Securities Investor Protection Corp. (SIPC) v. Vigman

Brief Fact Summary.

Boltz and Hartman, counsel of record for Securities Investor Protection Corp. (SIPC) (Plaintiff), had participated in similar proceedings against one of the defendants in this matter while they were employed as attorneys by the SEC, and so Vigman (Defendant) and the others sought to disqualify Boltz and Hartman

Synopsis of Rule of Law.

An attorney may accept private employment in a matter in which he had substantial responsibility while he was a public employee only when the appropriate government agency has been consulted and has given consent.

Facts.

Boltz and Hartman, counsel of record for SIPC (Plaintiff) in this action and members of the law firm of Rogers & Wells, were both former employees of the Securities and Exchange Commission (SEC).  During their employment for the SEC, they participated in a 1973 civil action against DCS Financial Corporation (Defendant) for fraudulent manipulation of securities.  Bunnington Corp. (Defendant), the company DCS (Defendant) merged into, a defendant in the instant action, was charged with numerous violations of the anti-manipulative provisions of the Exchange Act and Racketeer Influenced and Corrupt Organizations Act (RICO).  Vigman (Defendant), who had also been a defendant in the 1973 action, sought to disqualify Boltz and Hartman, as well as Rogers & Wells, from further representation of the SIPC (Plaintiff) in this action, on the ground that their continued representation in a matter connected to their government work violated the ethical standards of the legal profession.

Issue.

May an attorney accept private employment in a matter in which he had substantial responsibility while he was a public employee only when the appropriate government agency has been consulted and has given consent?

Held.

(Tashima, J.)  Yes.  An attorney may accept private employment in a matter in which he had substantial responsibility while he was a public employee when the appropriate government agency has been consulted and has given consent.  The instant complaint includes the alleged manipulation of the price of the DCS (Defendant) stock, the precise subject of the 1973 civil action.  Therefore, Boltz and Hartman are representing SIPC (Plaintiff) in connection with a matter the SEC prosecuted in the 1973 action.  Because Boltz and Hartman are representing a private client in connection with a matter in which they participated personally and substantially while employees of the SEC and because the SEC has not consented to their continued representation, they must be disqualified from further representation of SIPC (Plaintiff) in this action.  Since SIPC (Plaintiff) does not claim that Boltz and Hartman have been screened from participation in this action, Rogers & Wells must also be disqualified.

Discussion.

Courts have differed regarding the somewhat subjective standard of the appearance of impropriety under former Canon 9 and DR 9-101 and whether it was appropriate as a guide for attorney conduct.  Therefore, Model Rule 1.11(a), applied in this case, sets forth more specifically the circumstances in which concern for public confidence in government demands disqualification of a government attorney.  However, the concerns addressed remain the same.