washingtonpost.com  > Business > Policy > Securities
Page 2 of 2  < Back  

Lawyers In the Limelight

Koniak, who specializes in legal ethics, argues that the spike in enforcement against lawyers has not changed behavior in most legal suites because cases the government has filed involve gross examples of personal excess or coverups, rather than a series of incremental actions with which corporate lawyers might better identify.

But there is little disagreement that regulators are more interested now in allegations of lawyer misconduct than ever before.

Steven Woghin, former general counsel of Computer Associates, pleaded guilty to criminal securities fraud and obstruction of justice charges. He faces a maximum sentence of 25 years in prison. (Rick Maiman -- Bloomberg News)

_____Interactive Primer_____
Understanding Regulatory Policy
_____Related SEC Articles_____
Google Co-Founders Register to Sell Stock (The Washington Post, Nov 20, 2004)
Fund Founders to Settle, Pay $160 Million (The Washington Post, Nov 18, 2004)
Google Unveils Research Tool (The Washington Post, Nov 18, 2004)
More SEC News

Lawrence Byrne, a former federal prosecutor, said in an interview that in the 1980s and early 1990s, the government usually avoided serving subpoenas on corporate lawyers, reasoning that their communications with executives were protected by attorney-client privilege. Now, Byrne said, investigators are urging companies to waive that privilege in order to avoid criminal prosecution and huge civil fines.

"In my view, that's a policy shift that's here to stay," said Byrne, a partner at White & Case in New York.

"Uncertainties about what is or is not adequate cooperation by a company with an SEC or DOJ investigation can put an in-house or outside lawyer in a difficult spot," said Robert J. Giuffra Jr., a partner at Sullivan & Cromwell in New York. "When the second-guessing starts, the questions can be all about the lawyers."

SEC staffers are keeping tabs on how much companies cooperate, a prospect that former enforcement director William R. McLucas yesterday called "somewhat unnerving."

Debate over the strength of government enforcement efforts comes at a time when the SEC has postponed action on one of the more controversial reforms stemming from the 1990s financial scandals.

The proposal, known as "noisy withdrawal," would require lawyers to blow the whistle to someone outside a company if they obtain evidence of fiscal wrongdoing and officials inside the company fail to respond properly to the complaint. Some legal groups argue that the proposal would force them to choose between their duty to their clients and to the SEC rules. They also worry that executives will hesitate before seeking advice from a company lawyer about sensitive issues because the lawyer might later reveal those confidences.

Current rules require lawyers to report wrongdoing to people inside the company, such as independent members of the board of directors. Some scholars also interpret the rules as allowing lawyers to reach out to regulators if their concerns are not taken seriously. In at least two cases this year, the rules have worked as designed, according to a speech this year by SEC General Counsel Giovanni P. Prezioso.

In one case, the law firm Akin Gump Strauss Hauer & Feld resigned after Mexican broadcast client TV Azteca failed to heed advice to disclose a deal between the company and its chairman. A letter from the law firm describing the dispute eventually was leaked to a newspaper after the firm had resigned.

Prezioso said that in another case, a lawyer made it all the way to one of the SEC's regional offices to blow the whistle before corporate managers called him on his cell phone and agreed to take seriously his concerns that two board members had criminal records. The board members later resigned.

< Back  1 2

© 2004 The Washington Post Company