Eric Sieracki's defense against the SEC argues that he lacked scienter (the knowledge of the illegality of an act or conduct; the guilty knowledge). He had relied on the advice of his lawyers. (see Memorandum In Support Of Sieracki Summary Judgment Motion. http://pdfserver.amlaw.com/cc/Sieracki_Memorandum092110.pdf)
In general, an "advice-of-counsel" defense consists of three elements: 1) the defendant's good faith reliance on counsel's advice of; 2) the defendant's lack of knowledge that counsel's advice was erroneous, and 3) the defendant's full disclosure of all relevant facts to counsel, or counsel's actions as determined by the facts of his or her own investigation. (Jacqueline M. Jauregui, "Advice Of Counsel." Federal Defense and Corporate Counsel Quarterly, Summer 2000) The SEC said in its brief that an "advice-of-counsel" defense requires a party to show he requested advice about the legality of an action, received advice that was legal, and relied on it in good faith. (See SEC's Memorandum In Opposition To Sieracki's Summary Judgment Motion.)
Sieracki cannot use both an "advice-of-counsel" defense and an assertion of attorney-client privilege. The SEC states,
when asked in deposition whether he consulted Countrywide lawyer Mike Udovic regarding credit risk disclosures, Sieracki asserted the attorney-client privilege. SF 549. It is well settled that “[t]he privilege which protects attorney-client communications may not be used both as a sword and a shield.” Bittaker v. Woodford, 331 F.3d 715, 719 (9th Cir. 2003) (quoting Chevron Corp. v. Pennzoil Co., 974 F.2d 1156, 1162 (9th Cir. 1992)). (See SEC's Memorandum In Opposition To Sieracki's Summary Judgment Motion, p. 11.)
Forced Reliance
An officer or director of a corporation cannot know all of the complexities of the corporation, including the complexity of laws that govern it. Officers and directors must rely on a wide range of advisors who provide counsel, including attorneys. Officers and directors may not have the opportunity to verify the advice they receive; they may not possess the skills or have access to the knowledge that an advisor relied upon. It seems that in light of the growing complexity of knowledge, an "advice-of-counsel" defense must be a viable option. In order to allow this defense it may be necessary for corporations to include contractual provisions for defense. (see Mark A. Kressel, "Making the Advice of Counsel Defense Available for Corporate Directors." The Yale Law Journal Online, February 7, 2007.)