Corporate law faculty across the United States have joined in support of a rule recently proposed by the U.S. Securities and Exchange Commission that would make lawyers involved in executing corporate transactions more accountable for addressing client fraud.The rule would require corporate lawyers faced with evidence of a material violation of law to report this evidence up the corporate ladder. If there was no adequate response from corporate officers and the board or relevant board committee, ultimately the lawyers would withdraw from representing their client, notify the SEC of the withdrawal and disaffirm any materially false or misleading documents that they might have helped prepare.
Roger C. Cramton, the Stevens Professor of Law Emeritus at Cornell University Law School and co-author ofThe Law and Ethics of Lawyering , combined with his co-authors, Susan P. Koniak of Boston University and George M. Cohen of the University of Virginia, to respond to the SEC's draft rules. Their 48-page analysis of the new reporting requirements has been endorsed in principle by 48 other law faculty members from around the country, including Cornell Law School's Jonathan R. Macey and Charles W. Wolfram.
"That's a huge response from the legal academy, and it cuts across all political and academic ideologies," Cramton said of the support their recommendations received as they circulated the comments for review to colleagues at many law schools. "I've never seen such a positive response from a group this large with such diverse backgrounds. This is a real mix and that's unusual. The fact that they all gave their general agreement is remarkable."
When the U.S. Congress, following the collapse of energy giant Enron, passed the Sarbanes-Oxley Act to impose greater accountability structures on corporate financial statements, it included a provision requiring the SEC to propose new professional conduct standards for attorneys. The SEC drafted proposed rules and solicited responses to its proposals. Law faculty, anticipating resistance to the proposals from the American Bar Association and other lawyer groups, spoke up by endorsing the analysis produced by Cramton and his colleagues.
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