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External law firms mentioned in the reports include two Texas law firms: Austin-based Vinson & Elkins, Enron`s principal law firm; and Andrews & Kurth, Enron`s preferred Houston-based law firm, for legal work related to FAS 140 transactions. Enron used these structured finance transactions to transfer illiquid assets to special purpose entities, while retaining control of the assets and assuming responsibility for the debt incurred. In the bankruptcy auditor`s reports, it is noted that lawyers and law firms deny knowledge of any misconduct on the part of the company`s officers. Lack of knowledge is one of many legal and factual defenses lawyers could raise, according to reports. You can also argue that Enron`s board of directors approved many of the suspicious transactions and that the company addressed the concerns and made an appropriate business decision. That`s the verdict of experts and legal experts after an 18-month investigation into the former energy giant`s tangled network of suspicious transactions and inflated assets. Nevertheless, Vinson & Elkins hired attorney John Villa of Williams & Connolly in Washington. Villa is a litigator who has gained national notoriety with a rather rare specialty: defending leading struggling law firms. This decision not to question accounting is “the big hole through which much [of the V&E report] flows,” said Matthew Spitzer, dean of the University of Southern California School of Law and one of many legal experts who reviewed the law firm`s Forbes.com report. Hendrick, a securities and ethics partner, a litigator, referred the questions to a company spokesperson who declined to comment.

Steven Collins, general counsel at Alston & Bird, says lawyers working on the legal aspects of transactions “need to keep in mind the bigger picture, how what they do fits into the overall transaction. It was the effort of Houston-based V&E, which would have been one of the best in Texas, that charged Enron between $27 million and $30 million in 2000, according to The American Lawyer, a legal journal. V&E is the second largest law firm in Texas with revenue of $386.5 million in 2000. Since Enron provided about 7% of its invoices, Enron`s business was proportionately much more important to V&E than to Andersen. (Andersen has charged Enron $52 million a year, but it claims annual revenue of $9.3 billion.) So what? In legal practice, comments like this are made every day. Clients consult with lawyers to expedite, not hinder, their transactions. If a conservative-minded law firm thinks a deal goes too far, then a more aggressive firm may be willing to bless it. Moreover, buying opinions is not an anomaly for large companies; This is a common feature of the profession.

Experts are also “bought”: an expert who sees no professional misconduct is exchanged for another who does. And if 10 experts need to be consulted before agreeing with your side, so be it. The truth is that different lawyers, like different doctors, have different good faith views on the limit of good practice. So, the letter against V&E may seem overwhelming, and it may seem like it should be V&E, not Andersen, who is now sitting in the hot seat. But surprise! From a legal standpoint, Vinson and Elkins may not have done much wrong. What for? Because Andersen had a responsibility to the public that V&E simply didn`t have. But something else is emerging that lawyers and business representatives should be aware of. Congress eventually woke up and passed the Sarbanes-Oxley Act of 2002, which brought about various reforms by establishing an audit committee and the like. It is particularly relevant to lawyers and can change the way lawyers deal with their clients, the SEC and, in the long run, the public. Notably, the Securities Exchange Commission (“SEC”) has had a rule for about 50 years that allows it to prohibit or prohibit professionals from practising their profession for improper professional conduct. The SEC has enforced this rule against accountants, but almost never against lawyers. He just didn`t enforce it against lawyers – or, very, very rarely.

The SEC tends to hand things over to the states. In the wake of Enron, this is probably no longer the case. In fact, the new law explicitly states that no later than 180 days after its passage (i.e., by the end of January), the SEC will issue rules in the public interest and to protect investors who set minimum standards for the professional conduct of lawyers who appear and practice in any manner before the Commission. including requiring lawyers to report evidence of a material breach of securities law. or a breach of fiduciary duty or similar breach by legal counsel, chief executive officer or equivalent of the Company. Distinguishing what is above the abyss from what is on the edge of the precipice is one of the hardest lines a lawyer draws, and it is often better to draw only after the fact. Remember ex-convict Robert De Niro, who starred in the 1991 remake of the classic 1962 film Cape Fear? He sued a lawyer and his family because the lawyer had failed years ago to represent him “zealously” in his case and had refused to present exculpatory evidence because he personally believed in his client`s guilt. This character – the one Juliette Lewis thumb-sucking – had a good point (but an unfortunate calling mechanism). The ethical obligation to vigorously represent the client is at the limit of what is legal, although it does not go beyond that. V&E concluded by concluding that its work had been done: “[T]he facts disclosed by our preliminary investigation do not, in our sole discretion, warrant a thorough investigation by independent lawyers and auditors.” This conclusion could go down in legal history as one of the great bad appeals. The same facts — among many others — are now the subject of a massive federal criminal investigation, an SEC investigation, congressional committee hearings, and dozens of private class action lawsuits. What was the world of corporate lawyer before Enron? Prior to the Enron case, there were specific ethical rules for lawyers representing companies.

The rules state that these lawyers had to make sure they remembered that they represented the company and not the people who make it up. This is very difficult to do because it is the business leaders who hire and fire, pay and talk to lawyers. The company may be a person in the eyes of the law, but for the company`s lawyer, the company is an unlikely friend and confidant. However, the rules required that the company`s lawyer who had knowledge of illegal or criminal conduct that could be attributable to the company report it as much as possible in the company`s chain of command: to audit committees and others. That was the rule. Former executives interviewed by the Washington Post said the role Vinson & Elkins sometimes played went beyond the usual work of an external consultant for a large company. They said the lawyers regularly participated in discussions in the Enron conference room on the 48th floor. Stock, where complex partnerships were structured and then displayed on a large white dashboard. That`s easier said than done, lawyers say. Properly fulfilling the role of the lawyer in an Enron-type situation may involve admitting that one does not understand how a transaction works, that one questions its purpose, that one becomes a whistleblower and that one potentially alienates one`s colleagues.