Peter Henning has a post today about Larry Sonsini's spring-loaded options that he received while director and counsel for certain companies, including Novell.  Peter notes that the ABA issued an opinion in 2000 that taking equity in a client is not a per se violation of the ethical rules.  Certain other states, including New York, took this same position.  Wilson Sonsini has never been hesitant to take equity in a client.  In the 1990s, WS took equity in many start-up clients that they took to IPO.  In 1999, WS partners received $230 million in IPO shares.  The day that WS took VA Linux public in December 1999, the firm saw its 102,584 shares rise to a market value of $24.5 million.  (Compare that with a piddly "hours billed" fee for taking a startup to IPO!)  With Webvan, earlier that year, WS held $51 million by the end of the first day in trading.  Even in 2000, WS took Avanex Corp. public and saw its shares rise to $109 million one month later.  Although we don't know when the firm sold the shares, we can guess that they sold them fairly quickly after any lock-up period was over, and hopefully before the first two of these companies declared bankruptcy.

If you are interested to know more about this topic, see my article Counselor, Gatekeeper, Shareholder, Thief:  Why Atorneys Who Invest in Their Clients in a Post-Enron World Are "Selling Out," Not "Buying In.

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