We imagine that yesterday was a busy day in the partner offices of Ropes & grey. It was revealed that an associate is accused of providing insider information about not-yet-public acquisitions the firm was working on. We don’t know for sure what was happening (though we’ve asked and we will let you know).
But we imagine a lot of clients want to know if the accused associate, Arthur Cutillo, had ever worked on any of their matters, whether the firm has ascertained if his “tips” were limited to the matters named in the complaint, and if they ever had any indication that the tipping was going on.
The questions are still unanswered as to whether Cutillo worked on the matters that the complaint says he provided tips about, or whether he just heard his colleagues talking and snooped around firm documents. Also remaining are questions about what kind of hit the firm will take and if associates engaging in this activity is a limited problem.
The WSJ Law Blog raises the question of what will happen to the firm — “What happens to an otherwise extremely reputable law firm when one of its lawyers, to paraphrase Sarah Palin, goes rogue?”
The projected answer seems to be, in the long run, very little. “Unless more news comes out, I think this will just be a black eye, nothing more,” one industry expert told the Law Blog, which also pointed to Skadden and Wachtell as firms that have dealt with their own inside-trading issues (Wachtell in the 1980’s and Skadden in the 1990’s).
And that is probably the way it should be. Law firm associates constantly have access to private information, and most would never dream of disclosing that information to anyone. And not just to avoid insider-trading, but also to respect the attorney-client privilege. Or just to keep their jobs.
Big firm lawyers are, by nature, risk averse. And in all the coversations with lawyers we have had in the last day, all have said that they really do believe this is a very limited occurrence. Mort Pierce, an M&A attorney at Dewey Lebeouf, told the Law Blog the same thing. “It just doesn’t” happen all the time, Pierce said. “It’s really very rare.”
Most firms have training on avoiding insider trading and of course what a firm does not know about an associate’s background, the process of applying to the Bar usually brings out. But a lot of it comes does to the expectation that lawyers will be honest and respect the rights of their clients. And, lawyer jokes aside, most lawyers live up to that.
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