Judge Criticizes Irell & Manella in ‘Iconic’ Client Conflicts Case
A federal judge in California has found “ethical failures” in Irell & Manella’s work in stock options cases involving Broadcom Corp.
At the end of a three-day evidentiary hearing, U.S. District Judge Cormac Carney of Santa Ana said the ethics lapses involved failure to obtain written consent, the Daily Journal reports (sub. req.). “It’s a sad day for justice,” Carney said, according to the Daily Journal story.
Carney said Irell should have gotten such consent before representing multiple clients with adverse interests and revealing information gathered from an interview with Broadcom’s chief financial officer, the story says.
The now-former CFO, William Ruehle, is scheduled to be tried in October on charges of backdating stock options. Prosecutors had hoped to use the conversations, disclosed by Irell to outside auditors and FBI agents.
Irell lawyers testified during the hearing that they had interviewed Ruehle as part of an internal investigation into stock options grants and didn’t begin representing the CFO until a week after the interview, when they accepted service in a shareholder lawsuit against him, the story says.
The lawyers, partners Daniel Lefler and Kenneth Heitz, both said they had warned Ruehle before the conversation that his remarks could be disclosed to outside parties, according to the Daily Journal account. “Frankly, as the CFO it wasn’t open to him to have secrets from the auditors,” Lefler told the judge. “You can’t do that as the CFO.”
Legal ethics lawyer Diane Karpman told the Daily Journal that the case is “iconic” in that it shows how much client conflicts plague the legal profession.
