From: Mike Liles, Jr. [MLiles@karrtuttle.com] Sent: Thursday, March 06, 2003 7:41 PM To: rule-comments@sec.gov Subject: File No. S7-45-02 KARR TUTTLE CAMPBELL 1201 Third Avenue, Suite 2900 Seattle, Washington 98101 (206) 223-1313 Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20540-0609 Re: Proposed Rule: Implementation of Standards of Professional Conduct for Attorneys (Release Nos. 33-8186; 34-47282; IC-25920) (the "Amended Renewed Proposal"). Ladies and Gentlemen: We submit the following comments concerning the above proposal on behalf of this law firm and not on behalf of any client or bar association in which certain members of this firm, including the undersigned, hold positions. These comments are directed to both the "Noisy Withdrawal" proposal and the Alternative Proposal described in the Amended Renewed Proposal. As to the dilemma that attorneys would face under the client confidentiality duties under state professional ethics rules should the "Noisy Withdrawal" proposal or the Alternative Proposal be adopted, we view the Alternative Proposal as not greatly differing from the Noisy Withdrawal proposal because under the Alternative Proposal once an attorney provides an issuer with a notice of withdrawal, the response by the issuer must be swift and automatic and not subject to any review or discretion. The Alternative Proposal would operate, in other words, as an indirect way of implementing the "Noisy Withdrawal" proposal so that the result be virtually identical with that of the "Noisy Withdrawal" proposal, and we do not view this as ameliorating to any significant degree the attorney's duty of client confidentiality, or the public policies behind that duty, under state professional ethics rules. As are others, we are uncomfortable by the preemption approach of the Amended Renewed Proposal in overriding what we were all taught early in law school to be a fundamental part of our justice system here in the United States. The effect of the Alternative Proposal upon the issuer would be much worse than that for the Noisy Withdrawal, however, in that a public announcement would be required through the Current Report on Form 8-K for the Alternative Proposal. As an example of the type of mischief to which the Alternative Proposal could lead, please consider the possibility that such a notice of withdrawal could be sent to an issuer by a disgruntled associate attorney whose grasp of the facts and the applicable law in the circumstances is not tempered by experience and who might be determined to embarrass a law firm and its public client. The process once initiated by the associate would not be capable of being stopped or delayed without great personal risk under Sarbines-Oxley to the person implementing such an intervention, and once a Form 8-K is filed the damage to the price of the issuer's shares in the stock market could be substantial. We believe that the final form of the attorney conduct rule (the "Existing Rule") adopted by the Commission on January 23, 2003 (Release Nos. 33-8185; 34-47276; IC-25929; File No. S7-45-02), if supplemented by active publicity concerning the Commission's Section 21(a) release (the "Enforcement Cooperation Release") of October 23, 2001 (Release No. 34-44969), which sets forth the Commission Statement on the Relationship of Cooperation to Agency Enforcement Decisions, would strike just the proper balance under the circumstances in view of the widely publicized administrative and criminal sanctions imposed upon those involved in recent major corporate scandals. Once management of an issuer is apprised of evidence of a violation through "up-the-ladder" reporting under the Existing Rule, the incentives to management and the board would appear to be sufficient to assure that problems of major significance would be reported to the Commission under the standards described in the Enforcement Cooperation Release. Although not essential to the above analysis, we note the incentive of the structure of the Existing Rule to lead law firms (through their malpractice carriers and otherwise) to condition representation of public companies upon the existence of a qualified legal compliance committee ("QLCC"). We expect that within coming months most major law firms will condition their representation of pubic companies upon such a requirement and that all attorneys within such firms will be required to make the disclosures from the firm under Section 307 of Sarbanes-Oxley directly to the QLCC. To the extent that this occurs, the sensitivities of the three or more independent directors on QLCCs should further enhance the viability of the checks and balances afforded by the Existing Rule. In view of the above, we respectfully recommend that the Commission not adopt any part of the Amended Renewed Proposal but instead rely upon the framework of the Existing Rule and support that framework by actively publicizing the Enforcement Cooperation Release throughout the business and financial communities and directing these efforts specifically towards the management and boards of public companies. Randall Lee, the Regional Director for the Pacific Region Office, has been active in publicizing that release on the West Coast, but a major national effort by the Commission would seem appropriate to achieve the above effect. Respectfully submitted on behalf of the firm. Very truly yours, KARR TUTTLE CAMPBELL Mike Liles, Jr. IMPORTANT/CONFIDENTIAL: This e-mail message (and any attachments accompanying it) may contain confidential information, including information protected by attorney- client privilege. The information is intended only for the use of the intended recipient(s). Delivery of this message to anyone other than the intended recipient(s) is not intended to waive any privilege or otherwise detract from the confidentiality of the message. If you are not the intended recipient, or if this message has been addressed to you in error, do not read, disclose, reproduce, distribute, disseminate or otherwise use this transmission; rather, please promptly notify the sender by reply e-mail, and then destroy all copies of the message and its attachments, if any.