Sunday, January 25, 2009
Enron, Watergate and the Regulation of the Legal Profession, by Arnold Rochvarg, University of Baltimore - School of Law, was recently posted on SSRN. Here is the abstrat:
The most famous scandal of the twentieth century was the Watergate scandal, which most notably led to the resignation of Richard Nixon as President of the United States. The significance of Watergate, however, extends further than the resignation of Nixon. Because Watergate involved so many lawyers, it had a great impact on the regulation of the legal profession. Although the twenty-first century has just started, the strongest contender for this century's most famous scandal is the Enron scandal. Although the Enron scandal is identified mostly with misconduct by accountants and corporate officials, it too involved lawyers and has impacted on the regulation of the legal profession. Although the two scandals differ in that Watergate was a political scandal involving the misconduct of government officials, and Enron was a financial scandal involving misconduct of accountants and corporate officials, the issues involving lawyers are identical. Most significant to this symposium is that both scandals involve important issues concerning the role of an attorney for an organization when the attorney learns of information indicating misconduct by those working for and/or in charge of the attorney's organizational client. The purpose of this article is to discuss these issues as presented by the Watergate and Enron scandals, and to analyze how the responses by the legal profession and the federal government have impacted the regulation of the legal profession. The article will first discuss how issues involving the role of an attorney when representing an organizational client that has engaged in misconduct were central to the Watergate scandal. The article will then discuss reforms of the legal profession that were made in response to Watergate. These reforms were primarily the efforts of the legal profession itself. Next, the article will discuss the similarity of the Enron scandal to the Watergate scandal. Enron also involved issues of an attorney's role when representing an organizational client that has engaged in misconduct. As the article will discuss, the reform efforts in response to the Enron scandal differed from those in response to Watergate in that after Enron, the federal government through the Sarbanes-Oxley Act, and various actions by the Securities and Exchange Commission (SEC), sought to control various aspects of the regulation of the legal profession. As the article will demonstrate, the Enron scandal has brought forth changes that seriously challenge the traditional view of the legal profession as self-regulating.