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Who hasn’t read at least 20 editorials or news stories about the issues that Enron raises for the future of corporate practice? The result is that a lot of folks want to increase the regulatory scrutiny of corporate advisers, as well as adopt tighter government regulations for board members and executives. I don’t believe that stricter regulations or new laws are likely to prevent future “Enrons.” Regulations will never prevent the bad behavior of those who wish to avoid regulatory intent. As Chief Justice Earl Warren once wrote, “in civilized life, law floats in a sea of ethics.” Generally, unethical corporate behavior is a failure of top executives to create, sustain and promote ethical behavior, fiduciary responsibility and unassailable management techniques. As lawyers who work closely with corporate management, we play a number of roles that can have a tremendous influence on the ethical corporate culture and corporations’ legal health. We know from ACCA members and CEOs alike that the single most important role an in-house counsel plays is trusted adviser, creating an environment of openness and shared objectives with senior management. (For details, see www.acca.com.) Obviously, the lawyer to a corporate client is ethically responsible to the organization and the board, not to any one executive. But the reality is that the corporation acts through its leaders, who rely on the advice of their general counsel (or outside lawyers). What happens, then, if you find out about bad behavior within the company or are asked to participate in counseling corporate activities that don’t pass the smell test? Your role as a trusted adviser does not release you from your obligations as an officer of the court, as a professional, and as a fiduciary protecting the larger client’s legal interests. You need to know how the rules of practice allow — or require — you to proceed. PROFESSIONAL RESPONSIBILITIES Obviously, you should try to counsel the client toward a more acceptable path of conduct, but first you’ll want to understand and anticipate your professional responsibilities under your state’s versions of three Model Rules: � 1.13 (the organization as a client), � 1.16 (terminating the representation), and � 1.6 (confidentiality and related disclosure). Under these rules, you may find little concrete direction, and even less solace, as you take your concerns “up the ladder” to others in the corporate structure. If you reach the top, and there is no change of behavior in sight, your options are not very attractive: You may choose to stay on, provided you give no aid to and take no role in further perpetrating the improper behavior, or you may choose to withdraw from the representation (or quit your job, if you’re in-house). Model Rule 1.16 does not require you to quit. Either decision will cause a career crisis, and neither does anything to rectify the problems created by management’s poor judgment. BLOWING THE WHISTLE Your alternatives under Model Rule 1.16, however, do not include blowing the whistle to folks outside the corporation. It is important to point out that under this rule, you have no “right” to unilaterally disclose the client’s actions outside the organization — and, indeed, you could be subject to professional discipline for doing so. Model Rule 1.6 provides additional guidance in the event the client’s proposed actions are criminal or meet certain tests of potential harm. When these conditions are present, Rule 1.6 offers radically different disclosure options, depending on which state you’re licensed in: � You may have an obligation to disclose certain kinds of client activities that you cannot convince the client to correct, or � You may have the right to unilaterally decide to disclose such activities (but not an obligation to do so), or � You may be prohibited from making a peep. The furor over Enron may renew support for a provision that was recently rejected by the ABA House of Delegates as an amendment to Model Rule 1.6, which would allow (but not mandate) disclosure of client activities that would likely result in serious financial harm to third parties. The hardest part of this process is not what to do once you’re on the path (however uncomfortable it may be); rather, it’s determining whether and when the client’s behavior triggers your need to walk the path and consider your ethical obligation to withdraw from the representation. Clear-cut cases are rare and relatively easy to point out and resolve. Only hindsight is 20/20. You’re more likely to find yourself struggling to gather relevant information, trying to assess whether a proposed activity constitutes criminal action, or wondering when your efforts to counsel a client away from a bad proposal have solved the problem. RESOURCES If you need advice in this area, one good resource is John Villa’s book, “Corporate Counsel Guidelines” (published by ACCA and West Group). I also recommend the granddaddy treatise on ethics generally, by Hazard and Hodes, and the ALI’s “Restatement of the Law Governing Lawyers.” The ethics library of Cornell Legal Information Service ( www.law.cornell.edu/ethics) is also very good and offers information on the rules of every state. Before we dismiss the lessons of Enron as an isolated incident, let’s admit that we’ve all seen (or are likely to see in the future) bits and pieces of what the folks in Houston are being pilloried for doing. And, no doubt, your CEO or audit committee will soon appear at your door to ask what you’re doing as their lawyer to help the company avoid such a scenario. Corporate lawyers can play a critical role in creating or strengthening a healthy legal and ethical corporate culture by helping to guide the company toward the highest standards of behavior — but first, they must understand how the professional rules shape the parameters of that role. Supporting an ethical business climate is not just the right thing to do: In a post-Enron world, it’s going to be increasingly crucial to the company’s survival and profitability. Don’t let your client drown in the sea of law and ethics. Susan Hackett is senior vice president and general counsel of the American Corporate Counsel Association.

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