Sarbanes-Oxley is manna for lawyers
By Frank Schuchat
Rocky Mountain News
Saturday, February 10, 2007
The last cycle of corporate scandals from the early part of
this decade seems like very old news by now. Ken Lay has
gone on to that great boardroom in the sky.
Kenny Boy's Enron accomplice, Jeff Skilling, is in federal
prison in Minnesota serving a 24-year sentence, with the
possibility of time off for good behavior if he acts nicely
and pays his lawyer's last invoices.
WorldCom's former CEO Bernie Ebbers, at age 63, is in a cell
in Louisiana marking off the days of his 25-year sentence.
If I had been the presiding judge at Bernie's trial, I would
have read him his fate in terms a telecom executive can
understand. Instead of 25 years, I would have told Mr.
Ebbers his sentence was 13,140,000 minutes -- nights and
weekends included, no roaming. (I guess that is another
reason I never will be appointed to the bench.)
Finally, the venerable accounting firm of Arthur Andersen
has joined the ranks of other defunct institutions we shall
never hear from again, like Pan Am, TWA and New England
Republicans. So it might make some sense that the
Securities and Exchange Commission has started to chip away
at the Sarbanes-Oxley legislation enacted by Congress in
July 2002 to address the scandals at companies like Enron,
WorldCom and Tyco, as well as the imperative of showing
toughness in advance of midterm elections.
The SEC already has issued new regulations to reduce the
more burdensome aspects of the law for smaller public
companies. Some commentators even have suggested the entire
Sarbanes-Oxley regime should be scrapped because it adds a
layer of cost and complexity to doing business without
really improving protections for investors.
Now in principle I am not opposed to reasonable reforms.
But before we go too far with this, I think someone needs to
ask the critical question: How will this affect lawyers?
Sarbanes-Oxley has been a veritable boon for corporate and
securities lawyers across the United States. No CEO in his
right mind wants to end up sharing a cell with Skilling or
Ebbers or, heaven forbid, the likes of some poor fellow who
knocked off a 7-Eleven for a couple of hundred bucks and a
carton of Winstons. Martha Stewart might not be a bad
cellmate, especially if neatness is your thing, but she has
already paid her debt to society. There is a real premium
these days on professional advice that will keep executives
on the right side of the law and out of the slammer.
There are lawyers who have taken on large mortgages, second
homes and second wives based on the expectation of these
large fees continuing for the foreseeable future. And if
you have even just skimmed the pages of the legislation
affectionately referred to as SOX, you will appreciate that
these lawyers are earning their fees the hard way. There
was a time when a challenging corporate governance
assignment was how to set up golf foursomes at a board
meeting when the company had an odd number of directors.
Now CEOs have an obligation to actually know what is in
their company's SEC filings, and their lawyers have been
working overtime to keep up. Not only that, legal
publishers have been churning out thick treatises on how to
comply with Sarbanes-Oxley, and law firms and corporate
legal departments have invested large sums to buy these
tomes as well as additional shelving to house them along
with rows of binders containing new SEC releases. Legal
seminar companies have become flush, offering expensive
courses to educate practitioners on the new world of
corporate governance. And airlines have added extra flights
to transport lawyers to these courses.
So all I am saying is that Congress and the SEC should be
careful and not do anything that could upset the economy.
After all, I would wager that there is not a single law firm
in Colorado that had gross revenues in 2006 that were even
close to the $210 million severance package received by the
CEO of Home Depot. And he didn't even pass the bar exam.
Frank Schuchat is a
founding partner with Schuchat, Herzog & Brenman. He also
performs stand-up comedy and will be appearing in the Not
Your Children's Comedy Tour at Jazz@Jacks in the Denver
Pavilions on Feb. 28. For information, call 303-433-1000 or
go to www.jazzatjacks.com.