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Tuesday, November 11, 2008

Treasury's Stringent Rules for Bailout Contracts

When The Am Law Daily read the client conflict rules in the Treasury Department's $5.5 million bailout contracts with Hughes Hubbard and Reed and Squire, Sanders & Dempsey, one clause struck us as particularly onerous: both firms agreed not to represent any bank or financial institution Treasury buys assets from as long as Treasury owns equity in that institution.

Experts have estimated the capital purchase program may involve as many as 2,500 financial institutions. That's a lot of potential clients.

So we called two well-known ethics experts, New York University's Stephen Gillers and Boston University's Nancy Moore, and asked them about the conflicts provisions. Both agreed: they've never quite seen conflicts rules like these.

"Treasury is being very demanding," Gillers says. "They are putting the fear of God into these law firms."

It wasn't even the ban on representation that jumped out most at Gillers and Moore, though Moore says the clause "will definitely limit a firm's possible clients."

Gillers says he's never seen a contract requiring each attorney who works for the client to undergo ethics training in consultation with that client. Ditto for the next clause, which requires each attorney to disclose their "business interests" and those of their family members.

"This is remarkable," Gillers says. "This is unique and and atypical. I take my hat off to whoever drafted this document."

Read it all here.

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