Two years ago, sponsors withdrew the same proposal in the face of strong opposition. A few months later, the Enron scandal hit the fan, followed by a string of financial management meltdowns at other major companies.

Then, a year ago, Congress passed the Sarbanes-Oxley Act. With that law came tougher regulations requiring lawyers representing a corporation to report "up the ladder" if they learn of internal violations of securities and related laws that may harm the corporation or investors. Those regulations went into effect Tuesday.

The reporting proposal is likely to spur intense debates in the House of Delegates when it convenes on Monday and Tuesday during the ABA Annual Meeting in San Francisco. ... The 540-member House sets policy for the ABA.

... The reporting measure is one of two proposals to revise the ABA Model Rules of Professional Conduct, which serve as the basis for most state ethics rules for lawyers. Both recommendations closely track revisions that were proposed two years ago by the Ethics 2000 Commission after its comprehensive review of the Model Rules.

The proposals are among three recommendations relating to corporate wrongdoing sponsored by the ABA Task Force on Corporate Responsibility. Passing the recommendations "would significantly enhance the effectiveness of lawyers in the system of checks and balances necessary to restore public trust in corporate responsibility," the task force states in its report to the House.

The fraud proposal urges that the House revise Model Rule 1.6 (Confidentiality of Information). The change would permit a lawyer to reveal information relating to the representation of a client to the extent the lawyer believes necessary to prevent the client from committing a crime or fraud that would lead to "substantial injury to the financial interests or property of another." (In 2001, the House adopted an Ethics 2000 recommendation allowing lawyers to reveal information relating to clients to prevent reasonably certain death or substantial bodily harm to some person.)

The task force also is recommending that Model Rule 1.13 (Organization as Client) be revised. The change would allow a lawyer who concludes that actions by officers or employees will likely harm the company to refer the matter to higher-ups "unless the lawyer reasonably believes that it is not necessary in the best interest of the organization to do so."

The proposal offers an alternative for lawyers when "up the ladder" reporting fails to result in appropriate actions. At that point, lawyers would be allowed–but not required–to reveal information "if and to the extent the lawyer reasonably believes necessary to prevent substantial injury to the organization."

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In a third recommendation, the task force endorses a series of corporate governance practices. They include a statement emphasizing that "a lawyer representing a public corporation shall serve the interests of the entity, independent of the personal interests of any particular director, officer, employee or shareholder." ....