Center on Corporate Governance
The question in the title may seem to answer itself. But it does not; indeed, the question has been framed to explain my difficulty with Professor Schwarcz's position on third-party opinions. Frankly, Steven Schwarcz has taken a bold, tough position. Addressing what he sees as issues of "first impression," he asks "what it means for lawyers to issue legal opinions that create negative externalities," and "[i]f lawyers issuing legal opinions owe a duty to the public as well as to the opinion recipient." These are large, possibly even imponderable questions, but he answers them crisply and succinctly in the manner of a classic legal positivist: So long as "the lawyers neither know nor should know that their opinions will be used to facilitate an accounting fraud," they may deliver legally accurate opinions, even if they will thereby mislead investors. In short, lawyers may wear blinders, but they must stop and end their assistance the moment they recognize a fraud is afoot. In the wake of Enron and much evidence of the abuse of "special purpose entities" and off-balance-sheet accounting, asserting this minimalist position requires some courage and conviction. But Professor Schwarcz thinks much is at stake, including the "very viability of the entire structured-finance industry."
John C. Coffee Jr.,
Can Lawyers Wear Blinders? Gatekeepers and Third-Party Opinions,
Tex. L. Rev.
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