Task Force on Corporate Responsibility: Should the American Bar Association adopt new ethics rules?

Georgetown Journal of Legal Ethics, The, Summer 2003 by Kroetsch, Nicole, Petrich, Samantha

Consider Dante's "counselors of fraud." We're told that they "used their high mental gifts for guile, and because of their higher endowment their sin is reckoned greater and their place is lower than that of thieves." There is an analogy to modern times. Lawyers cannot escape their role in giving assistance to corporate wrongdoers by hiding behind their ability to craft a clever phrase to circumvent what they know to be the right answer.1

INTRODUCTION

In a speech in front of the annual meeting of the American Bar Association's Business Law Section last summer, former U.S. Securities and Exchange Commission Chairman Harvey L. Pitt made this timely observation. The collapse of Enron Corporation, resulting in a $20 billion overall loss for public investors,2 as well as a "disturbing series of recent lapses" at WorldCom, Adelphia, Tyco, Global Crossing and other corporations, inspired the American Bar Association ("ABA") to examine the activities of attorneys representing corporations.3 On March 27, 2002, ABA President Robert E. Hirshon announced the formation of the ABA's Task Force on Corporate Responsibility ("Task Force") to coordinate the Association's efforts in this area.4 The Task Force was created to respond to concerns from within the legal profession about the role it plays in safeguarding public confidence in corporations5 and to address concerns about the ethical responsibilities of lawyers in corporate America.6

The Task Force allowed the ABA to participate in the "dialogue now occurring among regulators, legislators, major financial markets and other organizations focusing on legislative and regulatory reform to improve corporate responsibility."7 In order to accomplish the mission set out for the Task Force, the ABA brought together a diverse group of individuals with experience not only in the field of ethics, but also in areas such as business law, corporate governance, and regulatory law.8 Included were five current practitioners, two of whom have previous experience as senior vice presidents of large corporations, as well as two who are chairmen of different business law committees of the ABA; three current vice presidents of large corporations, one each from General Motors Corp., Aon Consulting and The New York Times Company; one regulatory official, who was formerly a commissioner of the U.S. Securities and Exchange Commission; one academic; and one judge of a business court.9 Because of the diverse backgrounds of these individuals, each brought a unique perspective to the Task Force and offered specific examples from their area of expertise.

This Note will provide an overview and a discussion of the proposed recommendations of the Task Force with respect to the ABA Model Rules of Professional Conduct ("Model Rules"). The Note will focus on Model Rules 1.6 (Confidentiality of Information), 1.13 (Organization as Client), 1.2 (Scope of Representation) and 4.1 (Truthfulness in Statements to Others). Part I establishes an overview of the preliminary report released by the Task Force. Part II reviews the aforementioned Model Rules as they currently stand. Part III is a review of the changes to these Model Rules as recommended by the Task Force. Part IV addresses the benefits and costs of each of the recommended changes.

I. THE TASK FORCE REPORT

A primary objective of the Task Force was to review the applicable provisions of the Model Rules as most recently amended in February 2002.10 The Task Force released its preliminary report making recommendations to the legal profession in July 2002 ("Task Force Report").11 However, it should be noted that the Task Force admitted it was under a time constraint that prevented the kind of careful deliberation of changes to the Model Rules as was done by the Ethics 2000 Commission.12 Due to the timing and the quick release of the Task Force Report, the Task Force did not make specific recommendations as to the precise wording of changes to the Model Rules and recognized that much of the work is ongoing.13 The Sarbanes-Oxley Act,14 which was enacted after the release of the Task Force Report, also impacted the recommendations made by the Task Force.15 While a consideration of this legislation falls outside the scope of this Note, the Task Force held public hearings after the enactment of Sarbanes-Oxley and the legislation served as a backdrop to discussions about the legal profession and corporate responsibility.16

The Task Force divided its recommendations into three areas: (i) corporate governance, (ii) the Model Rules, and (iii) corporate communications.17 In making its recommendations, the Task Force welcomed suggestions from the U.S. Securities and Exchange Commission ("SEC"), Congress, and other legislative and regulatory agencies.18 However, the Task Force and the ABA believed that eventual promulgation and enforcement of ethical standards should remain the primary responsibility of the states (who decide on their own whether or not to adopt a state version of the Model Rules) and not be done through federal legislation or federal agency regulations.19 Provisions in the Sarbanes-Oxley Act granting an oversight board and the sec power to preempt state court rules by issuing conflicting national ethical rules have been criticized by the ABA as "unnecessary and counterproductive."20