Kaye, Scholer, Firrea, and the Desirability of Early Closure: A View of the Kaye, Scholer Case From the Perspective of Bank Regulatory Policy

Abstract

Most of the writing on the Kaye, Scholer imbroglio focuses on two issues. The first issue that has captured the attention of the pundits is whether Kaye, Scholer, Fierman, Hays & Handler really did anything wrong. To hear its defenders, Kaye, Scholer simply was defending the interests of an embattled client as zealously as it could. The firm's detractors, on the other hand, insist it was involved in an ongoing and unethical conspiracy to assist a client in violating federal banking regulations. Consistent with these concerns, the second issue involves the policy questions surrounding Kaye, Scholer's culpability in general and the propriety of the cease-and-desist order freezing the firm's assets in particular. The concern is that the aggressive actions of the Office of Thrift Supervision have harmed the attorney-client relationship or that they may prevent lawyers from vigorously representing the interests of their clients. This Article argues that, at bottom, the Kaye, Scholer case is not about legal ethics. Notwithstanding rules of professional responsibility, the underlying source of authority for the OTS' actions was a federal statute, the Financial Institutions Reform, Recovery and Enforcement Act, which clearly gives the OTS the authority to do what it did.