The current issue of Corporate Board Member contains its annual survey of corporate directors on their favorite corporate law firms. And up there in the No. 8 spot is Kirkland & Ellis -- the very same Kirkland & Ellis that served as the attorney for many of the supposedly "independent" entities that Enron created to bamboozle its investors.
That's not just my opinion of what Enron & Co. were up to. That's the conclusion of the law dean hired by Enron's board and an examiner hired by the Enron bankruptcy court, along with the Securities and Exchange Commission. And yet in the marketplace for corporate legal services, it seems, K&E not only has not been hurt by its involvement with Enron, it actually moved up in the rankings. K&E has not commented publicly on its Enron-related work.
Nearly two years after Enron became synonymous with corporate fraud, not one of the lawyers who prepared the papers for the transactions and issued opinions vouching for their legality has been charged with doing anything wrong.
Out in San Francisco this week, the American Bar Association went through a ritual self-flagellation this week, adopting changes to its "model rules" that would permit lawyers to waive attorney-client privilege and rat out corporate clients they know are engaged in wrongdoing. The move, purely advisory in nature, is intended to stave off a tougher SEC rule that would not just permit such whistle-blowing but require it.
It's an interesting issue, with good arguments to be found on both sides. But in many ways, it's a sideshow that will have much less impact on lawyers' behavior than stripping a few senior partners of their licenses and draining the bank accounts of a couple of big law firms.
Consider, first, that the government already has plenty of power to go after lawyers who aid and abet corporate fraud. Except in a few minor cases, the corporate cops haven't used the powers they already have.
Second, while Congress has empowered the SEC to go after lawyers and accountants, it barred shareholders from bringing private lawsuits unless such advisers can be shown to be "primary actors," which they rarely are. We have Sen. Chris Dodd (D-Conn.), among others, to thank for this stunningly misguided provision, and you can almost date the deterioration of professional standards from its passage in 1995.
In such circumstances, it's no surprise that lawyers continue to deny any responsibility in the Enron debacle.
Down in Texas, some stick to the ridiculous line that nothing illegal has been uncovered in Enron's dealings -- the same conclusion reached by Vinson & Elkins's Joseph Dilg when asked to look into Enron whistle-blower Sherron Watkins's warnings in the spring of 2001.
Equally unconvincing is the line from other firms that their lawyers, while intimately involved in the details of Enron's complex transactions, were ignorant of the broad purposes and were repeatedly misled by wily Enron executives and accountants.
Taking the prize for brazenness are the lawyers at Milbank, Tweed, the New York firm that, according to filings submitted by lawyers for shareholders, earned $60 million in fees representing Citigroup, J.P. Morgan and other investment banks in 25 allegedly fraudulent Enron deals involving $12 billion. But that didn't stop a bankruptcy judge from approving Milbank, Tweed's selection as lead counsel for unsecured creditors in the Enron bankruptcy case, earning the firm $43 million more in fees.
In the end, you'll know the SEC is really serious about getting tough with lawyers when it requires companies like Citigroup and J.P. Morgan to waive attorney-client privilege as a condition for settling charges of corporate wrongdoing -- the only way to determine what role the lawyers really played.
You'll know Congress is serious when it eliminates the Dodd loophole in private class-action suits.
And you'll know that the courts are serious when they don't reward lawyers for participating in what turn out to be corporate scams by paying them as much as $500 an hour to dismantle them.
Steven Pearlstein will host a Web discussion today at 11 a.m. He can be reached at pearlsteins at washpost.com.