Congress has ordered Bank of America (BAC) to disclose the legal advice it received about whether or not to tell shareholders about the ballooning losses at Merrill Lynch (losses so huge they sent Ken Lewis scurrying to Hank Paulson and Ben Bernanke with his hand out begging for a bailout).
This order could set a dangerous precedent, and Bank of America is right to fight it tooth and nail.
Legal privilege is a fundamental tenet of our legal system: Attorneys and clients need to be able to have open and honest discussions about facts without fear that those discussions will eventually be used against them. If Congress starts singlehandedly busting this privilege every time it wants information, the privilege will, for all intents and purposes, cease to be. This will amount to a radical change in our legal system, one that will have a profound effect on attorney-client interactions in all situations, not just this one.
Given the dangerous precedent it is setting here, Congress should immediately withdraw its request for Bank of America to waive attorney-client privilege.
At the same time, however, it should demand different information from Bank of America.
Specifically, it should demand to know:
- Who made the decision at Bank of America not to tell shareholders about the ballooning Merrill losses? This decision was not ultimately made by an attorney. It was made by an executive, probably Ken Lewis (who, at the very least, knew that the losses were NOT being disclosed, even if he was not the executive who made the decision not to disclose them). Even if the executive who made the decision was BOFA’s general counsel (who has since been fired, perhaps for blowing this decision), he made this decision as an attorney acting in an executive capacity. Just because he is an attorney and may have discussed the decision with other attorneys does not make the decision itself subject to privilege.
- What logic was employed in reaching this decision (leaving aside where it came from). Lawyers don’t make decisions. Executives (clients) make decisions. Clients often make decisions based on legal advice, but they’re still responsible for them. Clients can explain WHY they made these decisions without revealing their communications with their attorneys.
Put differently, Bank of America should not be forced to reveal what its attorneys recommended that it do. It should, however, be forced to reveal WHO DECIDED not to tell shareholders and WHAT HIS OR HER LOGIC WAS.
Being advised to do something by your attorney does not protect you from responsibility for that decision. In this case, therefore, it actually doesn’t matter what legal advice Bank of America got. What matters is that someone at the bank made a decision not to tell shareholders about the losses. The bank does not need to break legal privilege to tell Congress WHO made this decision and WHY.