New law taking effect in January forces lawyers to expose corrupt business practices. Will it do any good?
Uncle Sam is looking for a few good whistle-blowers.
No, it's not part of the Justice Department's war on terrorism. Rather it is a centerpiece of the government's corporate reforms to prevent the kinds of bookkeeping excesses that led to the downfall of business giants like Enron and WorldCom.
If only someone - an auditor, executive, outside director - had come forward and "blown the whistle" sooner, investors would have been better able to gauge the value of certain corporations. And the market, rather than bankruptcy judges, would sort out the good from the bad.
But how does one break a corporate code of silence that can be as intimidating as one imposed by Mafia dons?
The answer from Congress: lean on the lawyers.
The latest wrinkle in the government's attempt to restore investor confidence in American stocks hinges on the idea that corporate lawyers can - and should - be dragooned into service as whistle-blowers.
Unlike Time Magazine's "Persons of the Year," three whistle-blowers who voluntarily exposed questionable activities at Enron, WorldCom, and the FBI, corporate lawyers would be forced to take action or face professional and other sanctions.
The idea has sparked sharp debate within the legal community.
"This is really a revolutionary innovation - for good or bad - in legal ethics," says Geoffrey Miller, legal ethics professor at New York University. "It puts the attorney in the position of ratting out the client."
The new regulation was approved by the Securities and Exchange Commission (SEC) and is set to take effect on Jan. 26.
It requires corporate lawyers who suspect wrongdoing to report their concerns to senior management and, potentially, to the board of directors. The regulations require that if the firm fails to take sufficient steps to resolve the questionable activity the lawyer must end his legal representation and notify the SEC of any documents containing false or misleading information. The procedure is known as a "noisy withdrawal."