Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Richard Painter is an unlikely zealot. The University of Illinois law professor is buttoned-down, politically conservative, diffident. He comes across as a slightly old fashioned gentleman-scholar. Yet at a recent gathering of his friends and colleagues in the staunchly conservative Federalist Society, Painter fearlessly pressed an argument he has been making for over a decade: Corporate lawyers must be more effectively regulated. What’s more, he has argued, the federal government should be doing the regulating. Painter probably could not have conceived of a theme more likely to induce teeth-gnashing at the gathering of establishment lawyers, avowed states-rightists, and fervent critics of nearly every species of federal regulation. But, as ever, the 41-year-old Painter was undaunted. And now, in the wake of Enron’s implosion and the ensuing corporate scandals, Painter’s decade-long campaign for tougher ethical duties for corporate legal advisers appears to be on the brink of victory. Painter — joined by other legal scholars such as Boston University’s Susan Koniak and Cornell University’s Roger Cramton — was the driving force behind the provision of the Sarbanes-Oxley Act of 2002 that targets corporate lawyers. As required under that law, the Securities and Exchange Commission has been racing to promulgate new rules designed to force lawyers to alert a client-company’s senior management, and ultimately its board, to serious wrongdoing. Indeed, the SEC has proposed going further than the Sarbanes-Oxley Act expressly requires. In some instances, the SEC has suggested, lawyers should withdraw from a representation “noisily” — that is, by notifying the SEC of the withdrawal. In addition, the SEC has proposed that lawyers may in some cases be required to “disavow” the client’s offending SEC filings. These proposals have prompted a convulsive reaction among many corporate lawyers, the American Bar Association, the American Corporate Counsel Association, legal malpractice insurers, and others. And the SEC has received a ream of critical comments on the proposed rules, including letters from the ABA and 77 large law firms urging the agency to eschew the noisy withdrawal proposal. Painter’s comment letter endorses that requirement. It’s safe to say that Painter and his fellow scholars have won few fans in the private sector. ABA President Alfred Carlton Jr. recently complained publicly about “scholars” weighing in on the rules that impact the private bar. “We’re the lawyers, and we’re the people who have been involved in the issue,” he griped. Painter says he first confronted the question of how lawyers should deal with client misconduct back in 1992, in the wake of the Lincoln Savings and Loan scandal. Then a corporate associate at New York’s Sullivan & Cromwell, Painter found himself appointed to a New York Bar association ethics committee that was weighing the roles lawyers played in that debacle. Several law firms were implicated, and New York’s Kaye, Scholer, Fierman, Hays & Handler and Cleveland’s Jones, Day, Reavis & Pogue ultimately paid out multimillion-dollar settlements to avoid litigation with the federal government. “I was shocked,” says Painter. “I felt the organized bar really needed to be proactive and focus on ways the ethics rules could be changed.” It was not to be, though. The New York ethics committee ended up writing a report that dwelled instead on the fact that the U.S. government had attached Kaye, Scholer’s assets. Painter, who entered academia a few years later, began writing articles urging legal ethics reform for the corporate bar, and pressing the ABA to act. It didn’t. Then came Enron, which appeared to many to vindicate Painter’s concerns, and drove Congress to act where the ABA, and for many years the SEC, had declined to do so. “This has got to get straightened out,” Painter says simply. “It’s not good for the profession, and it’s not good for investors.” The SEC’s rules on the subject are slated to be finalized on Jan. 29, 2003.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.