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Lawyers and Corporate Scandals


Eli Wald


University of Denver Sturm College of Law


Legal Ethics, Vol. 7, pp. 54-84, 2004

Abstract:     
Recent corporate failures have resulted in a rare and important opportunity to revisit our core basic assumptions about, expectations of, and understandings of the roles corporate lawyers play and their duties to their organizational clients, the legal system and the general public, an opportunity the existing scholarship as a whole regrettably fails to take advantage of. The paper argues that the opportunity to experience an Ackermanian "constitutional" legal profession moment is all but lost because lawyer interest groups have launched a successful campaign to derail public discourse and prevent a serious study of the actual roles played by corporate lawyers and the need for reform. Specifically, interest groups have successfully employed the We Did Nothing Wrong tactic of evasion to frustrate attempts to explore the actual roles lawyers played in recent corporate failures.

Part II identifies the tactic used by interested groups to avoid responding to serious allegations of lawyer wrongdoing, explains its operation and suggests possible reasons for its success. Part III establishes the success of lawyer interest groups in derailing the "constitutional" moment by demonstrating that the reform that followed the corporate debacles built on the premise that lawyers did nothing wrong (assuming compliance with applicable rules of conduct), and was not based on studies of actual lawyer conduct. Studying allegations of lawyer wrongdoing in connection with recent corporate failures, Part IV identifies distinct patterns of attorney misconduct, patterns that expose disturbing corporate law practice realities. Numerous outside counsels arguably: designed and participated in fraudulent transactions; facilitated fraud by issuing necessary legal opinions; and orchestrated non-disclosure by means of technically accurate yet misleading disclosure. Lawyers charged with conducting internal investigations arguably failed to appropriately address conflicts of interest concerns, balance legal and business conflicts and exercise independent professional judgment to the benefit of clients. General Counsels allowed corporate wrongdoing to take place under their watch; some obstructed justice, participated in self-trading, and benefited from self-dealing.

These patterns of misconduct undermine the assumption underlying the recent reform efforts - that lawyers, by-and-large, did nothing wrong. Furthermore, the patterns of misconduct not only reveal the shortcomings of current reforms, but also raise doubts about the desirability of the roles corporate attorneys play and the rules of conduct that support such roles. Consistent with its self-regulation mandate the corporate bar must be able to justify its practice realties. Widespread attorney wrongdoing indicates a need to revisit these justifications in the corporate sphere.

Number of Pages in PDF File: 31

Keywords: legal ethics, legal profession, attorney misconduct, corporate lawyering

JEL Classification: K22, K41, K42

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Date posted: September 28, 2004  

Suggested Citation

Wald, Eli, Lawyers and Corporate Scandals. Legal Ethics, Vol. 7, pp. 54-84, 2004. Available at SSRN: http://ssrn.com/abstract=595564

Contact Information

Eli Wald (Contact Author)
University of Denver Sturm College of Law ( email )
2255 E. Evans Avenue
Denver, CO 80208
United States
HOME PAGE: http://law.du.edu/index.php/profile/eli-wald
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