If ever there was a time the in-house bar thought it could slip under the radar, that time has come to an end. The rude wake-up call comes in the form of the record 10 general counsel who were charged with or pleaded guilty to fraud in 2007.
"It's sure not a good time to be a lawyer," says Peter Henning, a professor at Wayne State University Law School who edits the White Collar Crime Prof Blog. "There's been a shift in the view of the in-house lawyer as a gatekeeper. It used to be just the CEO and CFO [who were targeted], and the third leg here is counsel."
This progression--though unwelcome for counsel who now operate under a microscope--is only natural given the increase in securities fraud investigations in the past few years. And the heightened SEC and DOJ scrutiny in general can all be traced back to cries of "Where were the lawyers?" during the Enron-era scandals and, of course, to SOX.
"Legal compliance now is so important that general counsel have to be involved in more things on a day-to-day basis, but this also increases their exposure," Henning says. "There's a sense of 'beware what you wish for.' In one sense it's a good thing that general counsel have more power and more involvement; at the same time it can be bad if things go sour."
Henning hopes lawyers don't pull back from such involvement in the name of caution as the crackdown continues--and it certainly will, he says.
"The SEC has announced it's targeting lawyers," he says. "The government is going to look at the role of lawyers and look at it very carefully. It's not just whether the lawyer made a bad decision but whether the lawyer prevented a client from making a bad decision."