Lawyers Gone Bad

by Philip Slayton

  And then law students become lawyers and experience the “real world.” They discover how clients are billed and lawyers are paid. Almost all law firms charge according to the hours spent on a file. The pay of a partner or associate depends in part, often in large part, on the number of billable hours he creates for himself (and others). The consequence is often “over docketing,” the exaggeration by a lawyer of the number of billable hours he has worked. Over docketing is tolerated, if not encouraged, by firms that value profit above all else and set unrealistic billing goals for their partners and associates. Gripped by ambition, greed, fear, or panic, lawyers cheat. They cheat despite the fact that a law society may disbar a member found to have overbilled. In a 2002 Ontario disciplinary case about overbilling of the Ontario Legal Aid Plan by Toronto lawyer Angie Codina20 (Chapter 15), the panel observed in its reasons that where “the lawyer has been dishonest in regard to the number of hours worked, the Law Society should impose a very serious disciplinary penalty.… The penalty for defrauding clients in a billing situation must be disbarment.” Angie Codina’s lover, lawyer Harry Kopyto, had already been disbarred for the same reason—overbilling Legal Aid. (In 2000, in unrelated proceedings, Codina was sent to prison in New York State for fraud, larceny, and practising law while not a member of the State bar.)

  Out-and-out cheating about the number of hours worked is only the half of it. Billing by the hour, whether a lawyer is lying or not, creates bad incentives and encourages unprofessional behaviour. The longer it takes a lawyer to solve his client’s problem, the greater his income. This system rewards the lead foot and the heavy hand. The contented lawyer is the one who in the morning has a pile of documents on the left-hand side of his desk that he can spend all day moving to the right-hand side. The worried lawyer is the one who creatively solves a client’s big problem before it is time for morning coffee and wonders what he is going to do for the rest of the day. Efficiencies reducing time spent are unlikely to be adopted. This may be why the legal profession has been notoriously slow to embrace information technology. “Why be more efficient, why computerize, when you can bill by the hour?” a lawyer from Saskatchewan wrote to me.

  It is, of course, absurd to value the work of an intelligent, well-educated person, and especially someone who is creative, according to how much time he or she spends doing that work. On that basis, sudden insight, however brilliant, has little or no value, while laboriously produced hackwork is worth a lot and is to be encouraged. This approach would value a painting by Picasso according to how long it had taken him to paint it.

  Many lawyers exhibit a high degree of knowledge and competence, but there is vice in these apparently desirable attributes. Mastery of the rules of law, and the ability to manipulate them, encourages disdain for those rules. A lawyer may come to believe that his mastery of rules carries with it a personal exemption from their application. He may even come not to distinguish between legal rules and those of personal conduct and morality. He may come to believe that, in some sense, he is bigger than all rules, no matter what their content. As his ego swells, he may ignore or break rules as a form of self-assertion and a statement of personal power. Or, using his interpretive skill, he may give new and convenient content to rules of conduct.

  Tax law practice often shows disdain for the ethical content of rules. No one likes paying tax, but many taxpayers consider that tax rules incorporate important principles of public policy, even of morality. As they sign their cheques payable to the taxation authorities, they may comfort themselves with the thought that redistribution of wealth through the tax system provides for the less fortunate, or that tax revenues allow the creation and maintenance of great public projects—universal medical care, for example. But the bread and butter of a tax lawyer or accountant is to facilitate the avoidance of tax. He is expected to manipulate the rules to minimize the tax payable by his clients. This can only distract attention from the rightful purpose of the tax system, and undermine its moral and public policy basis.

  Since the 2001 Enron scandal, newspapers have been full of tales about the collapse of unbridled capitalism. For the most part, lawyers have watched safely from the wings as famous corporations file for bankruptcy, accounting firms disappear, boards of directors are sacked, and CEOs and other senior executives are indicted and jailed. Pundits have repeatedly asked, Where were the company’s directors when all this was going on? Where were the auditors? Where were the regulators? Few have asked, Where were the lawyers?

  It’s peculiar that the legal profession has so far been largely untouched by this corporate crisis. The companies that got into trouble, and the people whose careers have been destroyed, all undoubtedly received expensive legal advice from top-drawer law firms. The average CEO, CFO, or director of a decent-sized company doesn’t make a move without his lawyer by his side. Jonathan Glater observed in 2005, in The New York Times,21 that, in the corporate world, nothing happens without the review and approval of a lawyer: “Lawyers have made themselves indispensable to public companies. Lawyers boast of their ability to learn the ins and outs of any problem and to know a client’s interests better than the client does. But if lawyers are as wise as they profess, how is it that so many of their clients have been in the middle of devastating financial scandals over the last four years?”

  Typically, a senior executive and his lawyer have a long-standing relationship. They go out together with their wives to expensive restaurants (the lawyer pays). They go on fly-fishing weekends (perhaps to a company-owned retreat). They play golf at the best courses. There’s a good chance the lawyer sits on the company’s board. Each gives to the other’s favourite charity. They’re friends (of a sort).

  But the lawyer and the executive are also locked in a symbiotic relationship. The dictionary defines “symbiosis” as “an association of two different organisms living attached to one another: a relationship of mutual benefit or dependence.” For the lawyer, status in his firm, and the income associated with that status, depends largely on control of one or more big clients. To lose a big client can be a personal economic disaster. A lawyer will do a lot to stop such a terrible thing from happening to him. For the corporate executive, the lawyer supplies a protective shield. When the going gets tough, the executive must be able to say, “My lawyer said it was okay!” Most times the lawyer will also have to put that in writing in a legal opinion.

  This symbiotic relationship between client and lawyer can be perfectly respectable, particularly if the executive genuinely seeks, and is disposed to take, objective and candid legal advice. My favourite client when I practised law—the CEO of a large company in chronic difficulty—told me that my job was to argue with him. “Tell me what’s wrong with what I want to say and why I shouldn’t do what I want to do,” he would say, waving his arms wildly. “Don’t let me get away with anything!” I accepted this invitation with enthusiasm. My client and I had spirited arguments almost daily; sometimes I won, and sometimes he won. At the end of several years working together (the company eventually prospered and was taken over), we shook hands, declared a draw, and assured ourselves that the job had been well done by all concerned.

  But not all CEOs are like my favourite client. Many a senior business executive, driven by the imperative of the bottom line and possessing an ego fuelled by his company’s success (which he attributes to his own genius22), will brook little or no opposition. No arguments on fine points of legal interpretation for him! The job of his lawyer is not to give advice but to provide protection and get him where he wants to go, by hook or by crook. If the lawyer is in the way, then, “friendship” notwithstanding, golf games nonetheless, there is always another lawyer. After all, nothing personal, it’s about money.

  In these circumstances, the corporate lawyer fresh from that golf game or fly-fishing weekend often can easily be co-opted. “There’s always a way, and it’s up to me to find it,” he tells himself. “After all,” he rationalizes, “the corporate/securities/tax law is so comp
lex and its meaning so uncertain. Almost anything is possible. And who can be certain what is right and what is wrong? My job is to be helpful, not judgmental.”

  It’s unlikely that the lawyer will take a stand if he fears that he may lose the client by doing so. He knows that, if he loses the client, his partners, seeing the firm’s billings shrink, will think his probity a trifle self-indulgent, and will punish him when it comes time to divvy up the profits of the partnership. So, in a Faustian bargain, to preserve a cozy relationship and protect his status and income, the lawyer does what his client tells him to do. Money is a harsh master.23

  What is this? A sleazy abrogation of responsibility by the legal profession? The removal of a vital safeguard from the economic system? Bad conduct driven by greed? Or just an acceptable approach to a complex situation, with everyone doing just what he or she is supposed to do?

  Enron is the poster boy for recent corporate scandal. The company filed for bankruptcy in December 2001, many of its executives have been under criminal investigation, and its auditor, Arthur Andersen, has been convicted for obstructing justice. But what about Vinson & Elkins, Enron’s lead law firm? Julie Hilden asked in an article in Slate,24 “How can the lawyers who approved the transactions be held blameless while the government takes down the company that merely trusted its lawyers’ advice?” Jonathan Glater in his New York Times article offered the cynical answer of one lawyer: “A lawyer may brag of mastery of a deal in advance, but once prosecutors are interested, suddenly that lawyer’s role consisted only of drafting a contract.”

  Hilden’s own answer is that Vinson & Elkins may well have done nothing wrong. She writes, “It was to Enron, its shareholders, and the boundary constraints of the law, not the welfare of the public or abstract concepts of justice, that V & E owed its loyalties.” Even if what was done were acts “taken on the very brink of legality,” Hilden argues that Enron’s law firm was ethically obligated to go to that brink. Accountants, she writes, have independence as their central virtue; lawyers, zealousness.

  Formal canons of professional conduct typically dance around the issue of how “zealous” a lawyer should be in rendering his services. In Ontario, for example, one law society rule says, “When advising a client, a lawyer shall not knowingly assist in or encourage any dishonesty, fraud, crime, or illegal conduct.” Another rule, given in the context of advocacy, requires that a lawyer represent the client “resolutely and honourably within the limits of the law.” The official commentary on this bland rule of advocacy, however, puts forward an aggressive spin: “The lawyer has a duty to the client to raise fearlessly every issue, advance every argument, and ask every question, however distasteful, which the lawyer thinks will help the client’s case.” And so, the governing body of the legal profession, in a rather vague and offhand fashion, tells the lawyer to stay within the law, of course, but also, by the way, to advance every argument that may benefit his client. This is not exactly helpful.

  What happens to a lawyer gone bad when his transgressions are discovered? In Canada, the legal profession is self-regulating and self-policing. Do law societies deal appropriately and expeditiously with serious complaints about their members? Do they merely suspend lawyers when they should be disbarred? Do they too easily readmit disbarred lawyers when their applications for readmission should be denied? Do they treat similar cases of misbehaving lawyers in a similar fashion, or is self-policing suffused by unpredictability and arbitrariness? Should the regulators have “zero tolerance” of lawyers having sex with clients, or would it be wiser to consider particular fiduciary responsibilities as they may arise in individual situations? And do the regulators move decisively to change legal practices vulnerable to abuse by practitioners?

  In Britain—but not in Canada—a revolution is underway in the regulation of lawyers and the provision of legal services. The principal figure in this revolution is not some frightening left-wing ideologue, but the quintessential establishment man—Sir David Clementi. Sir David is the former deputy governor of the Bank of England and now runs Prudential PLC, the huge international insurance company. In 2003, the British Lord Chancellor, Lord Falconer, asked him to conduct a review of the regulation of the legal profession in England and Wales. The extraordinary Clementi report was published in December 2004.25

  The Clementi report contains four main sets of recommendations. It proposes that the legal profession be overseen by a new legal services board with a lay majority chaired by a non-lawyer and accountable to Parliament. It advocates that the profession lose its powers to investigate complaints against lawyers, and that a new independent office be created for that purpose. It recommends that lawyers should be free to enter into partnerships with non-lawyers. And it proposes that companies or individuals outside the legal profession be allowed to own and manage a law practice. Said Sir David, summing up his work, “The current regulatory system is focused on those who provide legal services: the new framework will place the interests of consumers at its centre.” The Lord Chancellor welcomed the recommendations of the Clementi report and said that the government would press ahead to implement them.26 On May 24, 2006, the government published a draft Legal Services Bill incorporating the Clementi proposals. The final bill was published on November 24, 2006, and at the end of 2006 was under consideration by the British House of Lords.

  Much of what Sir David Clementi proposed is not that novel. In most common law jurisdictions, for example, but not in Canada, disciplinary powers are exercised partly or completely by a body distinct from the law societies. In the United States, lawyers are regulated substantively and procedurally by state courts (although in some states the court, while retaining the ultimate disciplinary authority, has delegated the job of investigating complaints to the state bar association). The proposed British office for legal complaints is very similar to the highly successful Office of the Legal Services Commissioner in the Australian state of New South Wales.

  THE LAWYERS whose stories are told in this book experienced spectacular falls from positions of high esteem. In some cases at least, the personal characteristics that led to their downfall, and the way they behaved as they made their transit, exemplify and explain general characteristics and behaviour of the legal profession. But, as I wrote at the beginning of this chapter, few lawyers fall dramatically and publicly, or at all. Most pass through their careers without attracting the attention of the investigative journalist or the law society disciplinarian, retiring with honour, praised by their peers, given testimonial dinners. What happens to the good lawyer, who behaves well, when his partner or employee turns out to be guilty of sharp practice, perhaps even to be a crook?

  Once, law firm partners knew each other well and knew their firm’s law practice intimately. Fifty years ago, Bay Street firms that now have hundreds of partners only had ten or fifteen. Until the early fifties, the general practice at these firms was for the partners to gather every morning and open the mail together, passing letters around the conference table for all to see. Until the eighties, an associate could be denied partnership simply because one or two existing partners were not comfortable with him or her. The comment “he makes me a little nervous” or “I don’t really want her as a partner” would be enough to doom a candidacy.

  But now, in huge firms with multiple offices, and even in smaller firms, one partner often knows little about the character and practice of another. He may not even recognize another partner when he passes him on the street. Questions of personal character, and the integrity of an individual law practice, are subsumed by efficiencies of scale, the reality of geographic spread, and the drive for profitability. The discovery of a rogue partner or associate is shocking. What can a law firm do to protect itself against the possibility of a partner or associate lawyer going bad? When it happens, what should the firm do? And how realistic is the current law and regulatory framework up against the realities of modern legal practice?

  Many Canadian law firms have lately changed from general
partnerships to limited liability partnerships, as legislation and professional rules have been amended to make such a change possible. When this transmogrification takes place (by simple amendment to the existing general partnership agreement), a discreet advertisement is placed in the local newspaper’s business section and the firm quietly adds the letters LLP at the end of its name. (In many jurisdictions, such as Ontario, the formal requirement that clients be notified of the changed status is satisfied by advertising in a local newspaper.) Few clients, and certainly none but the most sophisticated, understand what has happened and that what has happened is to their disadvantage. And few law firm partners seem to realize that the world has significantly changed for them as well.

  In a limited liability partnership, a partner has no responsibility for the liabilities of the partnership other than those that arise from his own negligent or wrongful act. (In some jurisdictions, a partner’s liability in a limited liability partnership also extends to persons under his supervision and control, and to liability for another partner or employee if he knew of that person’s negligence or malfeasance and did not take reasonable steps to prevent it.) Firms that convert to a limited liability partnership always disingenuously stress that, although the partners are no longer jointly and severally liable, clients should rest assured that the assets and insurance of the firm remain at risk. But most firms have little in the way of assets—they have leases of office space and computer systems that are more correctly seen as liabilities, a few pieces of art hanging in the reception area, that sort of thing—and have well-mined bank lines of credit that swamp the meagre assets they do possess. Recourse to firm assets will offer little comfort to a wronged client seeking recompense. Most firms—certainly the major ones—do carry significant insurance, although perhaps not enough to handle the very biggest of claims. It is the insurance policy, and particularly its fine print, that really matters.