What does the post-Enron world look like for lawyers? Some believe that lawyers need to become gatekeepers, there to watch over and control corporate officers and directors. Currently lawyers do not have a real gatekeeping role. Unlike auditors, lawyers don't have public duties of care, disclosure, or independence. Instead, lawyers are supposed to be zealously loyal to their clients. Thus they make very poor gatekeepers. But things may change a bit. Let's take a look at lawyers for publicly traded corporations before, during, and after the Enron collapse.

1. Before

What was the corporate lawyer's world before Enron? Prior to Enron's fall, there were some specific ethical rules for lawyers representing corporations. The rules said these lawyers had to be careful to remember that they represented the corporation and not the individuals who make up the corporation. That is very hard to do since it is the individual corporate officers who hire and fire, pay, and talk to the attorneys. The corporation may be a person in the eyes of the law, but to the corporation's lawyer, the corporation is an unlikely friend and confidant. Nevertheless the rules required the corporation's lawyer who learned of illegal or criminal conduct possibly attributable to the corporation, to report it up the chain of corporate command as far as he or she could: to audit committees and the like. So went the rule.

In addition, there is an opposing rule that attorneys all know about-that they are supposed to keep their client's confidences, more or less absolutely. California requires that this be done absolutely. Nationally, the American Bar Association ("ABA") suggests rules that are fuzzier. And in a case of exquisite bad timing, the ABA had before it a chance to amend its Model Rule in August of 2001. In particular, the ABA had the chance to change the rule to allow lawyers to divulge their clients' secrets to prevent the clients from using their lawyer's services to commit a crime or fraud and to allow a lawyer to breach client confidentiality to prevent, mitigate, or rectify a financial loss arising from the client's use of the lawyer's services to commit a fraud. The proposed changes were badly defeated within the ABA's House of Delegates, and one was withdrawn. And so the rules remain very absolute. An attorney may, if she wants, reveal client confidences to prevent an imminent death or the like by her client, but nothing else in the national view.

2. During

What about the lawyers' role in the Enron mess? Lawyers caught a break in the whirlwind of publicity following Enron's bankruptcy filing, probably because what Arthur Anderson did looked so bad. But lawyers were in the Enron mess up to their eyeballs. Specifically, two large firms were involved. Vinson & Elkins, Enron's general counsel, investigated Sharon Watkins's whistle blowing complaints and did not find anything to be worried about. Kirkland & Ellis, a Chicago-based firm representing Enron in setting up many of the entities that moved revenues off to the side, similarly reported they found nothing to be concerned about. In fact, Enron was Vinson & Elkins' biggest client. More lawyers were involved as both Enron and Anderson had lawyers on their staffs. All failed in some way, but lawyers didn't catch all the flak, at least not publicly. Lawyers got a break at least in part because of the Central Bank v. First Interstate Bank case, from 1994, that said lawyers are not liable for aiding and abetting in securities fraud just because they advise a corporate client who commits it, if they are not actively involved in creating and manipulating misinformation and are not principal actors in the fraud. This case supports the idea that lawyers involved with Enron are not liable just because they were involved when the fraud went on.

So lawyers got a break. Nevertheless, when everything did go bad in Enron, Milberg Weiss, the firm representing the Regents of the University of California, and you, and me, and our pension funds, sued those two law firms as well. They hope to get around the Central Bank holding. It's yet to be determined whether they'll succeed in doing so. In their 500-page complaint, they devote about 50 pages to attacking the work of the lawyers for Enron.

3. After

Nevertheless, what's happening in the wake of Enron-the last phase of this story? One good thing resulted from it and may yet prove to be very beneficial. The ABA created a Taskforce on Corporate Responsibility that reported a number of changes that it wants to make to the relevant Rules. In particular, the Taskforce wants to tighten up the rule about whom lawyers report things to in order to make it easier for lawyers to report wrongdoing and to expand their reporting to include a wider range of wrongdoing. In particular, the Taskforce has recommended that the ABA go back and change the rules on confidentiality and make changes that would allow lawyers to reveal fraud or other misdeeds of a client in order to prevent great harm to the public. Nevertheless, the hope for all that to be accomplished isn't very great. I wouldn't bet on the ABA revisiting these proposed changes in the attorney-client privilege, and, even if it did, I wouldn't bet on the states quickly adopting the changes to their rules. It's a long arduous process.

But something else is on the horizon that lawyers and corporate officials should be aware of. Congress finally woke up and passed the Sarbanes-Oxley Act of 2002 that made a myriad of reforms, setting up an accounting board and the like. It has some particular relevance for lawyers and may change the way lawyers relate to their clients, to the SEC, and, in the long run, to the public. In particular, for about 50 years the Securities Exchange Commission ("SEC") has had a rule that allows it to suspend or bar professionals from practice for improper professional conduct. The SEC has used this rule against accountants, but has almost never used it against lawyers. It just hasn't enforced it against lawyers-or, very, very rarely. The SEC tends to turn things over to the states. In the wake of Enron, that is unlikely to be the case anymore. In fact, the new law specifically directs that the SEC, not later than 180 days after enactment (which was the end of January), issue rules, in the public interest and for the protection of investors, setting forth minimum standards of professional conduct for attorneys appearing and practicing before the commission in any way, including a requirement that attorneys report evidence of a material violation of securities law, or a breach of fiduciary duty, or similar violation, to the legal counsel, chief executive officer, or the equivalent of the corporation.

So, what could this mean? I think what this could mean is a real invigoration of lawyers' rules at the federal level, something that's never been done there. It may also mean that we might really develop some national controls over attorneys-but different rules, tougher rules that would undo the state monopoly of the regulation of the legal practice that is largely in the hands of the lawyers themselves in determining whether they act rightly or wrongly. That, I think, is an interesting, threatening, and liberating possible future for lawyers and Enron