The Erroneous Post-Summary Correction
You discover that an entry summary you filed eight months ago for a client, Ardent Metals, misclassified a shipment of alloy tubing, understating duties by about $52,000. The error was yours, not the client's. Ardent's CFO says, "Let's not volunteer anything; the port rarely audits small importers, and we can absorb it if they do." You know the port has been increasing audits of metal importers. Ardent is a valued client and has hinted it will leave if you "make trouble." Your firm carries professional liability insurance that requires prompt notice of potential claims.
1. What are your obligations regarding disclosure and correction of the error?
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You have a duty to correct errors and to act with candor toward the client and the authorities. The error was yours, which strengthens the duty to remediate. You should advise the client in writing of the error, the estimated underpayment, and the options for correction (e.g., post-summary correction, prior disclosure, or voluntary tender), and recommend correction. You cannot file a false statement or conceal the error. If the client refuses, you must consider whether continued representation is possible and whether withdrawal or other steps are required under applicable rules.
2. The client instructs you not to disclose. How do you reconcile client loyalty with your professional duties?
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Loyalty does not require participating in concealment. Explain the risks: penalties, loss of mitigation, and potential harm to the client. Recommend voluntary correction, which often reduces penalties. If the client still refuses, document the advice and the refusal, and evaluate whether you must withdraw or take other permitted steps. You should not sign or file anything you know to be inaccurate. Consider notifying your insurer as required and consulting ethics counsel.
3. What internal steps should you take now, including insurer notice and file documentation?
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Notify your professional liability insurer promptly as the policy requires. Create a written record: the error, the estimated $52,000 underpayment, the client communications, your recommendations, and the client's responses. Preserve the entry file and correspondence. Consider a root-cause review to prevent recurrence. If withdrawal is contemplated, follow the applicable rules on notice and file return. Keep the client informed in writing at each step.