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Look Who's Left Standing

To date, no high-ranking internal lawyers and none of Enron's outside legal advisers have faced either civil or criminal charges. The lawyers' actions drew the interest of a bankruptcy trustee, however. The trustee concluded in 2003 that Enron could bring a case against five attorneys who likely had violated their professional responsibilities and failed to sound alarms about improper business practices. One of the lawyers, Kristina Mordaunt, personally profited by nearly $1 million after investing in questionable deals arranged by Enron's finance chief.

Former general counsel James V. Derrick Jr., testifying for his former bosses Kenneth L. Lay and Jeffrey K. Skilling this year, told a jury he had done nothing wrong during his tenure at the company and said he was proud of his service. Derrick, who has been dismissed as a defendant from most of the shareholder lawsuits filed against Enron executives, also said he had been questioned under oath by SEC lawyers earlier this year, a signal that regulators still may be reviewing the conduct of lawyers who worked at Enron and those who acted as outside advisers.

Separately, Vinson & Elkins LLP, a law firm that Derrick hired to vet many of Enron's deals, is facing a lawsuit alleging that it whitewashed the internal investigation into claims by former executive Sherron Watkins, who warned Lay that the company could "implode in a wave of accounting scandals."

Between 1997 and 2001, Vinson & Elkins earned $162 million in fees from Enron, according to trial testimony. Vinson lawyers privately expressed concerns about some of the Enron deals they reviewed, according to e-mail and voice mail messages cited in the shareholder lawsuit. Earlier this year, without admitting wrongdoing, Vinson agreed to pay Enron a total of $30 million to avert another lawsuit over its past work for the company.

Several lawyers employed by or doing work for these companies declined to comment through their own attorneys or other representatives, preferring to remain silent or let the public record speak for them.

Experts say there are significant obstacles to bringing charges against a lawyer or a law firm. First among them: Lawyers often are a layer or two removed from the decision-making roles in striking deals, dictating accounting policy or preparing corporate financial statements, said Michael J. Missal, a partner at Kirkpatrick & Lockhart Nicholson Graham LLP in Washington.

Moreover, at companies engaging in fraud, there may be a push to conceal information from lawyers so as to avoid detection. Lawyers also can defend themselves by saying that they relied on the word of top executives in collecting bonuses and other payments, as former Tyco International Ltd. general counsel Mark A. Belnick successfully argued to a New York jury that acquitted him of larceny two years ago.

The law itself poses complications. In order to protect communications between lawyers and their clients and to preserve the flow of information, attorneys enjoy broad protection from claims that they gave bad advice so long as they offered it honestly. That means prosecutors usually must seek cases with evidence of clear criminal intent: ones when lawyers personally profited, destroyed documents or misled auditors (as court papers say in the case of former Comverse Technology Inc. general counsel William F. Sorin, who was charged this month in a criminal complaint).

"People perceive the law as being certain and precise and mathematical, but it's really not," said Deborah J. Jeffrey, a defense lawyer at Zuckerman Spaeder LLP in Washington who also serves on a local disciplinary board for attorneys.

Moreover, federal authorities often defer to the states, which regulate attorney conduct, said Lawrence Byrne, a defense lawyer at White & Case LLP in New York. The local authorities, in turn, tend to focus on cases in which impoverished or elderly clients complain about poor service or inflated fees.

The only large law firm to face criminal charges in recent years, New York-based Milberg Weiss Bershad & Schulman LLP, is not under fire for its legal advice, but rather for a system in which it allegedly paid a small group of people to serve as plaintiffs. Milberg is fighting the charges, even as many of its lawyers have fled to other firms.


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