Lawyers Jokes

The devil visited a lawyer's office and made him an offer. "Here’s the deal" the devil said. "I'll increase your income five-fold. Your partners will love you; your clients will respect you; you will have a passionate affair with an associate and your wife will never find out, you'll have four months of vacation each year and live to be a hundred. All I want in return is that your wife's soul, your children's souls, and their children's souls rot in hell for eternity."



The lawyer thought for a moment. "So what's the catch?" he asked

You have probably heard this joke and variations on it. As Charles Dickens’ wrote in his famous diatribe against lawyers in Bleak House:

“The one great principle of the English law is to make business for itself. There is no other principle distinctly, certainly, and consistently maintained through all its narrow turnings.”

Although many lawyer jokes are about fees, many also convey the message that lawyers are unscrupulous, will do anything for money and have no real code of ethics.

Do lawyers really deserve to be the object of this type of ridicule? I recently published an article in our provincial lawyers publication, the Advocate, - “The Art of Reneging on a Merger”.

In my article I focus on a hedge fund, Apollo which owned a major chemical company, Hexion. Apollo wanted to buy Huntsman Chemical to merge it with Hexion. Huntsman was a family controlled publicly traded chemical company. When the fund made the offer in 2008, the deal looked rosy but soon after market conditions deteriorated and the hedge fund wanted to exit the deal. Literally billions of dollars were at stake,

By way of background, Jon Huntsman is the founder and chairman of Huntsman Chemical. He created Huntsman in 1970 and by 2000 it had become the world’s largest privately held chemical company with more than $12 Billion in revenue. Jon Huntsman is an old style businessman whose “word is his bond”. He gives generously to charity and to his community.

Hedge funds are not usually noted for their interest in anything but profit for their investors.

When Mr. Huntsman negotiated his deal with Apollo, he expected Apollo would complete. Apollo apparently thought they could get out of the deal but they underestimated Mr. Huntsman. Jon Huntsman sued Apollo, Hexion and Apollo’s bank [see my article for the full story - link above].

In 2009 Jon Huntsman wrote a book entitled “Winners Never Cheat – (even in difficult times)”. He does not mince words about lawyers in his book (p. 80):

“Shakespeare didn’t literally mean it when he said that the first thing we must do is kill all the lawyers, but you can forgive folks for smiling at the thought, given that the legal profession, collectively and with our complicity, is stripping America of personal accountability and trust. All of us, in ways large and small, partially are responsible for this erosion of integrity, but I place the greatest culpability, with notable exceptions, on attorneys – especially corporate lawyers.”

My interest in the Hexion/Huntsman situation was at first aroused by the legal strategies used by the Apollo to get out of the deal – strategies which were creative to say the least but doomed to failure. However, I soon began to wonder about the consequences of these strategies on innocent bystanders and whether lawyers should or are even entitled to take such consequences into account, or are accountable for the consequences.

The point I wish to make is that the actions of the lawyers on behalf of their clients in situations such as this can have far reaching consequences. While the lawyers for Apollo were trying to undo the Huntsman deal, management of Huntsman were undoubtedly going through hell. They had announced to their thousands of employees that Huntsman would merge with Hexion and everyone was waiting for the outcome. These Hunstman employees, watching the legal battle unfold, had no idea what the future held for them and had to live in uncertainty for the many months while the action wound its way through the courts. What if these employees had invested their pension monies and savings in their 401K’s in stock of Huntsman – and then watched as the stock price plummeted? What about the customers of Huntsman who expected the merger to occur but found their supplier deep in litigation with Apollo and Hexion. What about the damage done to business generally when parties to a contract simply refuse to comply with their obligations.

Suppose despite the action, the deal had completed (it did not). What impact would this have had on the employees of Huntsman and their attitude to their new employer?

Who should be thinking about these issues? What is the role for lawyers?

John C. Coffee Jr., a professor of law at Columbia University recently wrote a book titled “Gatekeepers – the Professions and Corporate Governance”. In the chapter entitled “Corporate Attorneys as Gatekeepers”, he reviews the history of the American Bar Association (ABA) code of ethics and the debate between academics who place justice as the first priority of the lawyer and the practitioners who place duty to client first.

Coffee describes the resistance of the ABA to creation of a code of ethics which has some moral content to it and the unflagging efforts of the ABA to resist changes to the code when events bringing lawyers into disrepute inflamed public opinion against lawyers. The ABA has been especially vocal about changes proposed by the SEC which would create any watchdog element for lawyers.

The first attempt to create a code of legal ethics in Canada came in approximately 1920. The deplorable record of law societies to create norms for lawyers’ actions and to deal with the public disenchantment (to put it mildly) with the profession especially over the last decade climaxing in the “anni horribilus” is described in a recent article by Adam Dodeck.  The anni horribilus, 2006-7, included the Wirick fraud, Tory Tory lawyers dealing with the Conrad Black situation, the Lawyers are Rats article in McLeans, etc.  It is interesting to note that Dodeck is somewhat optomistic about the future and is of the opinion that we are making some headway.

In my view, there are no facile or simple solutions to these moral and ethical questions. But it seems to me that if the academics are losing ground in their quest for justice, this can make the lawyers really facilitators and certainly not moral leaders. In other words, with reference to the jokes, many a truth may be spoken in jest.

Our Beloved Euro

The world seems to be lurching from crisis to crisis. For those old enough to remember, we had the misery of Black Monday in 1987 when the Dow dropped almost 23%. (It fully recovered in about 6 months to the chagrin of those who sold as the market plummeted.)

In the late 1990’s, Long Term Capital Management, a hedge fund whose board included two Nobel Prize winners in economics, had to be bailed out by the US government. The fund lost $4.6 Billion after betting on the Russian ruble just before the Russian financial crisis erupted. The fund was considered to be too large to fail. Some pundits opposed the bail out because bail-outs just encourage institutions to make risky decisions in the hope they will be rescued by government. (That sounds vaguely familiar.)

Then in 2000 everyone expounded at cocktail parties about the increasing value of their stock portfolios; no one could lose money on the market. The dot-com bubble then burst.

At the height of the bubble, Nasdaq peaked at 5132; today it is at 2346. Fortunately the general market has fared somewhat better than the technology stocks, most of which were trading on future promise rather than current performance. (I exclude Nortel which taught me a painful lesson as I held all the way down, being a loyal Canadian.)

With short memories and awash with cash, by mid 2008 investors scoured the world for opportunities. “Lazy money” was attracted, like moths to the fire, to any investment that would yield 7 - 10% and was rated relatively safe by rating agencies such as Moodys or DBRS. Lazy money is money owned by people who don’t want to do their homework by analyzing the risk and security of the investments they are purchasing. There were a lot of banks, pension companies and institutions who ended up with CDO’s and subprime mortgage portfolios that became illiquid and ultimately worth only a fraction of what they cost.

Today you can invest in the Euro and Greek bonds. Is Greece too big to fail. What is the credit rating for Greek bonds. Will Germany and France save Greece, then Portugal and Spain? What about all those rioters in Athens who think they will be entitled to their benefits forever regardless whether their government can afford to pay them. What happened to the rating agencies and the EU regulatory authorities when Greece issued bonds in 2008.

The headline reads:

“Goldman Sachs Group Inc. managed $15 billion of bond sales for Greece after arranging a currency swap that allowed the government to hide the extent of its deficit.”

And in the Saturday Globe and Mail, Business Section, May 15, Derek deCloet reflects on investors who are prepared to lend money to Britain (a holdout from the Euro) for 10 years at 3.74% or even worse for 30 years at about 4% simply because the rating agencies call their bonds “Triple A”. He writes:

“The biggest problem is that lazy money depends on rating agencies,” says one of the smartest debt investors I know. They shouldn’t, this person says: Rating agency analysts are typically underpaid, overworked, and the good ones are inevitably picked off by Bay Street or Wall Street firms that will pay them a lot more.

Here’s a modest prediction: Some time in the next several years, the rating agencies will be exposed again, this time by underestimating the risk in the government debt of some major economy. And, just as in the crisis of 2008-09, the investors who make the big money will be the ones who ignore credit ratings altogether and do their own homework.

I agree that we have to do our own homework, but I am really not sure how reliable my homework or my conclusions are. I predicted years ago the $US would fall because of the continuing deficit and balance of payment problems and increases, also the lack of political will to deal with entitlements. I even bought a hedge. I was right, but my timing was off. The hedge expired before I was in the money.

In 1979 the Hunt Brothers out of Texas cornered the silver market. Silver skyrocketed in price from about $5 to $50 per ounce in a year.  When silver was $45 I went to the only bank selling silver intending to buy some. I needed a bank draft which I did not have at the time. There were 30 or more people, some with paper bags full of cash, patiently waiting to trade it in for silver. I thought to myself, this is probably not a good idea. And I was right for once. One lesson I have learned is that investors generally like company – if lots of other people are buying something, it must be good. With the silver play, I was a contrarian.

I am not sure how to do my homework, but it is fun speculating! In the meanwhile, my daughter is going to school in Ireland which, unlike England, uses the Euro. So I did buy some Euro’s on Thursday. But I am going to stay clear of UK Bonds.