International Paper Company
Jonathan G. Katz
RE: Comment on Proposed Rules Pursuant to Section 307 of the Sarbanes-Oxley
Dear Mr. Katz:
I am Executive Vice President for Legal and External Affairs of International Paper Company. International Paper is a global paper and forest products company which has over 50 in-house lawyers who are located in the United States and various foreign countries. I am writing to provide the Commission with our comments in response to the Proposed Rules Pursuant to Section 307 of the Sarbanes-Oxley Act of 2002 (the "Act"); Release Nos. 33-8150, 34-46868 and IC-25829, File No. S7-45-02 (the "Proposed Rules").
At International Paper we recognize the need for the Commission to implement the legislative mandate of Section 307 of the Sarbanes-Oxley Act of 2002 and we understand the Commission's objective of explicitly defining attorney responsibilities in order to further the process of rebuilding investor confidence in the public markets. However, many provisions of the proposed rule clearly extend far beyond the requirements of Section 307, and have numerous negative implications relating to the manner in which both inside and outside counsel interact with, and provide advice to, their corporate clients. These implications may require more time for careful consideration and discussion than the time afforded by the legislative requirement that the Commission adopt final rules implementing Section 307 by January 26, 2003.
Additionally, although we agree generally with the principle of "up-the-ladder" internal reporting of material violations of the securities laws, we believe that as proposed the requirement of "noisy withdrawal" as it relates to outside counsel, as well as other ramifications of the proposed rule, in addition to extending the reaches of the rule far beyond the requirements of Section 307 of the Act, also present numerous problems in terms of state law relating to attorney-client privilege.
Both of these issues need to be considered in light of what we believe is the most significant drawback of the proposed rule: the very real possibility that the requirement of a "noisy withdrawal" by outside counsel will have a double-barreled chilling effect upon the willingness of (1) inside counsel to contact outside experts at precisely the time when outside advice may be most important, and (2) business leaders to engage their legal advisors in exactly the type of open attorney-client communications necessary to comply with the spirit and letter of the Act.
Accordingly, we urge that the Commission reconsider promulgating rules that go beyond the mandate of Section 307, and will have far-reaching negative implications for issuers and their shareholders.
We thank you for the opportunity to comment on this important matter.