Fulbright & Jaworski's chair serves on Riggs Bank's board. Why didn't he stop frozen assets' transfer to an ex-dictator?
Paul Braverman
The American Lawyer
10-22-2004
....
Pfeiffer's answer is unknown. He refused to answer questions from Senate investigators, and he declined to speak to The American Lawyer, both times citing attorney-client privilege. But a month later, according to the Senate report, Riggs closed Pinochet's accounts and sent him the balance -- more than $5 million. "If he knew that the bank had violated an international asset freeze, he had, at the very least, an obligation to both resign from the board and withdraw from the legal representation," says Deborah Rhode, professor of legal ethics at Stanford Law School. Pfeiffer is still on the Riggs board, and the bank still uses Fulbright for IP work.
That dilemma is only one facet of the ethical quagmire in which Pfeiffer is now mired, much of it caused by the ambiguous position he occupies -- as both a lawyer for Riggs and as a member of its board. (He now heads the corporate governance committee and chairs Riggs Bank Europe Limited.) In an e-mail declining an interview with The American Lawyer, Pfeiffer wrote that lawyers "regularly" hold both positions. But while once common, the practice has become much less so. Today most firms either ban or strongly discourage the practice.
Consider the potential conflicts that confronted Pfeiffer. Riggs had spent years accommodating Pinochet, and refusing to return his money after it closed his accounts would harm the relationship. "If I'm on the board of directors, it's harder to give objective advice," says Susan Koniak, professor of legal ethics at Boston University School of Law. "I've got another interest to worry about, namely my own."
If Pfeiffer put the bank's interests aside and decided the assets were frozen, was he obliged to ensure the bank complied with the freeze? "As a lawyer, no. As a director, maybe," says Charles Elson, professor of corporate governance at the University of Delaware. "A director is a monitor of management and has a fiduciary duty to follow up on things that could have a material effect on the company." Elson adds that the potential for compromise cuts both ways. Fulfilling the director's role of vigorously challenging management could cost the lawyer his client.
As a bank, Riggs had a duty to make a complete disclosure to regulators, says Charles Intriago, publisher of moneylaundering.com. But the Senate report concluded that "Riggs appeared to take affirmative steps to hide the relationship," a relationship Pfeiffer knew about since at least 2001.
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