A few days before Thanksgiving, Cox is marveling at the insight students have brought to their research presentations in Rethinking the Regulatory State, the course he co-taught with Lawrence Baxter as part of the fall semester’s Duke in D.C. program.
“The quality of their presentations, in terms of erudition, the nature of the topics selected, and the depth of analysis has been far above what I’ve come to expect in similar papers — and I’ve always been delighted in the past, so this is off the scale,” says Cox, Duke’s Brainerd Currie Professor of Law and a leading scholar of corporate and securities law.
He offers a few examples of the issues tackled by the 12 students who spent a semester working full time in the nation’s capital, embedded within congressional offices and agencies in and out of government that are involved with different aspects of financial regulation. These include the Securities and Exchange Commission (SEC), the Public Company Accounting Oversight Board (PCAOB), the Office of the Comptroller of the Currency, and the Financial Services Roundtable.
SEC extern Brian Oh ’10 undertook a multi-faceted analysis of the disclosure issues that led to Judge Jed S. Rakoff’s rejection, in September, of a $33 million settlement of the SEC’s lawsuit against Bank of America over its acquisition of Merrill Lynch. “He sifted through the strategies and issues that could have been involved in the prosecution of the case and how the trial could go forward. Brian also brought in elements of law reform into his analysis,” says Cox.
Timothy Reibold JD/LLM ’10, whose placement at the Institute of International Finance involved a review of international regulatory developments with respect to executive compensation, analyzed public reaction to executive compensation through the lens of various schools of thought in moral philosophy — his undergraduate major — making what Cox calls “a tremendously rich connection.”
Christopher Leach ’10, who worked in the SEC’s Trial Division, examined whether in today’s environment the classic “shareholder primacy” principle that corporate directors always seek to maximize shareholder wealth should remain the governing model or whether some other stake¬holder model should govern decision-making for financial institutions, in particular.
“It’s another great, great topic,” says Cox. “These papers are on the edge. The students’ focus consistently was on what’s unfolding in America and how it makes us think about the regulatory system. And all of the papers also are reflecting the themes in the seminar.”
An integrated approach to legal education
In offering students in-depth work experience concurrent with an intensive class on regulatory law and policy, Duke in D.C. is one example of the Law School’s broad effort to integrate professional-skills development into an already rigorous core curriculum. The integrated approach combines academic research and substantive law teaching with a simultaneous experience of lawyering in settings that call upon students to marshal their academic knowledge and analytic powers, come up with solutions to real problems, and develop skills essential to success in the law — the ability to work in teams and across disciplines, to articulate complex ideas orally and in writing, and to manage their workflow. The integrated approach thereby stitches together the varied components that make up a superior legal education.
“In one sense, our talented faculty has been using an integrated approach to legal education for many years,” says Dean David F. Levi. “It is common for faculty to include in core courses various simulations of the kinds of issues and problems that may be confronted in practice. Integrated externships and the addition of a practice unit to a core course — what we are calling ‘course plus’ — take this approach one step further by combining learning by doing and learning through study. The combination can be powerful.”
More than ever, observes Levi, law school graduates need to be “ready on day one” to step into a professional environment with a comprehensive grounding in professional skills and values as well as the ability to master complex legal issues. According to Levi, “The legal profession is changing. We know that many of our students will have to prove themselves from the very first. We want to prepare them to be up to this challenge. Fortunately for our students, Duke has a faculty that takes its teaching seriously and that embraces its obligation to prepare our students to handle the most demanding kinds of legal careers whether in government, private practice, public service, or law teaching and scholarship.”
Duke in D.C. is one of a number of such integrated courses. The Federal Defender Integrated Externship program, launched to enormous success in the fall 2009 semester, combines intensive classroom training in federal criminal law and procedure with student externships in the Office of the Federal Public Defender for the Eastern District of North Carolina. The “course plus” model adds a one-credit “applied law” seminar that focuses on case studies onto a traditional “black-letter law” course. Duke’s eight legal clinics, an array of other student-initiated capstone projects and externships, and a variety of simulation courses round out the mix.
The Law School also is making sure that getting students ready for day one of their professional careers starts on day one of their time at Duke Law; the full-time Legal Analysis, Research and Writing faculty has been expanded so that students have the benefit of smaller classes in the first year and can choose from an array of specialized legal writing and analysis classes in their upper years. And the newly designed Dean’s Course, which Levi teaches with Professor John Weistart ’68, is literally the first educational experience that 1Ls have at Duke. “Our goal is to expose 1Ls to the different kinds of careers and aspirations that lawyers have,” says Levi of the course that has featured a discussion of law and leadership with Ben Heineman, the former general counsel of General Electric, and leading trial lawyers Hal Haddon ’66 and Professor Michael Tigar, among others. “We invite them to reflect now, at this early point in their law studies, on what kind of path they want to follow and what they wish to accomplish in their life in the law.”
All of these curricular developments, Levi points out, “integrate the scholarship and research of a great university with the mobilization of knowledge through professional skills including the development of some of the basic communication and interpersonal skills that lawyers must have in order to succeed no matter what they do — whether they become law professors or political figures, trial lawyers or judges, transactional lawyers or entrepreneurs. They all must be able to write and to express themselves powerfully and to work in teams to be effective.”
Clinical Professor Andrew Foster, who oversees Duke’s clinical programs and directs the Community Enterprise Clinic, puts it this way: “We want to help our students move up that steep learning curve of being an early-stage professional. To do this, we need to create challenging opportunities that require them to integrate their substantive legal knowledge and intellectual skills with the interpersonal, communication, and other professional skills that are fundamental to effective lawyering. Through this process, they also will begin to develop their professional judgment, strategic thinking, and self-confidence. As a result, they will really be better positioned to be successful and effective early in their careers.” Facilitating students’ experience with different kinds of practice will also help them find the areas about which they are passionate, he adds. “Being passionate about something gives you the internal motivation to create your own career and take charge of it.”
Duke Law has long emphasized leadership; Levi’s predecessor as dean, Katharine T. Bartlett, the A. Kenneth Pye Professor of Law, launched the Duke Blueprint to LEAD, embedding such values as professionalism, collaboration, engagement, and the importance of working across disciplines into the overall fabric of the Duke Law student experience. Levi is embedding them in the curriculum.
One of his first initiatives as dean was to charge a working group of faculty, administrators, alumni, and students with developing ideas and academic programs for preparing Duke Law graduates for positions of leadership.
Co-chaired by Cox and Peter Kahn ’76, a partner at Williams & Connolly in Washington, D.C., and working closely with the faculty curriculum committee chaired by Weistart, the group focused its efforts over a two-year period on developing opportunities for upper-level students, in particular, to integrate real or simulated practice-based learning with substantive learning.
This approach would be “ideal for readying students to participate in the varieties of lawyering at the highest levels, whatever form that participation takes,” the co-chairs wrote in their report to the governing faculty. “Through this integration, the power of substantive knowledge can be teamed with analytic skill, judgment, and ethical decision-making to create potential for leadership in the law.”
“In the practice of law today, lawyers are not just advisers and wise counselors, but often the decision-makers themselves,” says Kahn, a Duke University trustee and former chair of the Law School’s Board of Visitors. “As our students take on leadership roles in business, government, and law firm management, for example, they need to be prepared to make the hard calls. Students need to learn to be risk aware, but not be risk averse. Without cutting back in any way on our core legal competencies, our feeling was that we need to teach our students creative and constructive decision-making, not just critical thinking. They need to learn to work cooperatively in teams, not only with lawyers, but with others across disciplines including those engaged in business, engineering, and public policy.”
The group sought to address a broad definition of leadership and leadership skills, says Cox: the self-confidence that comes with experience and having successful experiences in interacting with others; the ability to accurately assess one’s surroundings and environment; knowing when and whom to follow when appropriate, coupled with knowing when to step forward; and maintaining an accurate assessment of one’s strengths and shortcomings.
“The key, really, is to teach people how to learn,” says Cox. “You have to teach them in a way that does not become rote. So what we are trying to do is develop methods in which individuals are able to leave the Law School with a greater sense of self than they came in with, on average. And we do so by testing them in a variety of different settings so they can find [what works for them].”
Faculty as mentors, guides
Faculty, as always, are leading the way. Duke in D.C., for example, was launched by Christopher Schroeder, the Charles S. Murphy Professor of Law and Public Policy Studies and director of the Program in Public Law, to expose students to the reality of working in the public sector and to encourage them to consider including public service in their professional careers.
Building on one of the strongest and most creative groups of scholars in the legal academy, the Law School also has assembled a distinguished roster of professors of the practice of law who, Levi notes, “mine the seam” where the academic study of law and the thoughtful practice of it meet.
“It’s a big seam, rich with ideas and possibilities that can affect the worlds of practice and scholarship alike,” he says. “Our professors of the practice and clinical professors have an ‘interstitial capacity’ — they often have had experiences in a broad range of different kinds of law practice, they see the potential connections between that law practice and the work of our research faculty, and they often connect us to different parts of the University and the greater community.”
Lawrence Baxter is one of them. An administrative law scholar, he returned to the faculty as a professor of the practice after spending more than a decade as a senior executive at Wachovia Corp., where he led e-commerce initiatives. “The experience gained from executive positions on the cutting edge of innovation and business in a leading private corporation served to complement the experience I had gained as a teacher, researcher, and consultant with government regulators and Congress,” says Baxter. “The result has been to enrich deeply my understanding of the interaction between law, business, and government. This, in an increasingly complex, connected, and interdisciplinary world brings, I hope, added realism to the theory and practice of the law I teach and write about now that I am back at Duke Law.”
Other recent additions to the full-time faculty include Bill Brown ’80, who brings the insights of a long tenure on Wall Street and an active career as an entrepreneur and venture capitalist to classes in financial analytical techniques, accounting, fixed income markets, private equity and venture capital, and Donald Beskind ’77, a leading trial lawyer and long-time director of Duke’s Trial Practice Program who also teaches evidence and advocacy-related classes.
The Law School’s ranks of adjunct faculty include distinguished practitioners and judges who further help to connect the classroom to developments in law practice here and internationally.
In the Duke in D.C. classroom
Throughout their Duke in D.C. semester, Cox and Baxter traveled to Washington each Tuesday to convene their two-hour class on regulatory policy and law around an expansive boardroom table at the Pennsylvania Avenue offices of Morgan Lewis & Bockius. Baxter began each session by asking students to report on the work they were doing at their externship placements and to point out links they could identify between their work and the class and the subject of regulatory reform.
Tim O’Shea JD/MPP ’10, who worked for the House Financial Services Committee, tells his classmates that he has drafted a memorandum that was circulated to committee members before a hearing on a proposal to require most private investment vehicles to register with the SEC. The memo described existing market and regulatory conditions, the proposed legislation, and differences between the bills offered by the committee and the Obama administration. He notes that the committee moves at a fast pace; he is immediately “moving on to a new hearing that we’re going to have next week on systemic risk and insurance companies.”
Beth Landes ’10 says she has volunteered to work on “some interesting enforcement matters” at the Public Company Accounting Oversight Board (PCAOB), where she is spending the semester. She notes that she has enjoyed getting to read drafts of the briefs and engaging with colleagues in the office of the PCAOB general counsel to get their insights on the challenges and merits of a case the class is discussing, Free Enterprise Fund v. PCAOB. (The challenge to the constitutionality of the regulator was subsequently argued in the Supreme Court in December.)
Cox, who currently serves on the PCAOB’s Standing Advisory Group, describes the regulator’s formation as the centerpiece of the Sarbanes-Oxley Act, enacted in 2002 in the wake of the Enron and Worldcom scandals.
The PCAOB replaced the American Institute of Certified Public Accountants (AICPA) which previously was charged with setting auditing standards for public companies. Because the AICPA derived its funding from the accounting industry, its position frequently reflected a closer relationship to the wishes of its audit clients than to the needs of the users of audited financial statements, explains Cox.
Sarbanes-Oxley sought to remedy that situation by stipulating that the SEC can only accept as authoritative accounting pronouncements made by an organization with independent funding that operates by majority rule. It created the PCAOB as just such an independent organization, he says.
“Its members are appointed by the chair of the SEC in consultation with the secretary of the Treasury and the chairman of the Federal Reserve,” says Cox. “It’s funded independently by registration fees and its budget is approved by the SEC. It creates a significant body that oversees the procedures and processes of the auditors. And a key provision is that its five members aren’t removable except for cause.” Landes offers her impression that the SEC, in fact, exercises “pervasive control” over the PCAOB.
The students engage in a spirited — and knowledge¬able — exchange about why Congress may have made the PCAOB a self-regulatory organization, why commission¬ers can be removed only for cause, and the need for strict accounting standards.
“Based on the pleadings, about half the cases I’ve seen involve alleged manipulation of accounting standards,” says SEC extern Leach, adding that he is expressing his own views, not those of the agency. “They relate to inflated earnings.” As for protecting commissioners from being removed only for cause, Leach offers the view that it insulates the PCAOB from politics. “You want accounting principles to be the backstop — the numbers don’t lie, but if you allow them to be influenced by politics, they will.”
The discussion neatly reflects all of the elements that make the Duke in D.C. program effective: leadership by expert faculty who are intimately familiar with the players in and substantive law governing federal policy; students embedded in policymaking institutions and engaged as junior professionals in challenging legal and policy work; and the integration of substantive law and parallel, practical experiences in the classroom, creating a synergy of intellectual connections and mastery of the subject matter that carries back into the workplace.
The student experience
On-the-job externship supervisors are enthusiastic about the quality of work they are receiving from the Duke students.
Art Lowry, a supervisory trial attorney in the Trial Unit of the SEC’s Division of Enforcement, notes that having Leach in his unit for a whole semester provided “a much needed and appreciated resource” for the trial teams, at a time when the number and complexity of the cases they handle continues to increase. He knows that Leach also benefited from a unique learning environment. It is, he says, “an environment where the ‘rubber meets the road,’ allowing third-year law students to apply their legal training in the context of active securities law enforcement litigation.
“For example, Chris attended three depositions in connection with one of his assignments, one of which was an expert deposition,” says Lowry. “Chris used his familiarity with the facts he gained from those depositions in drafting memoranda for the trial team discussing the theories that could be used to exclude or include certain testimony at trial.” For his part, Leach welcomed the opportunity to travel to the Southern District of New York to hear argument in one motion he worked on.
Leach and his classmates, who submitted reflective reports on their externships bi-weekly and contributed to a password-protected class blog, also are uniformly enthusiastic about their semester learning from their workplaces, their professors, and each other.
“I love hearing about what everybody else is doing. It adds tremendous value,” says Leach of his classmates. “We’re getting inside perspective on regulatory reform from across different agencies.”
“A lot of times law school classes aren’t perfectly attuned with what you actually want to do, but this [program] pretty much is,” says O’Shea, who was on the front line of reform efforts through his externship with the House Financial Services Committee and who counts working in the financial services industry as a long-term career possibility.
“In class we’re talking about the theory of regulation as regulation happens. This is one of those times when very important and comprehensive legislation [is likely to get] passed. So understanding it comprehensively can only help me going forward.”