The Kaye Scholer Affair: The Lawyer's Duty of Candor and the Bar's Temptations of Evasion and Apology


  • The author is grateful for advice from Ken Scott, Marc Franklin, Fred Zacharias, Steve Pepper, Lewis Segal, Deborah Rhode, Richard Painter, Philip Lewis, Patrick Crawford, Gregory Keating, Jennifer Arlen, Erie Talley, Ed Rubin, and Tom Ehrlich. Peter Fishbein of the Kaye Scholer firm made documents available and commented on an earlier draft. Some of these people disagreed strongly with some of the things I say here.


The charges brought by the Office of Thrift Supervision against the law firm of Kaye, Scholer, Fierman, Hays, and Handler, in 1992 generated the most prominent legal ethics controversy of the decade. Despite massive attention to the case, the substance of the OTS charges has received little analysis and has been often mischaracterized. This article analyzes the charges and the bar's response to them. It concludes that the charges were plausible prima facie. It argues, further, that the response by bar organizations and leaders has been pervasively disingenuous and irresponsible. It also identifies and analyzes some broad ethical issues raised by the case about the participation of lawyers in financial scandals. The article concludes with an appendix reporting and assessing Kaye Scholer's response to the charges.