Here come the lawsuits

A fascinating column by Dennis K. Berman in The Wall Street Journal this morning (here) highlights just how quaint the Enron-driven financial crisis of the early part of this decade appears in the wake of the current market tsunami. Berman really drives home the story by landing quotes like this:

"Enron was a gnat compared to what's going on," said Sidney Powell, a Texas attorney for former Merrill Lynch & Co. employees.

Too true. And it's no coincidence that the above commentary comes from an attorney representing Merrill employees caught in post-Enron legal quagmire. Remember, next to images of Enron and Arthur Anderson employees being thrown out on the street, the defining characteristic of this earlier era was the resulting litigation. Thus, expect a tidal wave of legal and regulatory activity in the wake of the financial meltdown over the past several weeks... all played out (and played to the hilt) on CNN and CNBC, in the pages of Newsweek, and BusinessWeek and People. Lehman, Bear Stearns, AIG and Countrywide? I suspect Enron and Worldcom and Martha Stewart are going to seem tame by comparison.

But will the legal battles really be as fierce as those surrounding the Enron/tech bubble battles? I have no doubt, but some wonder is the true liability is really out there (see, for example, this Bloomberg article from earlier this week). Also consider another key quote from the Berman column in the Journal:

"These are necessarily going to be very close cases," said University of Illinois law professor Larry Ribstein, a critic of some Enron prosecutions. Should Mr. Fuld "err on the side of panic, or state the risk pessimistically, he's got a full-scale bank run. If he gets optimistic, it's bordering on fraud."

Again, very true -- but I'm of the belief that the Captain Renaults out there are going to be looking to "round up the usual suspects," particularly if Democrats take control of the White House, Congress, the SEC and U.S. Attorneys offices across the land. Passion will take the place of legal nuance as courts across the country are flooded with prosecutions, regulatory actions and private lawsuits.

Thus, in the midst of economic turmoil, a pretty good time to be a lawyer working on white collar criminal, regulatory, restructuring or bankruptcy work.

And, perhaps, not a bad time to be a litigation communications consultant either. I'll let ya know.