California Bar Journal
spacer.gif (810 bytes)


spacer.gif (810 bytes)

Enron fallout will mean changing some ethics rules

spacer.gif (810 bytes)
spacer.gif (810 bytes)

Diane KarpmanEnron may have literally sizzled California by creating the phantom energy crisis last summer, replete with gaming, temporary cartels and megawatt laundering. How many of you lost valuable billing time to blackouts; suffered anxiety and distraction for aged parents or young children due to power shortages; or even missed a statute due to a computer failure?  Lawyers probably in-curred vast unnecessary expenses by purchasing laptops, intent on continuing to work during rolling blackouts. As Enron class actions proliferate, what about California lawyers?

You can see the "copyrighted" First Consolidated and Amended Complaint against the company at The lawyers' section starts at page 168, paragraph 518. My favorite phrase is "hall of mirrors in a house of cards." Gee, do you think that violates the copyright? How do you copyright a public document?

Enron has engendered an onslaught of publicity involving third party claims or non-client claims against lawyers and accounting firms (the "Remaining Four"), not to mention energy traders, investment bankers and stock analysts.

The media hype will cause everyone to experience lingering fears of possible non-client liability, which is sure to roil lawyers, due to the heated Enron-ish press focus. Remember those remote letters you drafted for friends, regarding the viability of a, or the safety record of the Cub Scouts' overnight camping program? Ever wonder who relied upon those documents? We simply can't worry about all those reams of paper that we wrote as kids, but the future is something we can address.

Be reluctant with opinion letters.  After all, you can never really be compensated for the sleepless nights of future years. When drafting an opinion letter, clearly mark each page for the reader's eyes only.  Then, if your client attempts to peddle the assurances to drum up invest-ors, at a bare minimum, you have a possible argument against unknown or unintended investors.  Mark each and every page in bold, to highlight the margins of acceptable reliance.

Law firms reportedly paid out more than one hundred million dollars for the S&L debacle of the '90s.  The Office of Thrift's allegations that but for the lawyers, Keating could not have been successful, contained an element of truth. One of the primary reasons that the American Bar Association sought to amend the confidentiality requirement of Model Rule 1.6 was to permit lawyers to disclose client wrongdoing. Enron is likely to present a strikingly similar scenario and may implicate lawyers. Please, remind lawyer bashers that it is the lawyers who will bring everything to the light.

Enron's most profound impact upon the profession will involve document retention policies, which everyone knows means the destruction of drafts, e-mails and other potential smoking guns. If you are involved with an entity retention policy, it is highly advisable not to remind the company's employees of such a policy after receipt of a subpoena. A reminder to employees on the eve of a federal investigation, as evidenced in the Arthur Anderson prosecution, could be characterized as suspicious and . . . well, . . . possibly obstruction of justice.