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New Risks As Cos. Hire Counsel To Investigate Fraud

Sabatini Joanna | December 21, 2004

A recent report that the Securities and Exchange Commission may sue a company's outside lawyer for his role in an internal investigation has put renewed emphasis on the role and risks of "gatekeepers" in the post-Sarbanes-Oxley era.

The move comes as corporate boards and committees are increasingly hiring outside lawyers to investigate accusations of fraud at their companies. Often, the attorneys are hired after the SEC notifies a company of wrongdoing, or sometimes after the board becomes aware of an employee whistleblower complaint.

But experts note that the assignments can bring unintended consequences for companies, due in part to new rules of professional conduct for attorneys.

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