A Response to SEC Enforcement Director Robert Khuzami’s June 1, 2011 Speech Barry J. Mandel Foley & Lardner LLP November 2, 2011 Chair of Foley & Lardner’s

A Response to SEC Enforcement Director Robert Khuzami’s

June 1, 2011 Speech

Barry J. MandelFoley & Lardner LLP

November 2, 2011

Chair of Foley & Lardner’s Securities Enforcement & Litigation Group

©2011 Foley & Lardner LLP

Khuzami Speech: 4 Concerns

1. Multiple Representations

2. Excessive Lack of Recollection by Witnesses

3. Counsel Signaling Witnesses During Testimony

4. Excessive Delays in the Production of Documents and

Privilege Logs ©2011 Foley & Lardner LLP

Concern #1: Multiple Representations

Concedes there is no problem when lawyer represents employees who are purely witnesses with no conflicting interests or no material risk of legal exposure Problematic Scenario: Representing company and multiple employees when there is real potential for material legal exposure Problematic Scenario: Representing various entities with seemingly divergent interests SEC’s New Cooperation Program raises the stakes in these cases©2011 Foley & Lardner LLP

Concern #1: Multiple RepresentationsNew York Professional Conduct Rule 1.7 - Conflict Of Interest: Current Clients

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if a reasonable lawyer would conclude that either:

(1) the representation will involve the lawyer representing differing interests; or(2) there is a significant risk that the lawyer’s professional judgment on behalf of the

client will be adversely affected by the lawyer’s own financial, business, property or other personal interests.

(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:

(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;

(2) the representation is not prohibited by law;(3) the representation does not involve the assertion of a claim by one client against

another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and

(4) each affected client gives informed consent, confirmed in writing.



Khuzami

Concedes no problem when situation involves only witnesses with no conflict and no material risk of legal exposure

Counterpoint

Counsel want to have a grasp on the entire matter



Khuzami

Representing company and multiple employees

Multiple witnesses with seemingly divergent interests

Counterpoint

Counsel, not SEC, must evaluate each situation for conflicts

At least certain conflicts may be waived



Khuzami

SEC New Cooperation Program raises the stakes

Counterpoint

The New Program can be used to divide interests and insist on separate counsel


Concern #2: Lack of RecollectionNew York Professional Conduct Rule 3.3: Conduct Before a Tribunal

(a) A lawyer shall not knowingly: …(3) offer or use evidence that the lawyer knows to be false. If a lawyer, the

lawyer’s client, or a witness called by the lawyer comes to know of its falsity, the lawyer shall take reasonable remedial measures, including, if necessary, disclosure to the tribunal. A lawyer may refuse to offer evidence, other than the testimony of a defendant, in a criminal matter, that the lawyer reasonably believes is false.

New York Professional Conduct Rule 3.4: Fairness to Opposing Party & Counsel

A lawyer shall not: …(a)(4) knowingly use perjured testimony or false evidence(a)(5) participate in the creation or preservation of evidence when the lawyer

knows or it is obvious that the evidence is false


Concern #2: Lack of Recollection

Khuzami

Witness testifying only to things he or she recalls with certainty

Counterpoint

Risk of Perjury “Don’t Recall” may be

accurate even if SEC does not like it

Things now important to SEC might not have been so to witness


Concern #3: Signaling During Testimony

Khuzami

Change of testimony after attorney’s long speaking objection

Counterpoint

Speaking Objections Attorney not bump on log Clarifying for witness


Concern #3: Signaling During Testimony

Khuzami

Change of testimony after consultation with attorney

Counterpoint

SEC may not be hearing what witness thinks he or she is trying to say, so the attorney must counsel clarification of testimony


Concern #4: Late Production of Documents

New York Professional Conduct Rule 3.2 Delay of Litigation

In representing a client, a lawyer shall not use means that have no substantial purpose other than to delay or prolong the proceeding or to cause needless expense.


Concern #4: Late Production of Documents

Khuzami

Eve of witness testimony

Over-inclusive privilege material and double reviews

Counterpoint

Sometimes result of Overbroad requests Refusing to reschedule

testimony Cautious non waiver

Overbroad requests Time consuming
