Brief Fact Summary. Defendant law firm is charged with aiding and abetting securities law violations committed by their client due to their knowledge of certain misrepresentations.
Synopsis of Rule of Law. Attorneys may be held liable for aiding and abetting their client’s fraud if they knowingly allow a merger to close in violation of securities law.
Once the decision is made and the parties are irrevocably committed to the transaction, there is little justification for penalizing alleged omissions or misstatements which occur thereafter and which have no effect on the decision.View Full Point of Law
Issue. Did attorney Defendants aid and abet their client’s security law violation?
Held. Yes. Defendants’ participation in the closing of the merger despite their knowledge of inaccurate financial statements amounted to aiding and abetting the fraud.
Discussion. This case is viewed as a “legal ethics landmark” in that the law firm’s liability in aiding and abetting the fraud was based solely upon silence during the course of the closing proceedings despite knowledge of the client’s misrepresentations, rather than some kind of affirmative misrepresentation on behalf of the client in an opinion letter.