2007 Issue 1 - New York City Bar Association

L A W Y E R ’ S R O L E I N C O R P O R A T E G O V E R N A N C E
litigation under the securities laws should be reestablished by Congress,
reversing the impact of the Supreme Court’s decision eliminating such
liability in Central Bank of Denver N.A. v. First Interstate Bank of Denver
N.A., 511 U.S. 164 (1994). We believe that consideration of such legislation
at this time would be premature (see pp. 180-183, below). It is important,
first, to assess the impact on lawyer conduct of the SEC’s interpretation
and enforcement of its lawyer conduct rules. In addition, the courts
need to resolve the present uncertainty concerning the extent to which
lawyers (and other “secondary actors”) may be held as primary violators
of the securities laws for conduct previously thought to constitute aiding
and abetting (see Full Report at pp. 42-45).
* * *
VII
THE ROLE OF LAWYERS IN CONDUCTING INTERNAL INVESTIGATIONS*
A. Background and Context
1. Introduction
When conducting an internal investigation on behalf of a company,
investigative and company counsel face many challenges, from determining
the proper scope of the inquiry, to making findings of fact and recommending
remedial action, to addressing the expectations and demands
of regulators and prosecutors. Some commentators have suggested that
good corporate governance dictates that counsel must follow all leads of
possible unlawful conduct, address every instance of wrongdoing and
cooperate fully with the authorities. Others take as their starting point
the interests of the corporation’s shareholders, as determined by their
appointed representatives (the Board of Directors or a committee of the
Board), and use as their guiding principle the obligation to maintain
shareholder value.
Often these two approaches will not be in conflict. An independent,
comprehensive investigation, coupled with full cooperation with government
authorities, will be consistent with, and indeed mandated by, the
need to preserve shareholder value. There are other circumstances, however,
where a company may properly determine that, on balance, an investigation
that has no limitations will result in a waste of assets, or that
* The footnotes in this section are numbered as in the Full Report. This Section VII of the
report was prepared by the Task Force’s subcommittee on internal investigations: Daniel
Kramer, Chair, and members Wayne Carlin, Eric Corngold, Charles Gerdts, Barbara Gillers,
Lewis Liman, Claudius Sokenu, Betty Whelchel and Frederic Yerman.
T H E R E C O R D
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