John C. Coffee Jr. is one of the most prominent law school professors in the country. He's a fellow of the American Academy of Arts & Sciences, has advised NASDAQ and the New York Stock Exchange, and was named one of the 100 most influential lawyers in the U.S. by the National Law Journal. A broad Nexis search for citations of the Columbia University corporate law expert's name yielded 434 articles in 2003 -- compared with 346 for Harvard Law School criminal specialist Alan M. Dershowitz, 336 for Jonathan Turley of George Washington University, and 303 for trendy Stanford Law School intellectual-property theorist Lawrence Lessig.
Many of Coffee's sharpest words over the past couple of years have been about the Enron Corp. scandal. One of the best in the business at simplifying complex legal concepts for the lay person, he criticized the company's board, management, accountants, and lawyers in The New York Times, USA Today, BusinessWeek, and many other publications. In February, 2002, for instance, he told a Washington Post reporter that the initial investigation into the Enron fiasco, known as the Powers Report, was "very soft and equivocal" on the role played by Houston's Vinson & Elkins (V&E) -- the energy giant's former main outside counsel. "All [it says] about V&E was they were insufficiently objective or zealous," he complained.
But his view of V&E seemed to take a big turn a couple of months later when Coffee was hired by the law firm as an expert witness. In April, he wrote a four-sentence statement arguing that V&E should be dismissed from the Enron securities fraud class action since the firm's attorneys could not be classified as "primary" wrongdoers in the case. "[A] lawyer is not liable for his client's statements when the lawyer has acted only to counsel, advise, or edit the disclosures made by his client," Coffee wrote. His statement was intended to dissuade the Securities & Exchange Commission from submitting to the court overseeing the Enron class action an amicus brief supporting broader lawyer liability.
Then, on Oct. 8, 2003, he delivered a more elaborate 11-page opinion letter aimed at persuading bankruptcy investigator R. Neal Batson that V&E gave Enron good securities law advice. Specifically, he defended the company's decision, backed up by V&E, not to disclose the amount of money prison-bound Chief Financial Officer Andrew S. Fastow was earning from his side deals in its May, 2001, securities filing. "I believe that it was a reasonable judgment for V&E and the other legal advisors and consultants to Enron to conclude that it was `impracticable' as of the 2001 proxy statement's filing to determine the amount of Fastow's interest," he wrote.
Neither of Coffee's appeals worked. The SEC went ahead and wrote a brief arguing for broader liability for the attorneys who participated in the alleged securities fraud -- and U.S. District Judge Melinda F. Harmon in Houston sided with the agency's view rather than Coffee's. For his part, Batson concluded that there's enough evidence for a jury to find that the firm's proxy disclosure advice constituted malpractice.
Now Coffee, too, is drawing criticism for having lent his good name to a law firm that, many people believe, did a lot of sleazy things for its biggest client (total billings from 1997-2001 equaled $162 million). As an academic who is frequently quoted as an independent expert on the scandal, he should avoid any appearance of a conflict of interest, some say. He has often discussed Enron without disclosing his work for V&E. Critics charge that his work for the firm also epitomizes a much broader problem in the legal academy: that law schools are too close to law firms to offer much in the way of a sustained institutional critique. "It troubles me that he is the primary go-to guy for the press on what is going on in this case," says Susan P. Koniak, a professor of legal ethics at Boston University School of Law. "If he is going to be the person who explains Enron, he shouldn't have agreed to help play defense for its lawyers."
Coffee says he has done nothing wrong. He says he has offered testimony on only two narrow areas of the law and that he has not discussed these particular issues in public. His work for V&E has never been kept secret. In fact, the firm has handed out his writings to some of the reporters and academics who have been probing into the law firm's role in the Enron fiasco. And he says he rejects far more requests to testify than he accepts. "What you can't see is the work I've turned down," Coffee says.
Coffee also insists that his academic writings have not been swayed by his consulting work. Indeed, he has published articles arguing that liability for corporate attorneys should be increased in the wake of the recent round of corporate scandals. "Lawyers should act more like gatekeepers," he says. "At the same time, I can say that the way the rules are written, this was in compliance with the rules."
Coffee wasn't the only distinguished law professor to stand up as an expert witness on behalf of V&E. Geoffrey C. Hazard Jr., a professor at University of Pennsylvania law school who is the former director of the American Law Institute, an elite nonpartisan organization devoted to the improvement of the U.S. legal system, wrote an opinion letter defending the role of the firm in its investigation of complaints raised by Enron whistleblower Sherron S. Watkins. So did Cornell Law School ethics professor Charles W. Wolfram. These two eminent ethics scholars have enjoyed a brisk business through the years, attacking and defending attorneys and law firms accused of unethical conduct. Wolfram declined to speak to BusinessWeek and Hazard says that he has both attacked and defended law firms.
Almost every law school in the country allows its faculty to do private work on the side, typically one day a week. This consulting allows top scholars to pull in incomes that, in some cases, approach what they could make in private practice. Hazard, for instance, told BusinessWeek that he generally charges a retainer of $5,000, plus $700 an hour -- a billing rate equal to what blue-chip Manhattan firms charge for top partners. Over the past year, Hazard estimates that he has taken 50 cases.
Coffee declined to discuss his rates but says that his work for V&E accounted for less than 1% of his income over the past two years. He added that his private practice gives him valuable insights. For instance, he says that his work for V&E has taught him that responsibility for some corporate securities filings is often so diffused that no individual feels truly accountable for what is submitted. "Professors of medicine do some surgery," says Coffee. "If all you do is scold corporations and law firms, and you never work for them, then you are going to have a very remote and stilted view of how the institutional world of law firms works."
But not everybody accepts this proposition. Harvard's Andrew L. Kaufman, a law school ethicist, refuses to take paying clients. He believes his top priority should be to offer an objective critique of the legal system -- and that the type of consulting conducted by Coffee, Hazard, and many others compromises this goal by giving the appearance of a conflict of interest. "I always have the lingering question whether what they say is influenced by the testimony that they are giving for money," says Kaufman. "If you are testifying for money about intellectual issues, you tend to identify with your clients."
Because so many law professors are consulting on the side, the value of law schools as independent monitors of the legal profession has been diminished. And, of course, expert witness gigs are only one way big firms channel money and support to law schools. They also endow professorships, allow partners to serve as volunteer professors, and pay the high salaries for young attorneys who have accumulated tens of thousands of dollars in tuition debt. All these practices end up thrusting law schools and law firms into a very cozy relationship. That's too bad, because big law firms are badly in need of stronger, more independent watchdogs.
By Mike France in New York