What lessons should in-house counsel learn from the past 18 months of sordid revelations and regulatory enactments? How should we proceed to rededicate ourselves to professionalism and ethical conduct, given our unique role in our organizations?

The outcome of the Arthur Andersen criminal trial hinged to a very large extent on the conduct of Nancy Temple, in-house counsel for Andersen in Chicago. Yet I doubt she considered in her wildest dreams that one of her e-mails could cause the demise of an internationally renowned accounting firm.

The saga of Mark Belnick, former general counsel of Tyco, has been widely publicized — the loans, bonuses, and acquiescence to other looting of Tyco’s assets appear extraordinary. In his case, at least from the published reports, one is inclined to ask: What was he thinking? The answer may be that he wasn’t thinking, at least not long and hard enough.

Then there is Michael Salsbury, general counsel of MCI (formerly WorldCom) who recently resigned after reports surfaced that he had not acted properly. I have every confidence that he thought he was doing nothing more than being a good team player. Which of us doesn’t want to be seen that way by our colleagues?

Still more recently, Jamie Olis, a lawyer and former chief financial officer at Dynegy, was indicted for fraud. Mr. Olis likely isn’t the last lawyer indictment we’ll see either.

For those of us old enough to remember, all of this seems like shades of John Dean and Watergate all over again, except the misconduct and/or mistakes are more pervasive. Maybe every once in a while, we need to have these stark reminders that our responsibility is not solely to our boss (even if he is the president of the United States), and our role is not to hide an organization’s misdeeds.

Anything New?

There is, I suppose, room for argument on whether we are in a new environment of duties and responsibilities of in-house counsel, or whether we are merely returning to the standards that should have applied all along. We could hark back to our mothers’ admonitions that just because everyone else was doing it didn’t mean it was right. But that may recite the moral standard more than the legal one.

If the legal standards governing our conduct haven’t changed, they have at a minimum been greatly clarified and reinforced through the rules adopted by the Securities and Exchange Commission under the Sarbanes-Oxley Act. Technically speaking, the rules don’t apply to everyone. Lawyers working in-house at non-profits or private companies who do not transact any business with, or participate in the filing of any report with, the SEC are not covered.

For those who are covered, however, the reach of the rules is broad, requiring an attorney to report evidence of a material violation of federal or state securities law, material breach of fiduciary duty or similar material violation of any federal or state law by his/her employer or any agent of the employer. Mere non-involvement of the lawyer in the improper conduct is insufficient to escape liability. The rules mandate the lawyer to affirmatively give notice of a potential problem.

In case you are inclined to believe that these new rules are of no relevance to you if you do not serve at a public company, think again. I submit there will be a trickle down effect of the standards of conduct enunciated by the SEC. The de facto standard of care expected of counsel will include an obligation to come forward to disclose improper conduct.

As President Bush has stated, harboring terrorists is just as bad as being one. In this environment, watching breaches of fiduciary duty or other transgressions by management simply will not be condoned.

All around us, the standards of expected behavior and the potential for liability have increased. At a recent session of the MIT Enterprise Forum, a panel of repeat entrepreneurs and venture capitalists voiced concern that prospective outside board members were demanding larger compensation for their board service due to Sarbanes-Oxley.

These early-stage, non-public companies are not subject to Sarbanes-Oxley, nor are they likely to become so given the expected dearth of IPOs. But these very experienced board members believe that the standards for their conduct, and the scrutiny they may receive, have been raised. Similar reports of increased attention to proper corporate governance practices come from the National Association of Corporate Directors, a non-profit organization serving the needs of directors of public and private companies, for-profits and not-for-profit organizations.

Reputation Is Everything

It seems to me the first step towards ensuring that we meet appropriate standards is reminding ourselves that, when all is said and done, what each of us has left is our reputation. If that goes, all is lost.

When embarking on a course of action, reflect on how those whose judgments you value would view your conduct. The phantom reviewer may be a respected law professor, a mentor from your early years of practice, or even certain counsel with whom you have worked on a case or transaction. Each of us has someone whose opinion matters to us. Unless you are confident that your conduct would, when all the facts are known, meet with the approval of this valued seer, you should return to the drawing board.

It is undeniably true that the delineation between black and white appears clearer in hindsight. All of us may wonder whether we have the ability to correctly judge when a situation fails the smell test, particularly when it may involve arcane areas of business unfamiliar to us — derivatives or swaps, for example.

Developing an understanding of your organization’s business, which is itself one of the great pleasures of serving as in-house counsel, will help. Also keep informed about evolving best practices. Take advantage of the low-cost or free programs and reports available by outside law firms, accounting firms, and professional organizations from NECCA to the Conference Board.

And put that law school training on issue spotting to work. You may not know what the substantive answer is to how directors should conduct themselves when a company is teetering on the cusp of insolvency, but you can figure out that there may be implications to be investigated when your employer stops paying its debts.

Is It All Bad?

Despite all the bad news we’ve been hearing, the entire business world is not corrupt. Unless you work for a company that has an autocratic CEO, an ineffective board, a lackadaisical CFO, and a penchant for doing whatever it takes to meet the numbers, you probably don’t have to worry that there are ghosts in every closet. Hopefully, your employer is trustworthy, honest and honorable in its dealings with its customers, employees, investors or other similar constituents.

Each of us has had experiences where we say, “there, but for the grace of God, go I”. Hopefully, none of those musings would apply to the situations reviewed above.

You can help ensure that no one will ever read scandalous revelations about you by establishing and maintaining the highest ethical and professional standards for yourself and any staff you supervise. In the process, you’ll also be providing the best service to your client.

Patricia Randall is a NECCA board member and is formerly general counsel of Robotic Vision Systems, Inc. and Hadco Corp.