"Honesty never damages a cause that is just."
-- Mahatma Ghandi
Recently, a client mentioned to me a fact about his case that could reflect poorly on him. He asked me if, when testifying about it, he could say, "Well, the reason was X." My question: "Is X true?" He cast his eyes down, and admitted it wasn't. I told him he couldn't testify that it was.
Putting aside any ethical or moral issues, there are lots of practical reasons to be honest in litigation.
Many people say that the law isn't about a search for the truth. I think it is, and to prove it, there are plenty of ways the legal system seeks out and punishes the untruthful.