To Tell or Not to Tell: Legal Ethics and Disclosure After Enron

Tuesday, January 1st, 2002 at 12:00 am by Michael L. Fox
Michael L. Fox, To Tell or Not to Tell: Legal Ethics and Disclosure After Enron, 2002 Colum. Bus. L. Rev. 867

Enron. A small word, which now has international meaning in the contexts of bankruptcy, accounting and most importantly for this Section of the Survey, legal ethics and the professional responsibility of attorneys. In September of 2001, after the tragic day of the 11th, but before ‘Enron‘ was synonymous with ‘debacle,‘ I set out to begin work on my Section of this Survey. At first, I researched topics in the fields of securities, corporate, and tax law. However, in the wake of the Enron free-fall I realized that there was potential for an article in the making. In focusing on this idea, I decided to write my Section of the Survey on legal developments concerning the representation of corporate clients and to examine disclosure pursuant to the rules of legal ethics and professional responsibility against the ever-present background of the Enron failure. What follows is the fruit of that effort.

I hope to provide an informative and enlightening journey along the twisting and turning roads that line the world of legal ethics for the practicing corporate attorney. In doing so, I seek to evaluate the rules that Congress has imposed, as well as those that members of the legal profession have imposed on themselves, to safeguard the soundness of the legal system, the people and entities that attorneys represent, and society as a whole.

*869 What are the rules of legal ethics and professional responsibility as they pertain to disclosure of information and the representation of corporate clients? How do they affect the everyday lives of corporate attorneys? Are there any easy answers to the tough questions that lawyers must occasionally face–as when Vinson & Elkins (‘V&E‘), and others, represented Enron? This Section of the Survey evaluates the ethics governing the representation of corporate clients, and I will survey and evaluate the relevant current laws and rules of professional responsibility and legal ethics in the United States. I will focus on the newly created provisions of the Sarbanes-Oxley Act of 2002 (‘Sarbanes-Oxley‘ or the ‘Act‘), the American Bar Association (‘ABA‘) Model Rules and the American Law Institute’s (‘ALI‘) Restatement of the Law Governing Lawyers, and the codes and rules of both New York and Texas. Furthermore, in keeping with my interest in evaluating recent developments in our nation, I rely on and refer to newspaper, magazine, and journal articles, along with Congressional testimony and reports.

Part II of this Section of the Survey discusses the background of the Enron fall-out, the history leading up to the debacle, the events that purportedly caused it, and the conventional wisdom as to what went wrong. Part III surveys the major ethics and disciplinary rules that are at the crux of this discussion and addresses how the rules of ethics can be applied to the representation of corporate clients such as Enron. Part IV crosses the Atlantic, and discusses and evaluates some specific aspects of the laws of ethics in a European Civil Law nation–Italy. This Part examines similarities and distinctions between the different jurisdictions and considers whether there are any lessons that we in America can learn from our European colleagues. Part V seeks to summarize this difficult and often confusing area of law and practice by providing one or two lessons that we can all learn from.

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