David Boies — who champions himself as an advocate of honest corporate governance and disclosure — was the Tyco board’s outside counsel in connection with investigating corporate fraud. Consequently, during the trial of former Tyco executives Dennis Kozlowski and Mark Swartz last year, Boies was one of the prosecution’s main witnesses in contending that the Tyco executives had failed to disclose their compensation adequately to the Tyco board.
Meanwhile, however, Boies resigned last year as special chapter 11 counsel at the request of his client, Adelphia Communications, for failing to disclose to the Adelphia Bankruptcy Court and creditors that members of the Boies family indirectly own a substantial interest in a document management services company that did between $5 and $10 million of business with Adelphia. Apparently, other clients of Mr. Boies’ firm also have paid substantial sums to the document management company without knowing of the company’s affiliation with the Boies law firm.
Now, after a hearing earlier this week, this Wall Street Journal ($) article reports that the Bankruptcy Judge in the Adelphia case has ordered an ethics investigation into whether Boies and his firm should have disclosed the firm’s partners’ ties to the company that Adelphia used for document management.
In the meantime, final Bankruptcy Court approval of the Boies firm’s almost $30 million fee (most of which has already been paid) for doing legal work for Adelphia hangs in the balance. If any significant portion of that fee is disallowed, then that could prove to be one expensive non-disclosure for the champion of good corporate governance and disclosure.