A New Role for Lawyers: The Corporate Counselor after Enron
![handle is hein.journals/conlr35 and id is 1195 raw text is: A New Role for Lawyers?: The Corporate
Counselor After Enron
ROBERT W. GORDON*
Lawyers seem to have played a relatively minor part in the theater of
deception and self-dealing that has led to the collapse of Enron Corp. (En-
ron) and other corporate titans of the 1990s. The spotlight has been on the
grasping managers at the heart of the drama, debased accounting standards
and practices, corrupt politicians pressing to abolish or weaken regulations
and cripple enforcement, opportunistic investment bankers, conflicted
stock analysts, and a credulous business press. But lawyers-both in-
house lawyers and outside law firms-were participants in many of the
central transactions that ultimately brought about the companies' ruin.
I. SOME PROBLEMS WITH WHAT LAWYERS DID
A. Non-Disclosure by (Technical) Disclosure
Securities laws require accurate and transparent financial statements,
so that investors can know the financial condition of the company. Enron
arranged to borrow money from banks through transactions disguised as
sales of real assets.' No real assets ever changed hands, nor were they go-
ing to; Enron was going to repay the money with interest and cancel the
sales. The purpose was to show the debt on the company's books as earn-
ings. Another purpose was to make it possible for Enron to borrow money
on the security of assets without relinquishing any control, or any benefits
from the proceeds, of those assets.' Lawyers wrote opinions certifying the
disguised loans as true sales. Enron moved other debt off of its own
Chancellor Kent Professor of Law and Legal History, Yale University. Thanks to Susan
Koniak, Robert Eli Rosen, and William Simon for useful insights for this piece, and to Erin Conroy and
Dixie Lee Rodgers for research assistance.
I First Interim Report of Neal Batson, Court-Appointed Examiner, U.S. Bankr. Court, S.D.N.Y.,
In re Enron, No. 01-16034 (Bankr. S.D.N.Y. Sept. 21, 2002), at 7 n.26 [hereinafter Batson Report],
available at http://www.entwistle-law.comnews/institutional/worldcom/repenron-exam.htm (last
visited Feb. 22, 2003) (on file with the Connecticut Law Review).
2 Id. at 48.](ViewImageLocal?handle=hein.journals/conlr35&div=36&collection=&method=preview&ext=.png&size=3)
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A New Role for Lawyers: The Corporate Counselor after Enron
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