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Copyright (c) 2003 Kentucky College of Law
Kentucky Law Journal

NOTE: Turn Up the Volume: The Need for "Noisy Withdrawal" in a Post Enron Society

Fall 2003 / 2004

92 Ky. L.J. 279





The Enron scandal of 2001 was an American tragedy. Thousands of Enron employees were left without jobs and pensions when the company collapsed. 1 The shady accounting techniques and ghastly decisions made by Enron executives were widely publicized and met with scathing reprimands from the public. 2 Sadly, Enron's attorneys also played a key role in the company's collapse. 3 Through the Sarbanes-Oxley Act of 2002, Congress sought to curtail unlawful business practices not only through more accounting oversight, but also with new guidelines for attorneys who represented corporations. 4 Congress, through the Securities and Exchange Commission ("SEC" or "the Commission"), mandated that corporate attorneys who discover fraudulent conduct by managers must report the malfeasance all the way up to the board of directors if necessary. 5

But the SEC wants to go one step further. If a company's board of directors does not bring fraudulent conduct to an end, the Commission proposes a mandatory noisy withdrawal for outside counsel. 6 The SEC would require outside counsel to withdraw from serving her corporate client, renounce any work done by the attorney that she deems objection-able, and notify the SEC of these actions. 7

Critics see the noisy withdrawal as effectively turning the client over to enforcement authorities. 8 They claim this provision tramples on the confidential relationship between a corporation and its attorney. 9 Mandatory withdrawal with a notification procedure, however, is consistent with ethical principles and necessary to strengthen the integrity of the United States' financial system ...
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