Lawyer calls for action to silence noisy withdrawals under Sarbanes-Oxley Act

US LEGISLATION: provisions of Act would impair counsel's ability to inspire trust in clients

In-house counsel should rally to avoid the obligation of making noisy withdrawals from their companies under the post-Enron Sarbanes-Oxley Act, a US lawyer told the International Bar Association's corporate council conference last week.

Elsewhere a picture of confusion and uncertainty over the Act emerged.

Speaking at the conference in Barcelona, Meredith Brown of Debevoise & Plimpton said the noisy withdrawal provisions would impair in-house lawyers' ability to inspire trust in their clients, who would not be so open with them.

He said: 'Don't think that the fight is over...

alternative proposals are not dead yet.'

Meanwhile there were wide variations of approach at a meeting held to discuss the compliance of Securities & Exchange Commission-registered European companies with Sarbanes-Oxley's provisions.

Of around 20 companies represented, only one had a disclosure committee for employees to bring problems to the attention of an independent audit committee, as Sarbanes-Oxley proposes.

Fiat's international counsel, Scott Smith, said his company was unlikely to set one up.

William Lytton, a former legal adviser to US President Reagan and now general counsel with Tyco, said the wrong approach had been adopted towards Sarbanes-Oxley.

He said: 'There is a perception that you are preparing for someone in the office saying: "I want to murder someone." In fact, the scenario that no one has mentioned is when someone comes in and says "I think we should invest $1 billion in Baghdad next week", which is perfectly legal but stupid.'

Mr Lytton said Sarbanes did not address this.

But he said that board members - now in danger of civil and criminal liability for their decisions - would require separate external legal advice for a range of issues.

Lawyers' chances of advancing to board director status in the aftermath of Sarbanes-Oxley were questioned by Mitsubishi general counsel James Brumm, who said potential conflicts of interest would make advancement onto the board less likely.

See feature, page 20 (see Gazette [2003] 6 March)

Jeremy Fleming