What’s to Become of Ropes & Gray?

[WSJ_law_blog]

So, in light of Thursday’s shocking allegations that Ropes & Gray associate Arthur Cutillo was, for a good period of time back in the halcyon M&A days of 2007, livin’ large at Ground Zero of a big insider-trading scheme, we have to ask:

What’s going to happen to Ropes & Gray? Are clients going to start getting all awkward during phone calls with Ropes lawyers? Are job-seeking Ropesters going to be dis-invited from beauty contests? More seriously: what happens to an otherwise extremely reputable law firm when one of its lawyers, to paraphrase Sarah Palin, goes rogue?

A Ropes spokesman declined to comment on the situation. But industry expert Peter Zeughauser, formerly the general counsel of the Irvine Company, calls the incident “a definite black eye” that may set the firm back a bit, reputationally. “This happens at firms from time to time, and when it does it hits a firm’s management hard. It’s sad and embarrassing and triggers soul-searching.”

That said, Zeughauser doesn’t see the firm suffering a long-term stain. “Unless more news comes out, I think this will just be a black eye, nothing more.” Zeughauser says the firm’s reputation as a “blue chip” firm nationally, and one of the most highly regarded in Boston will likely keep the firm moving forward. “Ropes is held in high regard today, and it’ll be held in high regard tomorrow.”

Exhibits A and B backing Zeughauser’s point: Wachtell and Skadden. In the 1980s, a lawyer at Wachtell, Ilan Reich, pleaded guilty to insider-trading charges, admitting that he had tipped Drexel Burnham Lambert banker Dennis Levine off to several deals that Wachtell was working on — and got a one-year sentence. Click here for a good Fortune story from 2007 on Reich’s saga.

Suffice it to say, the Reich trouble didn’t exactly sink the Wachtell battleship.

And in the 1990s, a former paralegal at Skadden pleaded guilty to a charge related to insider-trading activity committed while at the firm. Click here for the NYT story, from 1989. Similarly, the situation didn’t exactly derail Skadden.

I think they will survive--this is not like some other firm scandals of late.