Abstract. This article explores the psychological literature on rationalization and connects it with contemporary questions about the role of in-house lawyers in ...
The power of rationalization to influence lawyers’ decisions to act unethically Kath Hall* and Vivien Holmes** Forthcoming, (2009) 11 (2) Legal Ethics 137 Abstract This article explores the psychological literature on rationalization and connects it with contemporary questions about the role of in-house lawyers in ethical dilemmas. Using the case study of AWB Ltd, the exclusive marketer of Australian wheat exports overseas, it suggests that rationalizations were influential in the perpetuation by inhouse lawyers of AWB’s payment of kickbacks to the Iraqi regime. The article explores how lawyers’ professional rationalizations can work together with commercial imperatives to prevent in-house lawyers from seeing ethical issues as those outside the organisation would see them. In particular, where lawyers overidentify with their client’s commercial point of view and convince themselves that their role is primarily about providing ‘technical’ advice on commercial matters, wilful or unintended ‘ethical blindness’ can result. Lawyers can end up involved in or perpetuating serious misconduct by their client organizations. Key Words Legal ethics, psychology; in-house lawyers; corporate scandals; rationalization; lawyers’ professional role; Australian Wheat Board.
1 Electronic copy available at: http://ssrn.com/abstract=1347846
I will never believe I have done anything criminally wrong. I did what is business. If I bent any rules, who doesn’t? If you are going to punish me, sweep aside the system. If I am guilty, there are many others who should be by my side in the dock.1 Nothing is more difficult, and therefore more precious, than to be able to decide. Napoleon, Maxims, 1804.
Introduction In attempting to understand the many corporate scandals that have occurred since the start of the new millennia, legal scholars have begun to explore psychological explanations for these events.2 When considering the role of lawyers in these scandals, such analysis is still young. Although a small number of legal scholars have contributed to this discussion,3 the potential for developing a psychological analysis of lawyers’ decisions to act unethically still remains largely unexplored within the professional and academic literature. This article aims to address this gap by connecting the psychology of rationalization with contemporary questions on the role of in-house lawyers in ethical dilemmas. Using the case study of AWB Ltd, the exclusive marketer of Australian wheat exports overseas,4 the article raises the possibility that rationalizations were influential in the perpetuation by in-house lawyers of the payment of kickbacks to the Iraqi regime. In 1
* Senior Lecturer in Law, Australian National University ** Senior Lecturer in Law, Australian National University The original research on AWB was conducted by Vivien Holmes for a paper entitled ‘What is the right thing to do? Reflections on the AWB scandal and legal ethics’ forthcoming in Jeremy Farrall and Kim Rubenstein (eds) Sanctions Accountability and Governance in a Globalised World, (2008/09). We would like to thank Christine Parker, Adrian Evans and Suzanne Le Mire for their very helpful comments on an earlier version of this paper. We would also like to express our appreciation to Aparna Nanayakkara for her research assistance with the AWB material included in this article. Steven Chibnall and Peter Saunders, "Worlds Apart: Notes on the Social Reality of Corruption" (1977) 28(2) British Journal of Sociology 138 p 142 quoting Poulson, an architect charged with corruption. 2 See for example, O'Connor, "The Enron Board; The Perils of Groupthink" (2003) 71 University of Cincinnati Law Review 1233; Donald Langevoort, "The Organizational Psychology of HyperCompetition: Corporate Irresponsibility and the Lessons of Enron" (2002) 70(5/6) George Washington Law Review 968; Donald C. Langevoort, "Resetting the Corporate Thermostat: Lessons from the Recent Financial Scandals about Self-Deception, Deceiving Others and the Design of Internal Controls" (2004) 93(1) Georgetown Law Journal 285; James Fanto, "Whistleblowing and the Public Director: Countering Corporate Inner Circles" (2004) 83 Orlando Law Review 435. 3 See for example Milton C Regan, "Moral Intuitions and Organizational Culture' (2007) 51 St Louis University Law Journal 941; Andrew Perlman, "Unethical Obedience by Subordinate Attorneys: Lessons from Social Psychology" (2007) 36 Hofstra Law Review 451; Nancy Rapoport, "The Curious Incident of the Law Firm that did Nothing in the Night-Time" (2007) 10(1) Legal Ethics 98. 4 This public company was originally the Australian Wheat Board. It paid significant “kickbacks” to the Iraqi Government in contravention of United Nations sanctions between 1999 and 2003.
2 Electronic copy available at: http://ssrn.com/abstract=1347846
particular, it argues that considering the role of rationalization in ethical decision making help us to understand why AWB’s in-house lawyers engaged in unethical behaviour and why they did not speak up even when it was clear that what was going on was in breach of United Nations sanctions against Iraq. To understand the relevance of rationalization to ethical decision making, it is important to acknowledge that we all rationalize behaviour. In the Oxford Dictionary, the general definition of rationalizing is: the act of rendering something comfortable to reason, to explain it on a rational basis. This definition reflects the common idea that rationalization is an acceptable process of bringing forth the most logical and compelling reason in support of our actions and beliefs. Yet there is a second and more technical meaning of rationalization that comes from the psychological literature. This suggests that rationalization is a self-serving process designed to preserve self-image, legitimate behaviour and facilitate decision making. 5 In this context, the Oxford Dictionary defines rationalization as; (psychol) a justification of behaviour to make it appear rational or socially acceptable by (subconsciously) ignoring, concealing or glossing over its real motive. As this definition suggests, the psychological concept of rationalization involves finding (often subconsciously) the most rational and convincing reason for behaviour with the goal of making it look better than it actually is. Psychology tells us that processes of rationalizing are highly seductive. Rationalizations are central to how we maintain a positive image of ourselves and preserve a sense of meaning and consistency in our lives. They are also important in creating excuses and denying responsibility for negative behaviour. Finally, rationalizations are particularly useful in the context of group behaviour. The mutual reinforcement that occurs between individual and group behaviour in the organizational context can transform self-serving rationalizations into organizational facts.6 Once a rationalization has been used successfully in the past to support 5
See for example C R Snyder, Raymond L Higgins and Rita J Stucky, Excuses: Masquerades in Search of Grace (1983) p 1; B E Ashforth and V Anand, "The Normalization of Corruption in Organizations" (2003) 25(1) Research in Organizational Behavior 52; C Argyris, (1990) Overcoming Organizational Defenses. Facilitating Organizational Learning, Boston: Allyn and Bacon; C Argyris, (1991) Teaching Smart People How to Learn. Harvard Business Review, May-June. 6
B E Ashforth and V Anand, "The Normalization of Corruption in Organizations" (2003) 25(1) Research in Organizational Behavior 52.
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questionable behaviour, it can then become normalized and entrenched into organizational decision making. This article suggests that achieving ethical behaviour by in-house lawyers in large organizations requires responding inter alia to the powerful influence of rationalization on individual and group decision-making.7 In considering this issue, the paper is divided into three parts. The first part explores the psychological meaning of rationalization and its role in individual and group decision making. The second part draws on the psychological literature to identify professional rationalizations that could influence in-house lawyers in making unethical decisions. The third part applies this understanding to the case of AWB and considers the role of in-house lawyers in facilitating breach of United Nation sanctions. Overall, this article argues that the concept of rationalization provides a useful perspective through which to analyse the events in AWB. In particular, identifying processes of rationalization helps us to understand how individual and organizational factors combined to produce ethically mindless behaviour. By drawing on evidence given by AWB lawyers at the Cole Inquiry into the UN Oil-For-Food Programme,8 this article argues that professional rationalizations could have worked together with commercial imperatives to distort the ethical issues involved in breaching the UN sanctions regime. In particular, the evidence given at the Inquiry suggests that management’s expectations of the in-house lawyers, together with the significant commercial imperatives to maintain the Iraqi market for Australian wheat, could have been foremost in the minds of the in-house lawyers at the time of making their decisions. The working together of commercial and professional rationalizations in such a way is a potentially common and significant risk that can prevent in-house lawyers from seeing ethical issues as those outside the organisation see them. Where lawyers overidentify with their client’s commercial worldview and convince themselves that their role is primarily to provide “technical” advice on the matters before them, wilful or 7
For a similar argument in the context of moral intuitions see Milton C Regan, "Moral Intuitions and Organizational Culture" (2007) 51 St Louis University Law Journal 941. 8 Discussed extensively in the text accompanying below n. 44.
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unintended “ethical blindness” can result.9 In particular, lawyers can end up involved in or perpetuating serious misconduct by their client organization. As the case of AWB shows, this can then have widespread ramifications not only for the lawyers involved, but also for the organization, investors and the public. With AWB, the consequences of the misconduct were, in Royal Commissioner Cole’s words “immense”. AWB lost its highly regarded international reputation, shareholders lost half the value of their investment and Australian trade with Iraq worth millions of dollars was forfeited. Furthermore, in the fallout that followed, senior executives resigned, AWB was threatened with law suits both in Australia and overseas and a significant shadow was cast over Australia's reputation in international trade.10
The Nature of Rationalization If we were to search the world and find a person without faults, we might know, for the first time, a person who does not make excuses. The rest of us, being imperfect, are not always happy with ourselves. We are tempted by and succumb to excuse making as a way of living with our flaws. Lurking in our memories and on the tips of our tongues is a constant stream of “Who me?,” “I didn’t do it.” “It’s only a game’” … I couldn’t help it,” or “I didn’t mean to”…11 Although rationalization is a common phenomenon, it is a complex one. Within the psychological literature, rationalization is dealt with under a number of different headings and theories. For example, within the realm of cognitive psychology, rationalization is discussed in the context of excuse making, ego-defence mechanisms, narrative
analysis
and decision
making
heuristics.
In social psychology,
rationalizations are considered in the literature on accounts, impression management and groupthink; whilst in criminology, rationalization is central to the influential theory of neutralization. In drawing from all of these contexts, common aspects of this behaviour emerge. These are that rationalizations are essentially: 9
See also Kath Hall, “Why Good Intentions are Not Enough: Psychology, Ethical Blindness and Legal Decision-Making” (forthcoming). 10 Commonwealth of Australia, The Inquiry into certain Australian Companies in relation to the UN Oil-for-Food Programme, Final Report (2006), vol 1, xi (referred to in this article as “The Cole Report”). 11 C R Snyder, Raymond L Higgins and Rita J Stucky, Excuses: Masquerades in Search of Grace (1983) p 1.
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•
self serving explanations;
•
that assist in making behaviour appear more acceptable to both self and others;
•
involve a degree of self deception;
•
often occur outside the realm of the conscious mind;
•
can reduce feelings of responsibility and/or anxiety for the negative aspects of behaviour; and
•
can neutralize the impact of legal or ethical issues involved in a decision.
To understand the impact of rationalization on decision making, it is useful to draw on narrative psychology. This argues that narrative plays a strong role in how we make sense of our lives.12 “Like good novelists, [we] invoke plots, scenes, and characters to explain how and why it is that people do what they do.”13 In particular, because narrative is an inherently flexible mode of thought, it allows us to filter ideas and experiences, and create a consistent and positive story about ourselves and our lives. In the process of creating a self-narrative, the role of rationalization is crucial. It is at the heart of how we consciously and subconsciously create consistency between our version of events and reality. 14 Because life often provides information and experiences that contradict our self-narrative, rationalizing these contradictions helps us to “patch up” the holes in our story and maintain a sense of self. It also allows us to reinterpret our view of events, particularly when events challenge our notion of ourselves as “good people”.15 As Tenbrunsel and Messick explain, “[t]he fact is that it is very easy to find the words to colour a story in such a way that it becomes appealing to the narrator and consistent with the narrator’s morality.”16 12
See Roy F Baumeister, "A Self-Presentational View of Social Phenomena" (1982) 91(1) Psychological Bulletin 3; Dan P McAdams, The Stories We Live By (1993); T Sarbin, "The narrative as root metaphor for psychology" in T Sarbin (ed), Narrative Psychology: The Storied Nature of Human Conduct (1986) p 3. 13 Dan P McAdams, "Personal Narratives and the Life Story" in Pervin and Craig St John (eds), Handbook of Personality Theory and Research (1999) 478 p 482. 14 See Charles Ford, Lies! Lies!! Lies!!! The Psychology of Deceit (1996) and Dan P McAdams, The Stories We Live By (1993). 15 See for example E Aronson and J M Carlsmith, "Performance Expectancy as a Determinant of Actual Performance" (1965) 65 Journal of Abnormal and Social Psychology 178 and Dolly Chugh, Max H Bazerman and Mahzarin R Banaji, "Bounded Ethicality as a Psychological Barrier to Recognizing Conflicts of Interest" in D A Moore et al (eds), Conflicts of Interest: Challenges and Solutions in Business, Law, Medicine, and Public Policy (2005) . 16 Ann E Tenbrunsel and David M Messick, "Ethical Fading: The Role of Self-Deception in Unethical Behavior" (2004) 17(2) Social Justice Research 223 p 226.
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In particular, the effect of self-interest on decision making is such that we can be subconsciously motivated to distort reality in an endeavour to preserve a positive image of ourselves. For example, research suggests that most people found guilty of white collar crime do not view themselves as criminal.17 These individuals resist incorporating a pejorative identity into their self-definition; preferring instead to rationalize their behaviour using common claims such as “everyone was doing it” or “it was not so bad anyhow”. As Adams and Balfour note, because rationalizing ideologies can distance individuals from the aberrant moral stance implied by their actions, they can even forge a “moral inversion” in which the bad behaviour is actually seen as good.18 It follows that rationalizing negative behaviour does not always involve a departure from one’s moral code. Rationalizations can become so deeply ingrained in the explanations that individuals develop about themselves, that negative behaviour can come to be seen as permissible or even desirable in the circumstances.19 This finding resonates with evidence in recent corporate scandals. When Enron’s exChief Financial Officer, Andy Festow, was charged with fraud he told reporters “I did nothing wrong”.20 Jeff Skilling also said, through his defence lawyer, that he had nothing to hide. “He did not steal. He did not lie. He did not take anyone’s money ... I guess they need a scapegoat. And I guess Jeff Skilling is their scapegoat.” 21 And, when Ken Lay was found guilty of serious fraud he said the verdict “shocked” him. “Certainly this is not the outcome we expected… I firmly believe I am innocent of the charges against me, as I have said from day one… If I were a CEO today, I would say it sends a very dangerous message [because it] basically makes an innocent act criminal.”22 Finally, most of the lawyers involved in assisting Enron executives also did not see that what they were doing was wrong. As Luban notes:
17
See Michael L Benson, "Denying the Guilty Mind: Accounting for Involvement in a White-Collar Crime" (1985) 23(4) Criminology 585; Michael L Benson, "The Fall From Grace" (1984) 22(4) Criminology 573. 18 Guy Adams and Danny Balfour, Unmasking Administrative Evil (1998). 19 Gresham M Sykes and David Matza, "Techniques of Neutralization: A Theory of Delinquency" (1957) American Sociological Review 664. 20 “Ex-Enron CEO indicted: Skilling pleads not guilty to all counts, released on $5 million bail” MSNBC at . 21 Ibid. 22 “Lay, Skilling guilty on nearly all counts: Former CEOs convicted of fraud, conspiracy, face lengthy prison terms” MSNBC May 25 3006, .
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One of the investigators of the Powers Report recalls that when Enron’s lawyers were explaining the details of the elaborate ‘special purpose entity’ deals that siphoned millions of dollars into Andrew Festow’s pockets, they weren’t ashamed or embarrassed. They were proud of their handiwork, and eager to explain how they did it.23 Rationalizations can also serve similar functions in the group context as in the individual context. As Ashforth and Anand write, “personal behaviors [can] become impersonal norms, emergent practices become tacit understandings and idiosyncratic acts become shared procedures”.24 In particular, because organizational life is often equivocal and open to multiple interpretations, rationalizations can help to make sense of, or impose order on, this life. 25 When a “questionable” event occurs that has similar features to a previous event, individuals within an organization can automatically draw upon previous rationalizations to assist in dealing with that situation. In this way, entrenched rationalizations can facilitate mindlessness in decision making, with ethical problems being resolved through a focus on previous organizational behaviour, rather than by an engagement with any ethical issues involved.26 These factors can also impact upon in-house lawyers’ decisions to act unethically. As the example of AWB demonstrates, lawyers can be drawn into organizational rationalizations of misconduct. Particularly where group dynamics are strong and the boundaries between acceptable and unacceptable conduct are blurred, in-house lawyers can engage in unintentional “blindness” rather than confront executives or act upon their concerns about the unethical issues involved.27 As the following section demonstrates, lawyer’s professional role provides certain rationalizations that aid this blindness. It is therefore important to explore the influence of professional 23
David Luban, "Making Sense of Moral Meltdowns' in Deborah Rhode (ed), Moral Leadership: The Theory and Practice of Power, Judgment and Policy (2006) 57 p 70. 24 B E Ashforth and V Anand, "The Normalization of Corruption in Organizations" (2003) 25(1) Research in Organizational Behavior 52. 25 See also Blake Ashforth and Glen Kreiner, '"How can you do it?': Dirty Work and the Challenge of Constructing a Positive Identity" (1999) 24(3) The Academy of Management Review 413; Mary Douglas, How Institutions Think, Routledge, 1987, p 69. 26 Blake Ashforth and Yitzhak Freid, "The Mindlessness of Organizational Behaviors" (1988) 41(4) Human Relations 305 p 308. See also Peter Fleming and Stelios C Zygidopoulos, "Time and Deceit: A Process Theory of How Lying Escalates in Corrupt Organizations" (Paper presented at the Theorizing Process in Organizational Research Conference, Santorini Greece, 2005) and Theodore M Schartz, Stephen X Doyle and Robert A Eberle, "The Strategic Management of Corporate Myths' (1998) 11 International Journal of Value-Based Management 237. 27 This is similar to the argument of lawyers ‘seeing no evil”. See further Mark Sargent, "Lawyers in the Perfect Storm" (2004) 43 Washburn Law Journal 1 p 32.
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rationalizations on how lawyers see themselves in relation to their client, and some of the issues raised by the in-house lawyer’s professional role.
Rationalization and Lawyers’ Professional Role Ironically, lawyers’ self-conception as advocates for the client, as neutral, non-judgmental facilitators of transactions, or as professionally trained to make ‘arguments’ on either side of an issue, can allow a high degree of rationalization of their complicity in conduct that is ultimately not in their corporate client’s interest, certainly not in the public interest and often immoral if not illegal.28 Wasserstrom argues that a key way of reasoning about the acceptability of behaviour is through the notion of professional roles.29 The process of reasoning that he describes is similar to rationalization in that “such reasoning is often used to deflect or defuse potential moral criticism by explaining that the role constitutes a sufficient reason for doing or not doing something that would otherwise be objectionable… or morally wrong….”30 Thus Wasserstrom suggests that the answer to the question of “what is the right thing to do?” can differ according to whether an individual is playing a particular role, and if so, what the requirements of the role are. In the case of a lawyer, according to a widely accepted paradigm of lawyering (adversarial/zealous advocacy), it is permissible and possibly obligatory to do things for a client that might otherwise be considered morally questionable. 31 As long as the client’s desired ends are not illegal, it is argued that the lawyer’s role is to help bring about those ends using any legal means possible, however objectionable. It is not the lawyer’s role to morally judge either the client’s ends, or the legal means. As Parker and Evans note, this conception of lawyering views the suppression of the lawyer’s own moral and ethical opinions as a moral act in itself.32 Since a lawyer’s role is to advocate for the client, they must turn off their own ethical concerns if they are to fulfill this role properly. The lawyer’s role is itself justified by reference to the
28
Ibid. Richard Wasserstrom, ‘Roles and Morality’ in David Luban,(ed) The Good Lawyer p 26. 30 Ibid. 31 Ibid. See also Tim Dare “Mere- Zeal, Hyper-Zeal and the Ethical Obligations of Lawyers” (2004) 7 (1) Legal Ethics 24. 32 Christine Parker & Adrian Evans, Inside Lawyers’ Ethics (2007) p 14. 29
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adversarial nature of our legal system, the rationale being that justice is best served by zealous advocacy on behalf of both or all sides of a dispute.33 Justifying behaviour by appealing to one’s role is psychologically attractive. Roles simplify moral decision making and make it easier to determine what one ought to do. “In the case of a lawyer, for example, there is something quite satisfying about being able to simplify one’s moral situation and to say that one’s task is to vindicate the claim of one’s client, subject only to the proviso that one refrain from violating the law.”34 Of course, acting for a client within the bounds of the law often leaves some room to move. A “good” lawyer will exploit that room to the client’s advantage. According to Whelan, large firm corporate practice regularly involves innovation, precedent setting and creativity as the lawyer attempts to further the client’s objectives by all legal means.35 “Legal means” include what Whelan and McBarnett call “creative compliance”. This includes using technical legal work to structure and package transactions so that they can be claimed to comply with the law but avoid any of the disadvantages of compliance. “It is essentially the practice of using the letter of the law to defeat its spirit and to do so with impunity”.36 The problem for the lawyer who adopts creative compliance as a modus operandi is that working routinely near the edge between legality and illegality can dull their sensitivity to the line between the two, and the difference between moral and immoral behaviour.37 As Cramton puts it, “by constantly going to the edge of the law and taking a very permissive view of what the law permits, these lawyers gradually adopt a mindset that ignores and may eventually assist the client’s managers in illegality that harms third persons and the client entity”. 38 Lawyers may also ignore wrongdoing or illegality for other reasons. As Sargent notes: 33
As discussed below, this argument makes more sense when applied to a court than when applied to in-house legal advice unrelated to litigation. It has also been critiqued by many, perhaps most noticeably David Luban “The Adversary System Excuse” in David Luban (ed) The Good Lawyer p 83122. 34 Wasserstrom, above n. 29, p 29. 35 Christopher J Whelan “Some Realism About Professionalism: Core Values, Legality, and Corporate Law Practice” (2006-2007) 54 Buffalo Law Review 1067, p 1113. 36 Doreen McBarnett “After Enron will ‘Whiter than white collar crime’ still wash?” (2006) 46 British Journal of Criminology 1091 pp 1091-1109. 37 Mark Sargent, above n. 27, p 33. 38 Roger C Cramton, “Enron and the Corporate Lawyer: A Primer on Legal and Ethical Issues” (2002) 58 Business Lawyer 143, p 173 in Sargent, above n. 37, p 33.
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Seeing evil is costly. Because it is costly, people tend to avoid seeing evil. If they see it, they convince themselves they did not see it, or at least pretend they did not. If they cannot pretend, they begin the process of rationalization, for which human beings have an almost infinite capacity. They conclude that the problem was not really that bad… or, optimistically, that the problem will take care of itself, disappear over time, or never be discovered. People, including lawyers whose professional training should prevent it, fall back on these devices when they come to appreciate the true costliness of seeing evil.39 Seeing unethical behaviour also involves an emotional or psychological cost. When lawyers see their role as being a problem-solver, they can be reluctant to confront a client with problems and risk being seen as a “bomb thrower”.40 Instead, they want to be someone who keeps the client happy. Recognition by a lawyer of wrong-doing can create what Sargent describes as “emotionally fraught role strain within the attorney– client relationship”.41 As Sargent then concludes, it is hardly surprising that some lawyers decide it is better not to see anything untoward at all. To illustrate this tension, and the potential for psychological analysis to assist in understanding unethical conduct, the following section discusses the AWB scandal and the role of in-house lawyers in those events. In particular, it considers whether professional and commercial rationalizations may have contributed to the in-house lawyers’ willingness to engage in “creative compliance”, and/or to adopt a “see no evil” approach to the payment of kickbacks to the Iraqi regime.
The Case of the Australian Wheat Board (AWB) In 2005, Australia’s international reputation as one of the least corrupt countries in the world was seriously knocked. Former US Federal Reserve Chairman Paul Volcker, reporting for the United Nations Independent Inquiry Committee, claimed that the AWB had paid over US$300 million in illicit payments to the Iraqi regime. He concluded that under the United Nations Oil-for-Food Programme AWB was the biggest single contributor of kickbacks to the corrupt Iraqi government.
39
Sargent, above n. 27, pp 33 –34. Ibid. 41 Ibid. 40
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AWB responded to these allegations with excuses and denial. It claimed that it had not paid any bribes. It said that the contractual arrangements fell within humanitarian exceptions to the Security Council Resolutions and that the United Nations Security Committee 661 had approved all the contracts.42 If kickbacks were involved, then AWB claimed it had been an unwitting participant in an elaborate Iraqi scheme. Although the Volcker inquiry had no direct evidence that AWB had knowledge of the payments going to Iraq, it was suspicious of these arguments because there were enough warning signs to suggest that AWB knew Iraq was benefiting under the wheat contracts.43 As evidence mounted of AWB’s complicity in breaching UN sanctions, significant Australian and international outrage followed. In 2005, the Australian Government initiated a Royal Commission inquiry into the scandal headed by Judge Terence Cole (Cole Inquiry). Submissions were heard over many months and in late 2006 Commissioner Cole handed down his damning report on the actions of the AWB. In contrast to the Volcker inquiry, the Cole Inquiry found considerable evidence of direct knowledge by AWB of the kickbacks.44 The Cole Inquiry showed that there was a culture of corruption within AWB that supported this type of behaviour. It uncovered evidence of conscious and deliberate efforts by AWB management to subvert the UN sanctions and to hide that subversion. It also suggested a failure at the ministerial, governmental and regulatory levels to follow up on signs that AWB was involved in paying kickbacks. It suggested that there was the “turning of a blind eye” at all levels to the possibility of illegal behaviour within AWB.45 Throughout the Inquiry, AWB officers consistently denied or made excuses for their behaviour even when the evidence of their involvement was clear. 46 Some suggested that the facilitation payments were necessary to do business in Iraq, and to preserve the lucrative contracts for the benefit of Australian wheat-growers. Others argued that they were just doing what they were told to by their superiors. Few people took 42
Stephen Bartos Against the Grain – The AWB Scandal and Why it Happened, (Sydney, UNSW Press, 2006) p 20. 43 Ibid. 44 The Cole Report. 45 Caroline Overington Kickback: Inside the Australian Wheat Board Scandal (2007) and Stephen Bartos Against the Grain – The AWB Scandal and Why it Happened (Sydney, UNSW Press, 2006). 46 Ibid; Transcripts of Commonwealth of Australia, The Inquiry into Certain Australian Companies in relation to the UN Oil-for-Food Programme.
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responsibility for their decisions or the blatantly unethical behaviour involved in paying kickbacks to a country that was flouting the UN sanctions regime. It is important to understand a little of AWB’s history to appreciate the commercial pressures operating on it when it became involved in rorting the UN Oil-for-Food programme. The original statutory body, the Australian Wheat Board (Wheat Board), was established in 1939 to control marketing of Australian wheat both domestically and internationally. In 1989, the domestic wheat market was de-regulated but the Wheat Board retained the sole right to export wheat. Then, in the late 1990’s, the Wheat Board’s international marketing and financial functions were transferred to a new privatised grower- owned and controlled corporate structure. AWB Limited (AWB) was at the head of the new corporate structure and so became the exclusive manager and marketer of Australian wheat exports through its subsidiary, AWB (International) Ltd (AWBI). The wheat for export was supplied by approximately 30,000 Australian wheat-growers, who contributed their wheat to the AWB national wheat pool. AWBI’s role was to market and sell all the wheat in that pool.47 As at November 2006, AWB was one of the world's largest wheat exporters; selling wheat to approximately 50 countries, mostly in the developing world. AWB’s wheat exports averaged AUS$4 billion annually and accounted for about 16 per cent of world wheat trade and about 3 per cent of Australia's total exports.48 The Wheat Board had a history of selling wheat to Iraq prior to the Gulf Wars, but this trade was put on hold in 1990 when the UN Security Council imposed sanctions on Iraq in response to its invasion of Kuwait. Those sanctions prohibited member states from making funds available to Iraq and required states to prevent their nationals from trading with Iraq. In “humanitarian circumstances”, food trade was allowed, however Iraq had no hard currency with which to purchase food and widespread hunger ensued. To soften the effect of the sanctions, in 1995 the UN set up the Oil-for-Food programme which allowed Iraq to sell its oil and use the income received to buy 47 48
The Cole Report vol 2 [9.16]. Ibid [9.1, 9.2].
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humanitarian goods. Iraq’s oil income was kept in a UN escrow account and purchases by Iraq were paid for out of that account after approval by the UN. Only contracts favourably reviewed by the UN were paid for from the escrow account.49 From 1996, sales of Australian wheat to Iraq resumed under this UN programme. By 1999, about 10 percent of Australia’s annual wheat export was being sold to Iraq. As Commissioner Cole noted, “[i]t was a large and profitable market.”50 At that time, however, Iraq introduced into negotiations with AWB the unusual requirement that sales include a “fee” for transportation of the wheat from the Iraqi port at Umm Qasr to inland silos. This fee was in effect a “kickback” or a payment of hard currency to the Iraqi Government. Later evidence established that AWB executives understood the nature of these payments, and also understood that they were prohibited by the UN sanctions and contrary to Australian Government policy. 51 However, evidence also establishes that the Iraqi market was considered so valuable to the newly privatised AWB that it was prepared to pay these fees and breach the sanctions, rather than lose the market. To get around the UN sanctions, AWB factored the transportation fee into the price of the wheat. AWB was required to submit contract documentation to the UN in order to obtain approval to sell wheat to Iraq. Once UN approval was obtained, AWB then needed permission to export under the contracts from a delegate of the Australian Minister for Foreign Affairs and Trade (DFAT). The contractual documents submitted by AWB to the UN and DFAT did not reflect the true arrangements between AWB and Iraq. Thus, unbeknown to the UN, payment from the escrow account to AWB covered not only the price of the wheat, but also the “fees” to Iraq. AWB then paid the “fees” to Iraq by various indirect means (including via a Jordanian trucking company, Alia), because the direct transfer of the money was in breach of UN sanctions.52 Between November 1999 and March 2003 approximately US$224 million in “fees” were paid by AWB to the Iraqi regim53.53
49
Ibid, vol 1 [1.102]. Ibid, xiii. 51 Ibid, xiv. 52 Ibid, xxi. 53 Ibid. 50
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AWB’s in-house lawyers and their role in the scandal Perhaps contrary to an outsider’s expectation, AWB’s in-house lawyers did not have a direct role in most contracts for the sale of wheat to Iraq. Negotiations for the sale were conducted by staff of the Middle East Desk of AWB’s International Sales and Marketing Division.54 Once negotiations were concluded, the Division prepared a note of sale and submitted it to the Contract Administration Department. That Department was responsible for documenting the contract and preparing the letters of credit under which AWB was paid for the wheat it had sold.55 It was the role of one of the in-house lawyers to meet regularly with the manager of International Sales and Marketing to discuss any legal issues arising from the Division’s work. Jessica Lyons fulfilled this role from the time she commenced employment with AWB Legal in July 2001 until August 2003.56 Lyons was the principal point of contact for legal advice for the International Sales and Marketing Division during this time.57 However, there is no evidence that Lyons was made aware of the kickback scheme until late 2002 or early 2003. It is not clear from the Cole report whether any AWB lawyer had knowledge of the kickback scheme prior to late 2002, although it seems likely that one or more did. In mid 2000, AWB commissioned the accounting firm Arthur Andersen to investigate “the existence of any illegal or unethical behaviour and any failure of control systems” within AWB.58 According to Arthur Andersen’s confirmation of retainer letter, these investigations were commissioned because of concerns “about the integrity of international business transactions conducted by the International Marketing Group”.59 That letter was addressed to Ms Alifia Sachak, Senior Corporate Counsel at AWB.
54
Ibid, vol 2 [9.65]. Ibid [9.83]. 56 AWB Legal employed five solicitors between December 2000 and 2003. A further five joined the Division by 2006. From December 2000 until April 2006, AWB Legal was headed by General Counsel, James Cooper. The Cole Report, vol 2 [9.109, 9.110]. 57 The Cole Report, vol 2 [9.113]. 58 Arthur Andersen.s understanding of its retainer as set out in a letter to AWB's Senior Corporate Counsel, Ms Sachak, dated 5 September 2000: The Cole Report, vol 2 [22.2]. 59 Ibid. 55
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Arthur Andersen delivered its final report in February 2001. Commissioner Cole noted that the Arthur Andersen report made “at least” the following matters clear: •
The culture of AWB and its employees required review and attention so far as ethical dealing was concerned.
•
Payment of inland trucking fees in Iraq was a concern. The concern arose for a number of reasons: - There had been an inquiry from the United Nations about AWB's payment of trucking fees. - AWB had sought to hide or disguise the payment of the trucking fees. - There had been AWB management pressure to maintain sales to Iraq. Avoidance of UN scrutiny of trucking fees was necessary if such sales were to be maintained. - Entities requested by AWB to make payments of trucking fees on its behalf had declined because of fears such payments may have been in breach of UN sanctions or may have constituted money laundering. - Increases in trucking fees appeared excessive, with the risk that some portion of the fees may be diverted to purposes other than trucking. 60
The Arthur Andersen final report was discussed at a meeting between Arthur Andersen and AWB officers, including an AWB lawyer. Each person at the meeting was given a copy of the report. In a statement made to the Cole Inquiry, Andrew Tuohy of Arthur Andersen’s said he did not recall which of AWB’s Legal Counsel was present at the meeting. 61 It seems likely that if James Cooper, as AWB’s General Counsel, was not at this meeting, the lawyer who did attend would have reported to him on such important and concerning issues.62 60
The Cole Report, vol 2 [22.2]. The Arthur Anderson report is circumspect in its language and does not explicitly find that breach of UN sanctions was occurring. 61 Ibid, Ex 731, WST.0029.0050 at 0053, para. 21. 62 See also Commissioner Cole’s comment that Cooper had a copy of the final report prior to being given one in June 2003at Commonwealth of Australia, vol 2 [22.22]. See also Transcripts 3326.26 and 3326.39.
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In June 2002, as tensions between Iraq and the USA escalated, the Iraqi Minister for Trade halved the amount of wheat Iraq would buy from AWB because of Australia’s support for the USA’s stance on Iraq. Then, in July 2002, Iraq alleged that a shipment of AWB wheat was contaminated with iron filings and sought US $2million compensation. An AWB delegation to Iraq offered to pay the compensation rather than lose the remaining contracts. Iraq responded to this offer by re-instating its original order for 1 million tonnes of wheat. 63 It is at this point that AWB Legal became directly involved in the kickback scheme, which was, by this time, very well established.64 AWB Legal gave advice on how the contracts for the recently confirmed sale of 1 million tonnes of wheat to Iraq (Contracts “A1670” and “A1680”) could be structured so as to conceal payment of compensation for the (allegedly) contaminated wheat. Commissioner Cole noted that the opinion provided by AWB Legal on these issues was in fact nothing of the sort: It was an attempt to devise a method whereby the payments to Iraq would not be obvious by spreading them thinly over future shipments… , to hide the fact of payment to Iraq by making the payment to an intermediary rather than [the Iraqi Grain Board] direct and in a country other than Iraq… and to falsify the nature of the transaction by recording it as a transaction different from payment of compensation... This, AWB's lawyers thought, might make it 'at least arguable' that AWB was not 'making funds or financial resources available' to the Iraqi Government, which AWB and its lawyers knew was prohibited by the UN sanctions. This advice was contrary to the clear, specific advice given to AWB by DFAT after consultation with the United Nations in November 2002. 65 This AWB “legal advice” was written by Lyons. Contracts “A1670” and “A1680” were later found by the Federal Court to be “deliberately and dishonestly structured so as to… work a trickery on the United Nations”.66 Commissioner Cole found that Lyons’ advice in effect recommended a way that AWB could carry out transactions which she thought to be prohibited by sanctions “in a manner which might minimise the risks of detection”.67 63
Caroline Overington Kickback: Inside the Australian Wheat Board Scandal (2007) 91 and 92. This deal was publicly lauded by the Australian Minister for Trade and the Prime Minister on the delegation’s return to Australia. 64 The Cole Report, vol 4 [31.35]. 65 Ibid, vol 1, lviii-lix. 66 AWB Ltd v Cole (no 5) (2006) 234 ALR 651,711[229]. The Federal Court found that the price in these contracts was inflated so as to extract money from the United Nations’ escrow account and pay it indirectly to the Iraqi regime through a trucking company. 67 The Cole Report, vol 3 [27.313].
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Contracts “A1670” and “A1680” were also used by AWB for another purpose. Around the time AWB had agreed to pay “compensation” to Iraq for the contaminated wheat, Iraq had in turn agreed to “repay” a debt of US$8.375 million purportedly owed to Tigris Petroleum Corporation Ltd (Tigris). AWB was to receive US$500,000 of that sum as commission for assisting Tigris in recovery of the “debt”.68 Contracts “A1670” and “A1680” were thus structured by AWB not only to surreptitiously pay compensation to Iraq, but also to recover from Iraq money “owed” to Tigris. The money to pay both the compensation and “debt” was to be extracted from the UN escrow account by way of payment of inflated wheat prices. Payment by AWB to Tigris of the “debt” monies extracted from the UN account was arranged by agreement. In May 2003, Tigris sent a draft agreement to AWB which was forwarded to AWB Legal and other senior AWB executives whereby Tigris was paid a “service fee” for (allegedly) assisting AWB to obtain contracts for the sale of wheat to Iraq.69. Commissioner Cole found that draft agreement to be a “sham”.70 Although over time the agreement between AWB and Tigris was recast, it remained a sham according to Commissioner Cole. He found that Cooper had facilitated the agreement, while Rosemary Peavy (a lawyer in AWB Legal), Lyons and external counsel Chris Quennell “all knew the true facts of the Tigris transaction”.71 None of the lawyers saw fit to advise against it. Professional and commercial rationalizations The evidence presented to the Cole Inquiry provides indirect evidence of what could have been in the minds of AWB’s in-house lawyers when making the decisions they did. For example, Lyons did not admit that she deliberately advised AWB how to get around the UN sanctions when she gave evidence to the Inquiry, but she did comment 68
In 1996, BHP Petroleum made a ‘humanitarian’ donation of wheat worth US $5 million to Iraq. Iraq was not told that the wheat was a donation. Tigris and AWB later represented to Iraq that the shipment of wheat was paid for by a loan to Iraq of US $5 million. BHPP assigned to Tigris any rights relating to the shipment. During 2001-2002, AWB assisted Tigris to persuade Iraq to repay the ‘loan’: The Cole Report, vol 1, xlviii. Iraq’s motives for agreeing to this are not clear. See Overington above n. 63, p 90. 69 The Cole Report, vol 1, lx. 7070 Ibid, vol 1. lx. 71 The Cole Report vol 3 [27.424]. See also The Cole Reoprt,vol 1, lxi: “The recasting of the [sham Tigris] transaction was done on the advice of, or with the concurrence of, internal and external lawyers for AWB.” Mr Quennell was a solicitor with the firm of Blake, Dawson, Waldron.
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on the commercial imperative to make the compensation payment. She said she remembered media articles to the effect that the deal to continue selling Australian wheat to Iraq had been a “very big success story”72. The deal with Iraq had been portrayed in the media not only as a success for AWB, but as good news for Australian wheat-growers and indeed the nation. The Prime Minister himself had commented, “I congratulate the wheat board, it’s a good outcome for the Australian wheat industry, and a lot of credit is due to them… I’m glad it’s been resolved. The wheat trade is important to this country and I know that wheat-growers around Australia will be very pleased with this news.”73 This identification of the commercial success of AWB with Australia’s interests can only have increased the pressure on Lyons to overlook any legal or ethical concerns she had about the method of paying compensation to Iraq, and made commercial rationalizations very attractive. It is possible she could have considered she was, after all, acting “in the national interest”. Lyons could also have called on the rationalizations provided by her professional role to justify the advice she gave as simply fulfilling the client’s instructions; those instructions having been given by an AWB officer who insisted “that payment be made to a Jordan-based company”. 74 She denied recognizing at the time that there was a problem with the transaction she was advising on. Perhaps she optimistically thought that the truth about this transaction would not be discovered, since AWB could claim client legal privilege over it.75 However, subsequent to giving her advice, Lyons did have concerns about it. Perhaps she was experiencing the “role strain” (discussed above) which can occur when a lawyer feels they should be confronting the client with “inconvenient truths”. Lyons discussed her concerns with several people including General Counsel Cooper and suggested that the Government should be made aware of the course of action proposed in her advice. Cooper’s response to Lyons was to seek instructions from management: “not to leave it on legal division’s shoulders to be responsible for this transaction, to push it upstairs to the business 7273
The Cole Report, Transcript 26 September 2006, 7238. Prime Minister Howard press conference, Kirribilli House, 8 August 2002, quoted in Overington, above n. 63, p 92. 74 The Cole Report, Transcript 26 September 2006, 7238. 75 AWB tried to prevent discovery by claiming client legal privilege over Lyon’s advice. 73
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managers who would make the decision whether to proceed.”76 Cooper thus disclaimed any moral or legal responsibility for the transaction by leaving it to the client to decide whether to proceed in this way, a justification for his inaction made available by his professional role. At the Inquiry, Cooper consistently denied knowledge of, or responsibility for, any problems, both in relation to the iron filings compensation contracts or the Tigris transaction contracts. Arguably Cooper was an example of a lawyer who chose to “see no evil”.77 In his evidence to the Inquiry Cooper said that in early 2003 he was not aware that UN Resolutions prevented the payment of “foreign currency” to the Government of Iraq or to any commercial industry or public utility in Iraq. 78 Although it is hard to believe this statement by Cooper, in assessing his evidence and his actions as General Counsel, it is worth noting that the UN sanctions against Iraq did not impose obligations on individual companies (as nationals of member states of the UN), but on the member states themselves.79 A substantial part of the payments made by AWB in breach of the sanctions were therefore not proscribed by Australian law at the time they were paid.80 Indeed, AWB later learned that the kickbacks were a legitimate tax deduction.81 Only in 2007, in response to Commissioner Cole’s recommendations, did the Australian Parliament enact the International Trade and Integrity Act 2007, which created new offences for breaching UN sanctions and further criminalised bribery of foreign officials.82 When questioned about the terms of the Tigris transaction, Cooper said he could not explain the terms of the final Tigris agreement, because “I relied on the drafting that was done by others”.83 However, Commissioner Cole found that it was “disingenuous” of Cooper to disclaim responsibility because he was General Counsel of AWB and responsible for a comprehensive review of the Tigris transaction. Indeed, 76
The Cole Report, vol 3 [27.318]. Transcript 26 September 2006, 7274,7276. See discussion above of professional rationalizations and reference to Sargent’s work above. 78 The Cole Report, Transcript 26 September 2006, 7274. 79 The Cole Report, vol 1 [1.40]. 8082 Ibid, vol 5, Appendix 26. See also Linda Botterill and Anne McNaughton “Laying the Foundations for the Wheat Scandal: UN Sanctions, Private Actors and the Cole Inquiry” (2008) vol 43 (4) Australian Journal of Political Science 583 pp 589-59. 81 Overington, above n. 63, p 265. ABC Radio National, “ATO rules AWB kickbacks not a bribe”, PM, 20 December 2006 at 20 October 2007. 82 The Cole Report, vol 1, lxxxiii – lxxxiv (Recommendations 1-3). 83 Ibid, vol 3 [27.422]. 77
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on the evidence before the Inquiry it appears he had checked and verified all aspects of the transaction.84 Commissioner Cole described the organisational culture at AWB as one of “superiority and impregnability, of dominance and self-importance”.85 He noted that “[a]t AWB the Board and management failed to create, instil or maintain a culture of ethical dealing.”86 In particular, commercial success and profit had become the main, if not the only, focus of AWB’s decision-making. Commissioner Cole found that the company’s senior officers were aware that its actions were in breach of UN sanctions but, when confronted with the choice of not agreeing to pay the fees and potentially losing the Iraqi market or agreeing to pay the fees and retaining the market the officers chose the latter. It is a moot point whether, had domestic law clearly prohibited kickbacks or the DFAT supervisory oversight of AWB been stronger, AWB’s decisions would have been different. It is quite possible that a likely breach of “hard” domestic law, with its accompanying consequences, would have been taken more seriously by both AWB officers and lawyers.87 In the circumstances, however, as Commission Cole noted, “[n]o one asked, ‘What is the right thing to do?’”88 In the cutthroat commercial world in which AWB operated, economic rationalizations clearly dominated decision making by AWB officers, including lawyers.89 Evidence at the Cole Inquiry suggests that AWB executives relied strongly on the economic benefits of selling wheat to Iraq.90 As a former employee, Mark Rowland stated: There was certainly a culture of pushing the business of AWB as far as possible for the highest return. My perception was that on occasion, this might 84
Ibid. Ibid, vol 1, xii. 86 Ibid. 87 The only lawyer referred by Commissioner Cole for further investigation by law enforcement authorities was General Counsel, Mr Cooper. That referral related to possible offences against the Corporations Act (2001) (Cth), concerning misleading the AWB Board over the Tigris “debt” arrangements. It was submitted to Commissioner Cole that Ms Lyons and Ms Peavy might have committed an offence of aiding or abetting AWB in relation to offences of money laundering arising under contracts A1670 and A1680 (Ms Lyons) and/or falsification of books/documents concerning the Tigris transaction (Ms Lyons; Ms Peavy). However, Commissioner Cole was not satisfied that AWB had committed these offences. Consequently, he made no adverse findings against either Ms Lyons or Ms Peavy. See The Cole Report, vol 5, Appendix 26 and vol 4, [31.426]; [31,443-31.445]. 88 The Cole Report, vol 1, xii. 89 See Richard Coughlan, "Codes, Values and Justifications in the Ethical Decision-Making Process" (2005) 59 Journal of Business Ethics 45 p 50. 90 See Linda Botterill, “Doing it for the Growers in Iraq? The AWB, Oil-For-Food and the Cole Inquiry” (2007) 66 (1) The Australian Journal of Public Administration 4. 85
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mean that the company moved into what some might describe as ‘grey areas’, where the legality of the position adopted by AWB might be open to doubt. If the commercial imperative justified the position adopted, in my experience, the company adopted that position in order to vigorously protect its customers and markets from overseas competitors. All of AWB management, as far as I could discern, were driven to ensure that the company maximized its trading capacity on behalf of Australian wheat growers.91 It seems evident that these commercial rationalizations strongly influenced the inhouse lawyers’ decision making. Both Lyons and Cooper referred to the commercial pressure to get the deals done and to facilitate the kickbacks. In addition, rather than acting as a break on unethical behaviour, professional rationalizations seemed to have meshed with the commercial rationalizations; the evidence given by the in-house lawyers suggests that they thought they were “just doing their job” in facilitating the payment of kickbacks by AWB. Finally, it seems likely that the in-house lawyers were affected by the moral context of the organization within which they were situated.92 Theoretically, in-house lawyer’s separation from executive management should make them less vulnerable to organizational pressures and culture. As Sargent notes, however, in fact their “constant exposure to the moral rules-in-use that govern day-to-day life in the corporation produce in some an ethical numbing that erodes their ability to function in that vital quasi-adversarial manner.”93 In addition, the ambiguity that can surround what is acceptable behaviour in the commercial context can reduce the ability of inhouse lawyers to challenge the ethicality of commercial transactions.94 Green argues that in many cases of white collar crime there is genuine doubt within the business community about whether the behaviour involved is morally wrong or not.95 As Chibnall and Saunders suggest, the negotiable nature of corruption often enables the conduct to be seen as acceptable where the circumstances of the group require it. 96 It therefore appears likely that both the executives and the in-house lawyers constructed an alternate view of their behaviour that focused on what they perceived 91
Ibid, p 11. Sargent, “Lawyers in the Moral Maze” (2004) 49 (4) Villanova Law Review 101 p 105-110. 93 Ibid, p 880. 94 Chibnall and Saunders, above n. 1. 95 B.A Green, "Professional Challenges in Large Firm Practices" (2005) Fordham Urban Law Journal 185 p 502. See also Botterill, above n. 91, p 11. 96 Chibnall and Saunders, above n. 1, p 139. 92
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were the beneficial reasons for paying the kickbacks to Iraq. This alternate “reality” probably did not recognize the importance or legitimacy of the UN sanctions regime and reinforced the sense of AWB as an invincible organization.97 Whilst evidence suggests that both the executives and the in-house lawyers were aware that their behaviour violated the sanctions regime, the psychological literature would suggest they chose to ignore this perspective in favour of a situational morality that did not complicate the practical problems at hand.98 This situational morality was further reinforced by the challenging and unpredictable nature of doing business with Iraq and the insularity of AWB’s business practices.99 What emerges from this analysis is that despite the variety of situations in which rationalizations can be used, certain “reasons” tend to dominate in the commercial context. Of these, the most common is that the unethical behaviour was necessary for the growth or survival of the business. Particularly in situations where the legality of particular behaviour is perceived as negotiable, if management can see their actions as commercially necessary and therefore within their “duty” to investors, then they can see themselves as justified in bending the rules or adopting unorthodox methods in getting the job done. The in-house lawyers, in turn, can be drawn into this analysis by their desire to further the aims of their client, which they see as mandated by their professional role. As noted above, in advising management on how to carry out transactions so as to minimized the risk of detection, Lyons responded to instructions from an AWB officer who “was insisting” on a certain method of making payments to Iraq and also to the perceived importance of the wheat trade with Iraq to both AWB and Australia. Conclusion This article has drawn on the psychological literature on rationalization and the material revealed at the Cole Inquiry to examine the role of in-house lawyers in the AWB scandal. It seems likely that AWB’s “trade at all costs” culture permeated AWB Legal and threatened the legal departments’ professional objectivity and 97
See for example comments made by former Prime Minister John Howard when he said "There was absolutely no belief, anywhere in the government, at that time that AWB was anything other than a company of high reputation”, BBC NEWS “Howard Denies Iraq Bribe Warnings” at . 98 New paper and earlier evidence. 99 See Overington, above n. 63, p 142.
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independence. Coupled with this culture, the widely accepted conception of a lawyer’s role as being to carry out the client’s instructions and work for the client’s interests to the limits of the law, arguably led to unintentional ethical blindness on the part of the lawyers. Thus, it seems that commercial rationalizations and professional rationalizations worked together within AWB to legitimate unethical decision making by the lawyers involved. Changing the acceptability of these rationalizations relies on changing attitudes within organizations, the business community and the profession. Ultimately this means beating the legal mindset that considers complying with the letter but defeating the spirit of the law is clever and legitimate. It also involves recognizing that the dynamics affecting in-house lawyers in large organisations are far more complex than most professional, academic or text book discussions acknowledge. As Sargent writes, These worlds are governed by social and economic dynamics not reflected in the codes of professional responsibility, our detached theorizing, our encomia of justice, our insistence on the nobility of the profession, and our often hypocritical protestation that we are educating students to be ‘good’ lawyers leading a ‘balanced’ life.100 Finally, it is important to consider the extent to which the adversarial/zealous advocate paradigm of lawyering might be negatively influencing how lawyers see their role. If this paradigm is being used by “good” lawyers to justify outsmarting ethical issues rather than working as a brake on unethical behaviour, then the widely adopted professional mindset of the lawyer as the neutral/zealous advocate needs refining. In particular, the lawyer’s professional role needs to emphasize their capacity to work with clients to limit unrestrained commercialism and unethical conduct, rather than providing a set of rationalizations that allow lawyers to facilitate unethical decisions. It also follows that developing a better understanding of how powerful psychological dynamics such as rationalization can influence in-house lawyers in large organizations is crucial to strengthening the framework for lawyers’ ethical decision making.
100
Sargent, above n. 93, p 879.
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