Conflicts of Interest at an Organization's Highest Authority: How the District of Columbia's Rules of Professional Conduct Can Fail to Protect Private Organizations

Abstract

This Article examines how the District of Columbia’s incomplete incorporation of the Model Rules of Professional Conduct into its own Rules of Professional Conduct has created a scenario in which wrongdoing inside a private organization can flourish. In 2002, following the Enron scandal, the American Bar Association (ABA) revisited and revised its Model Rules of Professional Conduct. The ABA nevertheless took a conservative route, rejecting rules long proposed by experts which would have permitted attorneys aware of corporate crimes, fraud, and other wrongdoing to report their concerns to individuals or entities outside the organization’s reporting structure. Additional scandals unfolded contemporaneous with the ABA’s revisions, instigating federal legislation, the Sarbanes-Oxley Act of 2002. Regulations promulgated under that Act included the reporting out opportunity long sought by ethics experts. In light of the new federal legislation, the ABA, in 2003, finally passed a revised Model Rule 1.13 which requires attorneys to report wrongdoing up the ladder to an organization’s highest authority and permits those attorneys to report out such wrongdoing in the event the highest authority failed to respond appropriately. Unfortunately, the District of Columbia did not heed these lessons. Citing antiquated notions of client confidentiality, the District adopted an approach which requires an attorney to report wrongdoing up the ladder but then fully accept the results of that reporting, even if the highest authority to whom the attorney reports the misconduct is the one engaging in the misconduct. In so doing, the District has created a structure which incentivizes the termination of ethical attorneys in order to cover up corporate wrongdoing. This Article recommends changes to the District of Columbia’s Rules of Professional Conduct which will enable the District to take the lead in promoting a bar committed to ethical conduct and appropriate corporate governance.