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If the Enron scandal has put reform of the accounting industry on the priority list for legislators and regulators, a band of securities law and legal ethics professors are out to make sure the legal profession gets its medicine, too. Led by Richard Painter, professor at the University of Illinois College of Law, 19 professors signed a letter in mid-March urging Securities and Exchange Commission chairman Harvey Pitt to use the SEC’s enforcement powers to require attorneys — both in-house and otherwise — to report securities law violations to their corporate boards of directors. The letter’s signatories include some of the biggest names in the legal academy, including Harvard Law School’s Reinier Kraakman, Geoffrey Hazard Jr. of the University of Pennsylvania Law School and Stephen Gillers of New York University School of Law. (The SEC hasn’t taken any position on the Painter letter as of press time.) The professors’ proposal stops short of requiring lawyers to report misconduct to outside authorities. Reporting corporate misconduct to the company board is optional under Model Rule 1.13 of the American Bar Association’s Model Rules of Professional Conduct, which is substantially similar to the rule in most states. But unlike the rule proposed by the letter, rule 1.13 does not require an attorney to go to the board. Painter says his group was not seeking to comment specifically on the conduct of Houston-based Vinson & Elkins or any other law firm representing Enron Corp. But, he says, the scandal provides a good opportunity to revisit the reporting issue. The corporate bar, accustomed to self-regulation, isn’t very enthusiastic. One critic of the letter, Lawrence Fox, a partner at Philadelphia’s Drinker Biddle & Reath and a former chairman of the ABA’s committee on ethics and professional responsibility, criticizes the letter as “grandstanding.” Many outside counsel have painful memories of the aftermath of the savings-and-loan crisis, when federal regulators sued the S&Ls’ law firms on the controversial grounds that the attorneys had a responsibility to report their clients’ misconduct to the regulators. Virtually all of the firms settled, for as much as $40 million. Painter is hoping that the bar will do what he thinks is the right thing this time: “If the ABA and the states aren’t willing to endorse this simple principle, the internal regulatory mechanisms aren’t working.”

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