discover the fraud. At one point, he told Mattioli that ”if something is wrong with those deals, then I want to know it today.” Mattioli did not respond.

A similar series of events was played out with Kaye, Scholer, Fierman, Hays & Handler, one of New York’s largest law firms, which Goodman invited to step into Singer Hutner’s place and close new loans for O.P.M. Hutner wanted to warn Peter M. Fishbein, a Kaye Scholer partner and an old friend, to stay away from O.P.M. In his deposition, Hutner quoted Putzel’s response to the notion: ”Oh my God, that is exactly what you can’t do.”

Fishbein phoned Hutner in October 1980 asking ”if there was anything he should be aware of” in considering Goodman’s invitation. Hutner told him only that ”the decision to terminate was mutual and that there was mutual agreement that the circumstances of termination would not be discussed.” Two years later, Hutner testified that ”this specific thing caused me more personal pain than anything I can recall during the course of the entire O.P.M. thing, including learning that Myron was a thief.”

The end result of Singer Hutner’s close-mouthed policy: Goodman was able to use the unwitting Gary Simon and Kaye Scholer to close more than $15 million in loans for O.P.M. in December 1980 and early 1981 that were secured by fraudulent Rockwell leases. The use of outside counsel like McLaughlin and Putzel has increased significantly during the post-Watergate decade as law firms have been exposed to increased public and Government scrutiny. Attorneys are more and more finding themselves in the unaccustomed role of defendants charged with complicity in their clients’ illegal activities, or as targets of Government investigations of securities frauds.

Aside from the old saw that a lawyer who represents himself has a fool for a client, lawyers who find themselves in potentially compromising circumstances are often willing to pay for the expertise of a specialist. That is particularly true in cases involving the fine points of legal ethics, about which many lawyers are quite ignorant. But lawyers, like other people, also hire specialists as a precautionary move, seeking advance legal clearance before taking action that might later become the focus of a lawsuit or a criminal investigation. And the more prestigious the specialist, the better.

Joseph McLaughlin, for example, given his considerable stature in the New York legal fraternity, seemed an ideal man for Singer Hutner to have in its corner. That was reflected in his fee, a healthy $12,500 for 25 hours work; that averages out to $500 an hour, a rate more than double what senior corporate lawyers in New York’s big firms ordinarily charge their clients. It was about four times the rate charged by Putzel.

In his deposition, McLaughlin testified that he professed no expertise in legal ethics (except to the extent that it overlaps with the attorney-client privilege) and that he hardly knew anything about ”the mechanics” of Singer Hutner’s work for O.P.M. He minimized his role, calling himself a ”sort of avuncular … senior adviser” with no time ”to get down to the nitty-gritty of this thing.” In part, he said, that was because he was busy that summer of 1980 ”running for office, in effect” – that is, jockeying for a judicial appointment. He was eventually named to a Federal District Court judgeship. At year’s end, he was a leading contender for a position on the New York Court of Appeals, the state’s highest court.

After O.P.M. came tumbling down, Singer Hutner, and four codefendants including Rockwell and Lehman Brothers, became the targets of a spate of multimillion-dollar lawsuits. The suits, brought by lenders, accused the law firm of being an accomplice in the O.P.M. crimes, on the ground that the attorneys knew or should have known they were part of an ongoing fraud. A tentative settlement of the lawsuits has been reached whereby the five defendants would pay $65 million; Singer Hutner’s share would be about $10 million. But the law firm still maintains that it acted in conformity with the ethics code, as interpreted by Putzel and McLaughlin. And Putzel said in a recent interview, ”I am in my own conscience absolutely convinced that the advice we gave was correct ad-vice based on what we knew at the time.”

Even the lawyers’ lawyers have lawyers in the O.P.M. case, and those representing Putzel offered a written brief that summarized their client’s attitude toward legal ethics. Under the adversary system of justice, they wrote: ”A lawyer’s primary obligation, loyalty and responsibility must be to his client, rich or poor, likeable or despicable, honest or crooked. Lawyers are not ordinary people: they sometimes are duty-bound to stand up for and protect liars and thieves.”

Whether or not Singer Hutner violated the ethical code, a basic question remains: Is there not something wrong with a code that can plausibly be used to justify the extreme lengths to which Singer Hutner went to protect its criminal client? Indeed, there is growing concern both inside and outside the legal profession that the current rules make it too easy for lawyers to condone or even actively assist their clients’ ongoing crimes, frauds and cover-up conspiracies.

This concern has found expression in some of the reforms contained in the proposed new American Bar Association model ethics code, which is to be voted on next month after more than five years of often acrimonious debate. Put together by a special commission of prominent lawyers, the new code would cover issues ranging from advertising of legal services to conflicts of interest. But the controversy centers on provisions dealing with the kinds of dilemmas that confronted Singer Hutner. The new proposals are designed to make it clearer that lawyers’ customary vows of loyalty to their clients and silence about their guilty secrets must sometimes give way to a higher duty to keep their own hands clean – even to the point of blowing the whistle.

The current ethics code, in its tilt toward the client, reflects in part the economic self-interest of its authors. The code was written by lawyers and for lawyers who get paid to help clients do what they want to do. Lawyers are not paid to place restraints on their clients.

”I suspect many lawyers have thought that they have a privilege to assist, at the periphery, projects that are criminal or fraudulent,” says Geoffrey C. Hazard Jr., a Yale law professor who was the principal draftsman of the proposed new model ethics code. The failure of the current rules to emphasize ”the seriousness of a lawyer’s helping a client to commit a crime or fraud,” he says, may help explain why so many lawyers became ensnared in the Watergate cover-up.

The whistle-blowing provisions of the proposed new code are not universally admired. John C. Elam, a past president of the prestigious American College of Trial Lawyers, is the leader of that group’s opposition. He denounces the proposals as ”a tremendous assault on the traditional role of the lawyer.” If clients cannot be sure that their lawyers’ lips are sealed, he reasons, they will not disclose plans that might be illegal, and lawyers will not have any opportunity to persuade them to obey the law.

For all the heat of the debate, Geoffrey Hazard and most other critics of the current ethics rules stop well short of proposing abandonment of the fundamental premise that attorneys must ordinarily do their utmost to advance their clients’ interests and keep their secrets. For example, there is something approaching a consensus among experts that a criminal defense lawyer should do his best to get an acquittal even for a client he knows is guilty of murder. The argument concerns where the fine lines should be drawn. For instance, while it is clearly proper for a lawyer to move to suppress illegally obtained evidence that would establish his client’s guilt, most experts would disapprove of a lawyer’s helping a client to concoct a false alibi.

If the new code had been in effect in the fall of 1980, Putzel’s advice that Singer Hutner could not alert the victims of the O.P.M. fraud, or even the lawyers whom Goodman used after Singer Hutner had quit, might have been different. One proposed rule says that lawyers may blow the whistle if necessary ”to rectify the consequences of a client’s criminal or fraudulent act in the furtherance of which the lawyer’s services had been used.” Another states that a lawyer must not ”fail to disclose a material fact to a third person when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client.”

Joseph Hutner, for one, says that these particular changes might not be such a bad idea: ”I would have been much happier protecting the other lawyers, and in particular my close personal friend Peter Fishbein, from getting in bed with a criminal.”

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