Hollinger Lawyers Indicted

Federal prosecutors have indicted two in-house lawyers for Holing, along with CEO Conrad Black, for financial fraud.  Peter Atkinson and Mark Kins were in house lawyers for Holing that put information together for the form's audit committee, run by ex-Illinois governor James Thompson.  The indictment alleges that the information to the audit committee was false.  Newspapers have seized on the indictments of the lawyers as noteworthy of special comment.  Article

It is remarkable that so few lawyers have been successfully prosecuted in the 2002 wave of corporate scandals.  CEOs need lawyers and accountants to help them put these elaborate financial scams together.  One would expect in-house lawyers to be more at risk than outside lawyers but even in-house lawyers have largely escaped prosecution.  The prosecution of outside lawyers has been even rarer still.   

Sarbanes-Oxley focused on auditors and accountants and, other than a weak provision on an SEC study of lawyers role in the scandals, did not direct any provisions to the behavior of lawyers.  Lawyers not only escaped the 2002 legislation, they have escaped major SEC rule-making (SEC disqualification was strengthened) and have escaped most of the government prosecutions.  There are four theories:  One, lawyers are clever at covering their tracks;  two, lawyers know the legal boundaries; three, lawyers (prosecutors) do not sue lawyers; and four, lawyers turn state's evidence quickly and receive clemency from prosecutors.  Each is probably true to some extent and explain an given case. 

There is a growing public consensus, however, that professional advisers (accountants and lawyers) are a necessary part of the more elaborate financial frauds -- that CEOs are just not smart enough to understand or implement the details -- and that the advisers should be held accountable.  This case may provide some warning but not until prosecutors start going after outside lawyers will the public recognize that prosecutors are getting serious about regulating the legal profession.