ABA Weighs in on Backdating Debacle: Dear CalPERS, Accused Executives Have Right to Counsel

In response to a letter sent by the California Public Employees’ Retirement System (“CalPERS”) to various companies in 2006 relating to stock option backdating and investigations conducted into allegation of it (the “CalPERS Letter”), the ABA, in a letter sent through its Presidential Task Force on Attorney-Client Privilege (“ABA TF Letter”), expressed concern with CalPERS’ view that organizations should “[r]efrain using any company resources to satisfy the tax and legal liability for executives implicated for wrongdoing related to the backdating of options.” The ABA TF letter reiterates the policy favoring an employee’s right to counsel and opposing any governmental (or quasi-governmental) actions that discourage or forbid corporations from funding the defense of employees who are the subject or target of an investigation.

In the wake of the backdating scandals, which by all accounts have just begun to uncover the true breadth of the problem in public corporations, the ABA TF Letter to CalPERS is timely.

Here is a copy of the ABA TF Letter to CalPERS.

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