SOX Hop

In the pre-Enron era, nonlawyer types assumed that a "noisy withdrawal" involved an ATM and an alarm. But as corporate scandals filled the front pages, the nation boogied to a new lingo. On top of that, the federal government's efforts to reform America's biggest companies over the last few months have foisted some hardcore legalese on the general public.

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The era of corporate scandal has produced one unexpected blessing: a lively crop of new words and phrases. On top of that, efforts to reform America’s biggest companies over the last few months, led by Congress and the Securities and Exchange Commission, have foisted some hardcore legalese on the general public. Let’s start at the beginning. Troubled corporations — we all know which ones they are — often suffer from an ethics deficit. Enron Corp., of course, is the classic example. From its “crooked e” logo to its off-balance-sheet excesses, the energy trading company has become the emblem of massive corporate corruption. Its misdeeds have led to so many new words that one writer, Paul McFedries, maintains a list of Enron-based neologisms on his Web site, www.wordspy.com. The creations range from nouns, like Enronomics, to adjectives, like Enronishand Enronian. The company’s name has even been deployed as a verb. In a 2002 speech about Social Security and Medicare, Senator Tom Daschle said he didn’t want to Enronthe American people. And journalists have warned darkly about federal budgets getting Enronized. ARE YOU NOW … ? Thanks to zealous prosecutors and pack reporters, the egresses of allegedly plundering CEOs, CFOs, and even the occasional GC have become highly public corporate perp walks. Though mortifying, they’re tame compared to, say, the medieval practice of parading heads on pikes (which would give new meaning to the phrase execution level). The next stop on this career train wreck is facing a judge and/or congressional committee. These command performances, in which expensively attired executives often invoke their right to avoid self-incrimination, have yielded the phrase Fifth Amendment capitalist. Coined by National Public Radio reporter Noah Adams last year, the phrase is a clever remake of the McCarthy era’s “Fifth Amendment Communist.” But taking the Fifth will only get you so far. With the discovery of a telltale smoking memo, senior management’s days are usually numbered — often in the single digits. What ensues is a bloodless regime change. Another key phrase doomed CEOs have in common with Saddam Hussein? Teams of investigators trolling for material violations. ‘COLORABLE’ BUT NOT COLORFUL Which leads us to the eruption of legalese brought by Sarbanes-Oxley, or SOX. The new law dragged hitherto obscure terms, like corporate governance, onto the front page. And phrases like disclosure controls and procedures, from the SEC rules implementing SOX, have already joined the corporate lexicon. Corporate lawyers reacted to proposed SEC rules asking them to become whistleblowers — and threatening criminal liability if they didn’t — with their own effusions of legalese. As Floyd Norris pointed out in The New York Times, the legal establishment managed to defang a rule requiring lawyers to report upevidence of client misconduct. How’d they do it? By diluting the definition of credible evidencewith qualifying clauses and double negatives. Good old colorablewas also trotted out. Although the adjective was already familiar to law school alumni, to the uninitiated it probably meant a crayon-friendly surface. Now the public knows that a colorable defense can relieve a lawyer from the duty of tattling on the business side. Thanks to the efforts of the American Bar Association and others to soften a threatened SEC rule, however, nonlawyer types, at least for now, can still assume that a noisy withdrawalinvolves an ATM and an alarm.

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