Legal ethics, confidentiality, and the organizational client

The ethical rules governing lawyers representing organizational clients when the lawyer encounters actual or potential criminal or fraudulent conduct on the part of the client, or those acting for it, are in sharp focus today. Although there is uniformity in some respects, there are significant differences among the existing rules in the states, the Model Rules of Professional Conduct as recommended by the ABA Commission on Evaluation of the Rules of Professional Conduct (the Ethics 2000 Commission), those rules as approved by the ABA House of Delegates, and the recommendations of the ABA Task Force on Corporate Responsibility in its preliminary report dated July 16, 2002 (printed at p. 189). The Sarbanes-Oxley Act enacted on July 30, 2002, directs the Securities and Exchange Commission (SEC) to adopt ethical rules for lawyers representing issuers before it dealing with actions lawyers should take within the organization when there is evidence of financial fraud, and authorizes the SEC to adopt additional rules for that situation. The author discusses the differences among existing rules, the ABA Commission's recommendations, and the recommendations in the preliminary report of the ABA Task Force on Corporate Responsibility currently in the process of review in public hearings. The author suggests that the original recommendations of the Ethics 2000 Commission represents the best choice for the states, that the SEC should adopt rules consistent with those recommendations as to action within the organization, and that the SEC should not promulgate rules that would place lawyers in the position of acting under differing and conflicting standards in the same matter.