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Non-Tech : The Enron Scandal - Unmoderated -- Ignore unavailable to you. Want to Upgrade?

To: James Calladine who wrote (2734)	8/12/2003 8:34:20 AM
From: Glenn Petersen	Read Replies (1) \| Respond to of 3602

A half step from the ABA: washingtonpost.com ABA Loosens Attorney-Client Secrecy Rules Reuters Monday, August 11, 2003; 10:27 PM By Gail Appleson, Law Correspondent SAN FRANCISCO (Reuters) - The American Bar Association on Monday narrowly passed a controversial proposal that will allow lawyers to pierce sacred attorney-client secrecy rules to help stop financial crimes. In a 218 to 201 vote, the ABA's policy-making body amended its ethics code to allow, but not require, lawyers to breach attorney-client privilege if they believe doing so would stop a client from committing a financial crime or fraud. Dennis Archer, the ABA's incoming president, urged passage of the amendment. "This is in the best interest of our profession. It is in the best interest of our country," said Archer, a former mayor of Detroit. Many lawyers objected to the change, fearing it would severely harm the time-honored duty of lawyers to keep a client's information secret. They also worry that the change could expose lawyers to liability lawsuits. Among them was president-elect Robert Gray of Richmond, Virginia, who will succeed Archer in August 2004. "This is not the proper time to bow to threats by those who seek to regulate us," Gray said. "This not a time to take a position that the core values of this profession are subject to compromise." The group is scheduled to vote on another controversial ethics amendment on Tuesday that applies to lawyers who represent corporate clients. The proposal clarifies "triggers" that would require lawyers to report a corporate officer's conduct to the company's upper management. It also addresses circumstances in which lawyers can reveal information to authorities about their corporate clients. Similar proposals have been defeated by the House of Delegates in previous years. However, Archer and many other lawyers feel the landscape has changed in the wake of high-profile scandals that have engulfed Enron and other companies. "The environment we are in is very sobering," said William Ide, a former ABA president from Atlanta. "As officers of the court it is our responsibility to take a hard look at the damages that have been done to people. We need to decide there is more lawyers can do." Indeed, the ABA's vote will be closely watched by the U.S. Securities and Exchange Commission, which has been charged by Congress with setting standards of professional conduct for in-house and outside attorneys who advise public companies. Some SEC rules for lawyers went into effect last week, and the agency could adopt more stringent requirements if it is dissatisfied with the ABA's actions. However, several lawyers spoke out against the proposal, including William Paul, a former ABA president from Oklahoma City, Oklahoma, who said the rule change undermines a system that has worked for some 200 years. "We need that rule to enable us to do our work," he said, adding that the amendment "asks us to barter away a piece of our professional soul to get some hope for public approval." Sharon Stern Gerstman of Buffalo, New York, said the recent corporate scandals were not caused by lawyers' inability to reveal confidences and there is "not one shred of evidence" that the rule change would have made a difference. Instead, she said the ABA is being pressured by "government agencies that want us to make their jobs of learning our clients' secrets easier for them." © 2003 Reuters

To: James Calladine who wrote (2734)	8/21/2003 7:10:16 AM
From: Glenn Petersen	Read Replies (1) \| Respond to of 3602

SEC vows to target directors over fraud Case of Boston firm slated to be a model boston.com By Bloomberg News, 8/21/2003 The Securities and Exchange Commission is stepping up its effort to punish corporate fraud by pursuing charges against board members who ignore misconduct, SEC enforcement chief Stephen Cutler said. Cutler said the agency will use a case against a former outside board member at Chancellor Corp., a Boston transportation equipment-leasing company, as a model for such enforcement actions. That case, which charged that the director failed to act on evidence of accounting improprieties, is the "first salvo in this area," he said in an interview. By focusing on directors, the SEC is expanding its scrutiny of corporate watchdogs who oversee management. Since Enron Corp.'s collapse, the agency has sued accounting firms, auditors, and investment banks for colluding with management or overlooking wrongdoing. Cutler said he's not aware of any other SEC case against an outside director not directly involved in fraud. "This case signifies the commission's willingness to pursue cases against outside directors who were reckless in their oversight of management and asleep at the switch," Cutler said of the action against Rudolph Peselman, the former Chancellor director who also served on its audit committee. The effort reflects a change in the commission's mandate after accounting scandals at Enron and WorldCom Inc. The SEC is the principal agency enforcing the Sarbanes-Oxley corporate governance law passed last year, which has prompted it to more aggressively pursue wrongdoing among those who advise and supervise chief executive officers. In the Chancellor case, filed April 24 in US district court in Boston, the SEC alleges that the company fraudulently overstated revenue in 1998 by 177 percent. The SEC charged several former Chancellor executives and Peselman with fraud. Chancellor improperly booked $19 million in revenue in 1998 from a subsidiary Chancellor didn't control until 1999, the SEC said. The company fired an audit firm that disagreed with the accounting treatment, the SEC alleges, and hired another auditor, who signed off on it. Chancellor also paid "several million dollars" to entities controlled by Chancellor's chairman and chief executive, Brian Adley, the SEC alleges. Adley has denied wrongdoing. © Copyright 2003 Globe Newspaper Company.