A Disease Known as 'Enronitis': A Breed of Greed

'Clients want to throw rocks at us' is only too familiar a message amongst those of us who have gone through the ordeal of facing an Inquiry Committee, or worse still, a Disciplinary Inquiry.

Nothing unfamiliar in a language from a client, disheartened, dismayed or disadvantaged or a vengeance among a breed of greed, deceit, and at times financial chicanery.

Familiar language when you look at Enron, last December, and its stunning collapse, the seventh largest corporation in USA, amidst accusations of funky accounting and off balance sheet machinations and document-destruction, and accusations against the auditors, the venerable Arthur Andersen.

The Enron saga is not just one - so many others before, and after, have gone down under - which still beckons a transparency, and auditors have been in the front of attacks on the terror they bring to the economy, global or local.

Insolvency may be an answer - but not the end-all - for in the call for openness is to question: who will audit the auditors?

The 'Barings' scandal, which saw the collapse of the merchant banking group some half decade ago, again stunned auditors in the front-line, now a Suit in the High Court of Justice of England against auditing firms of the bank in a billion-pound claim.

The Australian insurance company, HIH, which went to the laundry, is just another. Post-Enron came Allied Irish Banks, another mega disaster of a whopping US$1.5bn.

Brewing in a mass tort litigation in America, are some 49,000 asbestos-plaintiffs; total corporate asbestos liability to US plaintiffs is expected to reach US$200bn.

Insolvency may be a way out, but employees and shareholders, and so many other investors, including the public, are clients who are at risk whosoever and wheresoever they are, and the genuine sick and dying may be deprived of a cover. All count on a management, the board, and auditors to protect them.

Whoever the client is, he or she is always at the mercy of his employers, be they a legal, banking, insurance, medical service or whatever. The client's loss - for whatever reason - has always been to lynch his employer or the auditor or the lawyer or service-provider as target.

Nothing new in this, and for centuries it has been so!

So often the lawyer, auditor or professional goes through the gauntlet - and not a welcome episode in terms of time, effort or costs, and the respondent wonders whether he can ever put happiness back into his practice or take the alternative, quit the profession altogether to a lesser risk environment, and a nine-to-five job, without (or with little) worries.

I have advocated so often that if we do not take care of a customer, someone else will, remembering that the client is his number one enemy.

Last August, Jay G Foonberg, an American litigator, spoke at the American Bar Association's 123rd Annual Conference, of a client's gratitude, and depicts it in a curve as follows:

1. Day Writ is served on client - 'Boy, am I in big trouble. I never should have sold those pulleys without checking them out. I didn't know they were defective and would be used in a high-speed train which crashed'.
2. Next day - 'I forgot I cancelled my product-liability insurance'.
3. Two days later, first meeting with lawyer - 'If I lose this case, I'm bankrupt'.
4. After eight days of discovery - 'I don't know how you learned so much about pulleys and fast-train hydraulic mechanisms. You really studied hard'.
5. At trial - 'Do you really think you can keep the copy of the contract from being introduced using the "best-evidence" rule?' (A rule peculiar to the American court system.)
6. After Writ sustained and verdict taken under submissions - 'You've got them running scared - try to settle'.
7. After settlement, right outside court - 'You did it. You did it. I can't believe it. I'm getting a bank cheque right now to pay the settlement before they change their mind'.
8. Day of settlement - 'He's a fantastic lawyer. No other lawyer could have done what he did. I owe him my business, my career, everything'.
9. Ten days later - 'He's a great lawyer and did a good job, but the law and the facts were on my side'.
10. Three weeks later - 'He's a pretty good lawyer but the judge was on my side'.
11. One month later - 'He did his job, but there was no way I could lose'.
12. Six weeks later - 'The case was cut and dried. I could have argued it without a lawyer and won easily'.
13. Two months later - 'I never needed a lawyer to begin with. He made a big deal out of a simple matter just to build up a big fee'.
14. Ten weeks later - 'He's crazy if he thinks I'm going to pay his bill'.
15. Three months later - 'That miserable bastard sued. I'm filing a complaint against him with the Law Society and I'll cross-complain for misconduct'.

Nothing unfamiliar in the above. But how do we avoid this? Foonberg suggests 16 Rules which will ensure that a complaint will be filed against you.

• Don't return phone calls, especially the ones which someone in your office promised would be returned.
• Ignore client requests for information on the status of a case.
• Don't give your client regular accountings for time and disbursements after being paid a retainer.
• Don't bombard your clients with paper - let them think the case is languishing for lack of attention.
• Don't tell your client immediately of a bad development or a result. Let the client learn of the bad outcome from the other party.
• Pump up your client with unrealistic expectations over both result and likely time taken - this ensures the client is unhappy even though you know the outcome was good.
• At your first meeting with the client build up your image, then disappear from the scene, leaving the client to be contacted by your assistant, articled clerk or paralegal, neither of whom the client has met.
• Take on more cases than you can handle, and make more promises than you can fulfill.
• Don't give your client a copy of the fee agreement.
• Leave everything to your memory; don't document all work done and phone calls, conversations, messages left, and faxes and e-mails sent.
• Keep your client waiting at least 20 minutes, then don't apologise or explain; but make sure your meeting with the client is interrupted by phone calls and 'urgent' signings on other matters.
• Lie to clients about your expertise.
• Rely on memory alone to determine potential conflict; don't debrief people in your office about their clients in previous firms; convince yourself you are wise and fair enough to resolve all conflicts without bothering to inform clients of the conflict.
• Don't refund unearned fees.
• Tell the client that if they don't accept a settlement you want them to accept, you'll refuse to represent them.
• Don't co-operate with the client's next solicitor when the client is unhappy with you.

Over the years, we have seen quite a number of lawyers who have been struck off the roll or suspended for a period of time: leading to their demise, you may say, finding it thereafter, difficult to get employment - even if it means applying to be a bus driver or for a sales job at a wine cellar.

Yet, 'Enronisation' will be a true end for the lawyers who fail to:

• manage client expectations;
• build trust;
• keep clients updated; and
• clarify fees and charges.

Failure to do so attracts client-rage. Not all things are within our control, not a client-rage! But some things are; we have the knowledge and we have the power, and client-care is just one of them to avoid death or to be named and shamed. And we are risk-finders in our training and practice.

You can do everything under the sun to prevent an imbroglio - and you could be spreading 'Enronitis' yourself, and turning the wheels of misfortune, and quite often it starts with ignorance and perhaps arrogance, chicanery and all.

Palakrishnan, SC
President
Law Society of Singapore

Your President Listens Members of the Law Society will continue to have the opportunity to meet Mr Palakrishnan, SC, President of the Law Society, at his fortnightly Saturday sessions at the Law Society's premises between 10.30am and 12noon. The sessions for next month will be on 13 and 27 April 2002.