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When President Bush signed the Sarbanes-Oxley corporate responsibilitybillinto law last year, he enjoyed an executive’s freedom to look at the bigpicture. “This new law sends very clear messages that all concerned must heed,”hesaid from the East Room of the White House. “This law says to everydishonest corporate leader: you will be exposed and punished; the era oflowstandards and false profits is over; no boardroom in America is above orbeyond the law.” But 16 months later in Atlanta, judges of the 11th U.S. Circuit Court ofAppeals have been left to determine the clarity of one part of theSarbanes-Oxley law. “You’re going to have to show me something with neon light andunderlined byCongress,” Chief Judge J.L. Edmondson told one lawyer arguing one of twomeanings of the law presented to the court on Friday. The lawyer, Conor R. Crowley of Washington, was defending a Floridafederaljudge’s conclusion that � 804 (b) of the law allowed former DeanWitter investors to sue the company for making unauthorized trades in1998 — even though the statute of limitations on their claims had expiredbythe time Bush signed the Sarbanes-Oxley bill into law. FLORIDA JUDGE’S RULING Judge Richard A. Lazarra of the Middle District of Florida wrote lastMarchthat Congress unquestionably had the right to extend limitation periodsandtherefore revive previously expired claims.The section extends limitation periods, Lazarra explained, quoting thelawthat it “shall apply to all proceedings addressed by this Section thatarecommenced on or after the enactment of this Act” — regardless of when thealleged violation occurred. “This language, standing alone, seems to presume that the Act affordsredress for violations that had already occurred before July 30, 2002,”Lazarra concluded, referring to the day Bush signed the bill into law.To support his decision, Lazarra quoted from a section-by-sectionanalysissubmitted into the Congressional Record to provide guidance to anyoneinterpreting the law. The author of � 804 (b), Sen. Patrick J. Leahy, D-Vt., wrote thatthesection, “by its plain terms, applies to any and all cases filed aftertheeffective date of the Act, regardless of when the underlying conductoccurred.” During Friday’s oral argument, neither Edmondson nor the other membersofthe panel — 11th Circuit Judge Stanley F. Birch Jr. and visiting 9thCircuitSenior Judge Joseph Jerome Farris — sounded convinced by Lazarra’sdecisionor Crowley’s efforts to defend it. “Congress has to be explicit,” Birch said. ‘MAGIC WORD’ NOT NEEDED Farris later chimed in that Congress knows how to use the word “revive,”suggesting that if Congress had wanted Sarbanes-Oxley to be able torevivepreviously expired claims, it could have done so. “They didn’t,” Farris added. Crowley responded, “This is not about the use of the magic word’revival.’” He added that the judges should consider the legislative historycarefully,especially Leahy’s comments during Senate debates during which hereferredto his desire to see victims of the Enron collapse be able to sue thecompany’s executives. Consider when Congress debated Sarbanes-Oxley, Crowley told the panel:”Thiswas in the context of Enron and Tyco and WorldCom.” But Edmondson still sounded skeptical: “Congress didn’t use language weagree they could have used to make clear” its intentions. By asking the judges to pore over what individual senators may have saidduring a debate, Edmondson added, “You put us in a difficult situation. … It really is a thicket.” Crowley, of Washington’s Finkelstein, Thompson & Loughran, said thecourtshould give “great weight” to Leahy’s comments over any other senator’sbecause Leahy authored the section of the bill at issue. DEAN WITTER LAWYER Arguing for Dean Witter’s parent company, Morgan Stanley DW Inc.,William H.Pratt of the New York office of Kirkland & Ellis had a much easier timebefore the panel, speaking for long stretches without being interrupted.He argued that judges in the three district courts — in the EasternDistrictof Virginia, the Southern District of New York and the Central DistrictofCalifornia — made the opposite conclusion from Lazarra’s on whether theoldclaims could be revived by Sarbanes-Oxley. Pratt noted, however, that the 11th Circuit would be the first appealscourtto rule on the question. Pratt relied heavily on �804 (c) of the law, which he saidexplicitlyprohibited the revival of time-barred claims. The law states, “Nothinginthis section shall create a new, private right of action.” Regarding Leahy’s comments, Pratt pointed out that the senator’sanalysiswas added to the Congressional Record the day after the law was signed.Buteven if it were timely, Pratt noted that then-Sen. William Philip “Phil”Gramm, R-Texas, appeared to disagree with Leahy. “You don’t revive time-barred claims based on mixed histories,” Prattsaid.Crowley pointed out that Leahy’s analysis was submitted to the SenatebeforeSarbanes-Oxley was signed into law, but that a clerical error kept itfrombeing added to the record until after the bill had been signed. TheSenateallowed by unanimous consent to make Leahy’s analysis part of thelegislative history before the bill was signed. David Carle, a spokesman for Leahy, confirmed Crowley’s account of thesenator’s comments getting into the official record. Carle added that Lazarra’s interpretation of the section “is also his[Leahy's] interpretation of the law he authored, and which he published at thetime of enactment.” Interpretations from the law’s namesakes — Sen. Paul S. Sarbanes, D-Md.,andRep. Michael G. Oxley, R-Ohio — could not be obtained.

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