Here is a nightmare for a bankruptcy lawyer. You answer the phone and you hear a voice you don't recognize. "You don't know me, but …" the voice says.

"You don't know me but I know what is going on down at the pie company." That would be Grandma's Pie Co., John C. Grandma, president and principal stockholder. The pie company is your client, operating its business in a "reorganization" case under Chapter 11 of the Bankruptcy Code.

"I know what is going on down at the pie company," the voice repeats. "I know they are taking inventory out the back door and selling on the side. They are taking the money from the sales and putting it in their pockets. It is not showing up on the books."

You struggle to recover your composure. "Wait, slow down," you say. "Who is doing all this, and how do you know? Who are 'they?' And while we are at it - who are you."

The voice assumes an air of portent. "You don't need to know who I am," the speaker says. "And if you don't know who" - a bit petulant this time, scolding - "if you don't know who, you certainly should know. It certainly goes straight to the top."

You seek to pursue your questions, but you hear the click. Hello? Nobody home. Conversation over. And you have a problem.

You have a problem, unsought and largely unwelcome, even though you didn't steal any pies (if any were stolen - after all, how do you know the caller was telling the truth). You aren't even a part of the company.

But you are the lawyer, for the company. And this fact poses a dilemma of exquisite complexity. The problem is: now you know - something. Whom do you tell? And when do you tell it.

For an outsider, this may not seem to be a problem. Suppose you represent Dawson Defendant, accused of bank robbery. In the course of your representation, you come to conclude that Dawson very likely did rob the bank. Do you blow the whistle on Dawson? Even the most superficial student of "Law and Order" knows the answer to that: You do not tell. The crime is Dawson's, not yours. The information is for you to know and for the prosecutor to find out. If the prosecutor doesn't make his case, your client walks. Quite the contrary, if you do tell, you have breached a fundamental duty of loyalty to your client. In the schoolyard, we had a name for that sort for thing.

So how does the pie company pose a problem, when Dawson does not? With the pie company, the problem is twofold: first, you are in a kind of "ongoing relationship"- representing the debtor as he continues to do business. And second, the offense (if any) is a kind of "continuing offense." Suppose (for argument) that the folks at the pie company are stealing from creditors, and that the management knows all about it. Assume that the creditors don't have a clue about any trouble. Then as the pie company continues to do business, and to incur debt, it continues to mislead creditors about the state of its business.

So stated most starkly, you have two bad choices: if you continue to represent the client in this continuing wrong, you make yourself part of the problem. If you break ranks and blow the whistle, you may be breaching some fundamental duty of loyalty.

The problem is aggravated because the client is in Chapter 11. Outside Chapter 11, you may have a duty to "somebody" - say, the creditors. Inside Chapter 11, you are (in some sense) an "officer of the court:" you speak for the debtor, as it continues to run its business in its role as "debtor in possession." As debtor in possession, it has the obligations of a bankruptcy trustee. So you address the court as the spokesman for the "trustee." Bankruptcy judges tend to take this role seriously: rightly or wrongly, they tend to count on counsel to help assure "debtor good behavior" in the operating case.

So, a dilemma. If you blow the whistle too clearly, you may be in breach of your duty of loyalty. But if you do nothing, you may breach your obligation as an officer of the court. There is no completely clear path out of this one, but here are some signposts:

First, as the problem was posed above, you really don't know anything yet. You got an anonymous phone call that made some vague allegations that might or might not involve your client the company. For all you know, it is all a tissue of falsehood?

Given the tenuous nature of the record so far, one is tempted to wonder if you can simply ignore it and go about your business. This approach would be hazardous. With regard to all but the flimsiest and most (apparently) frivolous of allegations, you probably do have some duty to make an inquiry. Necessarily the scope of your inquiry may be tailored to the scope and strength of an allegation: in this case, maybe a couple of phone calls will clear things up.

Maybe, but maybe not. Maybe you find that what the caller said was true: that someone is spiriting away inventory at the expense of creditors - and that top management is involved, so it is the fault of "the company," not just some freelancing by low-level employees. What then?

Probably the next step is to confront top management. This is going to be a big moment in your life and it would be impertinent to dismiss it lightly, but you've got to do it. You've got to tell them that you know, and that you can't put up with it. (Yes, of course you might get canned - but what is your point?).

Now phase three: your client doesn't deny the offense. Quite the contrary, he says he's perfectly happy to continue and if you don't like it - why, that is just your problem.

Indeed it is your problem. So, what next? Here is where matters get really tricky. A crude reading might impel the conclusion that you have to quit the case and tell the world. But the bankruptcy courts haven't really gone that far. Rather, they slice the obligation a bit thinner. The general reading is that you must withdraw. You are, after all, in there in the first place only on court approval - and the court doesn't want you just to abandon your client in mid-case. But there are ways and ways to withdraw from a case. And the general consensus is that you may withdraw in "silence," but at the same time planting clues all around so that everyone will understand that this file glows in the dark. "Fundamental differences with the client" is a stock phrase. Translated: "there is a ton of stuff I could say, but please don't ask me to tell.

The somewhat inelegant catchphrase for this maneuver is "noisy withdrawal." Casuists may quibble over whether you are really "telling" when you are "not telling" in this way. On one side; if there really has been misbehavior and if the world should know about it, then why all the hocus pocus? On the other side, who do you think you re protecting (except, of course, your own self esteem) by all the nudge, nudge, wink, wink?

In any event, courts have accepted "noisy withdrawal" as a compromise between the duty of loyalty and the duty to the court.

This note is being written to join a collection of essays on Sarbanes-Oxley. Sarbanes-Oxley, among other things, imposes the notorious "disclosure" requirements that have received so much public scrutiny. Note that we have gone all this way in this note without ever mentioning Sarbanes-Oxley. The reason is that everything said above was true before Sarbanes-Oxley ever came along. In other words, bankruptcy had a fairly well developed body of doctrine on the duty to disclose before Sarbanes-Oxley ever occurred.

One question, then, would be: how much will Sarbanes-Oxley affect bankruptcy practice? A simple answer is: "not very much, and for good reason" - the reason being, that Sarbanes-Oxley involves only public companies: many Chapter 11 debtors are non-public "family firms" and therefore quite beyond its reach. The flip side question might be: how much will bankruptcy practice affect Sarbanes-Oxley? That is - how far will the "bankruptcy past" shape or clarify the "Sarbanes-Oxley future?" On that, at least for the moment, we can be content to wait and see.