Chief Justices Urge Waiver of Confidentiality

All 50 state supreme court chief justices have endorsed a plan to let lawyers at publicly traded companies set aside client confidentiality to tell financial regulators about accounting fraud and other corporate wrongdoing.

The Conference of Chief Justices said that disclosing information about a client is justified if it stops a crime that would hurt investors. The group, which unanimously passed the resolution last week, wields influence over standards for lawyers because state courts in many states must approve legal ethics codes drafted by bar associations.

An American Bar Assn. task force on corporate governance also has recommended the waiver in response to corporate scandals at Enron Corp., WorldCom Inc. and other companies where lawyers were criticized for tolerating misconduct.

The waiver represents a break from the tradition that lawyers keep information received from their clients confidential.

Some lawyers say having them alert regulators to potential frauds would discourage executives from fully disclosing problems and thus prevent lawyers from giving the most informed advice to their clients.