                  UNITED STATES COURT OF APPEALS
                      FOR THE FIRST CIRCUIT

                                           

No. 93-1971

                         BERNARD P. ROME,

                            Appellant,

                                v.

                     JOSEPH BRAUNSTEIN, ETC.,

                            Appellee.

                                           

           APPEAL FROM THE UNITED STATES DISTRICT COURT

                FOR THE DISTRICT OF MASSACHUSETTS

             [Hon. Rya W. Zobel, U.S. District Judge]
                                                    

                                           

                              Before

                      Selya, Circuit Judge,
                                          

                  Bownes, Senior Circuit Judge,
                                              

                     and Cyr, Circuit Judge.
                                           

                                           

     Bernard P. Rome, with whom Rome, George &amp; Klein was on brief
                                                    
for appellant.
     Isaac H. Peres, with  whom Riemer &amp; Braunstein was  on brief
                                                   
for appellee.

                                           

                          March 22, 1994

                                           

          CYR, Circuit Judge.   Bernard P. Rome, Esquire, appeals
          CYR, Circuit Judge.
                            

from  a  district court  order  entered  on intermediate  appeal,

affirming  a  bankruptcy court  ruling  under  Bankruptcy Code   

328(c) disallowing Rome's application for fees as court-appointed

counsel to  chapter 7  debtor Chestnut Hill  Mortgage Corporation

(CHM)  due to  disqualifying conflicts  of interest.   Finding no

error, we affirm.

                                I

                            BACKGROUND
                                      

          As its longtime corporate clerk and counsel, Rome filed

a chapter 11 petition in behalf of CHM in November 1989, followed

by  an  application for  Rome's  appointment  as counsel  to  the

chapter  11  debtor in  possession  pursuant  to Bankruptcy  Code

  1107(a), 11 U.S.C.   1107(a); see  also id.   327(a), 11 U.S.C.
                                             

   327(a).  Thereafter, as  counsel to the  debtor in possession,

Rome filed three abortive chapter 11 reorganization plans propos-

ing a 20% dividend  to general creditors.  Various  CHM creditors

successfully resisted  these initiatives, however, on  the ground

that the plans would  unfairly advantage certain CHM  insiders   

including its president and sole shareholder, Arnold Leavitt, and

Leavitt's family  and friends    by  providing priority repayment

of their prepetition "loans" to  CHM.  In August 1990,  after all

three plans failed to win creditor approval, the bankruptcy court

acceded to creditor demands  for the appointment of a  chapter 11

trustee, appellee  Joseph Braunstein, and to  Braunstein's reten-

                                2

tion  of Riemer and Braunstein (R &amp;  B) as counsel to the chapter

11 trustee.

          Meanwhile, three months before Braunstein's appointment

as  the CHM chapter 11 trustee, an involuntary chapter 7 petition

had been filed against Arnold Leavitt.  Shortly thereafter, while

still serving as counsel to CHM  in its chapter 11 case, and with

bankruptcy court authorization, Rome began to serve as counsel to

Arnold Leavitt  in  the involuntary  chapter  7 proceeding.    As

chapter 11  trustee, appellee Braunstein began  negotiations with

Rome,  by then  also  representing one  Sandra Dickerman,  Arnold

Leavitt's secretary at  CHM, in her ultimately  successful bid to

purchase property belonging  to the  CHM chapter 11  estate.   In

March  1991,  less than  two  months after  the  bankruptcy court

approved the Dickerman acquisitions from CHM, the  CHM chapter 11

proceedings  were  converted  to  chapter 7  and  Braunstein  was

appointed the CHM chapter 7 trustee.

          Late  in 1991, Braunstein, R &amp; B, and Rome filed appli-

cations  for compensation  and  reimbursement of  expenses.   The

Braunstein application, as chapter 11 and chapter 7 trustee,  and

the R &amp; D application as counsel to the chapter 11 and  chapter 7

trustee,  approximated $81,000  in  fees.   The Rome  request, as

counsel  to CHM qua debtor  and chapter 11  debtor in possession,
                   

approximated  $62,000.   The  applications  were  opposed by  CHM

creditors; additionally, Braunstein, as  the CHM chapter 7 trust-

ee, opposed the Rome application.  

                                3

          At the  hearing held on these  fee applications, Braun-

stein represented to the bankruptcy court that he intended to set

aside  certain  prepetition transfers  of  CHM  assets as  either

preferential or  fraudulent.  Creditors represented  to the court

that  Arnold Leavitt had "looted"  CHM prior to  Rome's filing of

the  CHM  chapter  11 petition,  by  transferring  CHM  assets to

Leavitt  family members, and that  Rome, in an  effort to further

Leavitt's  interests at  the expense  of  CHM and  its creditors,

repeatedly  "obstructed" creditor  efforts  to investigate  CHM's

financial  condition  and to  promote  its  reorganization.   The

bankruptcy  court ultimately allowed the Braunstein and R &amp; B fee

applications  in full.  On  the other hand,  the court disallowed

the Rome  application  entirely,  on two  grounds:    (1)  Rome's

contentious tenure as counsel to  the debtor in possession  "pro-

duced virtually  no benefit to creditors  and loan participants";

and (2) Rome's concurrent  representation of CHM and  Leavitt, as

well as  CHM and  Dickerman, was "patently  inappropriate."   The

district court affirmed.

                                II

                            DISCUSSION
                                      

          The  Bankruptcy  Code  imposes   particularly  rigorous

conflict-of-interest  restraints upon  the employment  of profes-

sional persons in a bankruptcy case.

          Except as otherwise provided in this section,
          the  trustee, with the  court's approval, may
                                                  
          employ  one  or more  attorneys, accountants,

                                4

          appraisers, auctioneers, or other profession-
          al persons, that do  not hold or represent an
                                                    
          interest adverse to the  estate, and that are
                                              
          disinterested persons, to represent or assist
                               
          the  trustee in  carrying  out the  trustee's
          duties under this title.

Bankruptcy Code    327(a), 11  U.S.C.   327(a)  (emphasis added).

See Fed. R. Bankr. P. 2014; In re Cropper Co.,  35 B.R. 625, 629-
                                             

30 (Bankr.  M.D. Ga. 1983)  (noting "strict standards"  unique to

bankruptcy);  see also  Bankruptcy  Code    1107(a), 11  U.S.C.  
                      

1107(a) (   327(a) applicable  to counsel representing  debtor in

possession);  In re  Roberts, 46  B.R. 815,  822 (Bankr.  D. Utah
                            

1985).   Moreover, as the bankruptcy court is invested with ample

power  to  deter  inappropriate  influences  upon  the  undivided

loyalty of court-appointed professionals throughout their tenure,
                                                                

the  need for  professional self-scrutiny  and avoidance  of con-

flicts of interest does not end upon appointment.  The court "may
                                                                 

deny  allowance of compensation . . . if, at any time during such
                                                     

.  .  . employment  . . .  , such  professional person  is  not a

disinterested person, or represents  or holds an interest adverse
                                                                 

to the interest of the estate . . . ."  Bankruptcy Code   328(c),

11  U.S.C.    328(c)  (emphasis  added).   Thus,  section  328(c)

authorizes  a  "penalty" for  failing  to  avoid a  disqualifying

conflict of  interest.  See S. Rep. No. 989, 95th Cong., 2d Sess.
                           

39 (1978). 

                                5

          Although  the  Code  idiom "interest  adverse"  is  not

defined,1 the  companion requirement    that  appointees be "dis-

interested"     is  defined,  see Bankruptcy  Code   101(14),  11
                                 

U.S.C.   101(14), as  including, inter  alia, one who  is "not  a
                                            

creditor, an  equity shareholder, or an  insider," nor presently,
                                                      

or  "within two  years  before [bankruptcy],  a[n] . . .  officer
                                                                 

. . .of the debtor,"  and does not  have "an interest  materially
                                                                 

adverse to the interest of  the estate or of any class  of credi-
       

tors or equity security holders" for "any reason."  Id. (emphasis
                                                       

added);  see In  re Martin,  817 F.2d  175, 179 (1st  Cir. 1987).
                          

These statutory requirements    disinterestedness and no interest

adverse to the estate     serve the important policy  of ensuring

that all  professionals  appointed  pursuant  to  section  327(a)

tender undivided loyalty and  provide untainted advice and assis-

tance in furtherance of their fiduciary responsibilities.2 

                    

     1However,  an  "adverse  interest"  has  been  described  in
pragmatic terms as the "possess[ion] or assert[ion] [of] mutually
exclusive  claims to  the same  economic interest,  thus creating
either an actual or potential dispute between rival claimants  as
to which . . . of them the  disputed right or title to the inter-
est in question attaches  under valid and applicable law;  or (2)
[the possession  of] a  predisposition or interest  under circum-
stances that render such a bias in favor of or against one of the
entities."  In re Roberts, 46 B.R. at 826-27.
                         

     2Rome  argues  on appeal  that  he  not only  disclosed  his
position as the clerk  of CHM but could reasonably  have believed
that such a ministerial  position would not make him  a corporate
"insider"  within the  meaning of  Bankruptcy Code    101(31), 11
U.S.C.    101(31).   We  express no  view  on these  claims,  and
confine our holding to Rome's impermissible representation of two
other clients (Leavitt and Dickerman) with "interests adverse" to
the CHM estate which he was responsible for representing by court
appointment. 

                                6

          In the exercise of  its own ongoing affirmative respon-

sibility to "root out  impermissible conflicts of interest" under

Bankruptcy Code     327(a) and 328(c), the  bankruptcy court must

determine whether  any  competing interest  of a  court-appointed

professional  "created  either  a  meaningful  incentive  to  act

contrary  to  the best  interests of  the  estate and  its sundry

creditors    an  incentive sufficient to  place those parties  at

more  than acceptable  risk     or  the reasonable  perception of
                                                              

one."   Martin, 817 F.2d  at 180 (emphasis  added).  The  test is
              

neither subjective, nor  significantly influenced  by the  court-

appointed  professional's "protestations of  good faith," as Rome

would  have  it, see,  e.g., supra  note  2, but  contemplates an
                                  

objective screening  for even  the  "appearance of  impropriety."

Id.  at 180-81, 182.  Finally, if its fact-specific inquiry leads
   

the bankruptcy  court to conclude that  an impermissible conflict

of interest looms or exists, available sanctions include disqual-

ification and  the denial or  disgorgement of all  fees.   Id. at
                                                              

182-83.  See Bankruptcy  Code   328(c), 11 U.S.C.   328(c).   We,
            

like the district court, will then review the bankruptcy  court's

factual  findings for clear error  and its conclusions  of law de
                                                                 

novo.  In re La Roche, 969 F.2d 1299, 1301 (1st Cir. 1992). 
                     

          The  bankruptcy court  determined that  Rome improperly

represented  two undisclosed  "interest[s]  adverse"  to the  CHM

chapter  11 estate      Arnold Leavitt  and  Sandra Dickerman    

resulting  in  actual  conflicts  of  interest warranting  Rome's

retroactive  disqualification and forfeiture  of all compensation
           

                                7

from  the chapter 11 estate.   Rome raises  three principal chal-

lenges to the bankruptcy court ruling.  

A.  The Duty of Disclosure
                          

            First, Rome argues that  retroactive disqualification

is inequitable in these circumstances, since the bankruptcy court

and the  trustee tacitly  endorsed his representation  of Leavitt

and  Dickerman, pendente lite, or,  at the very  least, voiced no
                             

objection until the filing of his application for compensation in

December  1991.  Given the relevant findings in this case, howev-

er, we  are not  swayed by  Rome's resort  to general  notions of

equity.

          Although the  bankruptcy court has an  affirmative duty

to  exercise  vigilance in  avoiding  impermissible  conflicts of

interest on the part of court-appointed professionals, see, e.g.,
                                                                

In re  Anver Corp., 44 B.R. 615, 617 (Bankr. D. Mass. 1984) (once
                  

alerted to  potential conflict of  interest on part  of appointed

counsel,  the bankruptcy court must  raise the issue, sua sponte,
                                                                

in order to safeguard  its institutional integrity), normally the

professional, especially  counsel, possesses ready access  to, if

not full   awareness of,  the facts material  to any existing  or

potential  competing  interest  which  might  conflict  with  the

interests court-appointed counsel must represent, or those  which

might generate an unacceptable appearance or risk of conflict.

          As  with other prophylactic  ethical rules constraining

attorney conduct, sections 327(a) and 328(c) cannot achieve their

purpose unless  court-appointed counsel police themselves  in the

                                8

first instance, especially in  circumstances such as these, where

the nominal applicant (CHM) for Rome's appointment is a corporate

debtor  in possession who can  only act through  its officers and

agents     here  Leavitt,  Rome, and  Dickerman     and  may  not
                                                                 

command the appointee's primary  loyalty.  See In re  Roberts, 46
                                                             

B.R.  at 837-39,  846  (duty of  disclosure  and disallowance  of

compensation under    327(a) and 328(c)  are designed to "prevent

'the dishonest  practitioner from  [engaging in]  fraudulent con-

duct,  and  to  preclude  the honest  practitioner  from  putting

himself in a  position where he may be required to choose between

conflicting  duties'")  (citation omitted).    Thus,  as soon  as

counsel acquires even  constructive knowledge reasonably suggest-

ing  an actual or potential  conflict, see id.  at 839 (fiduciary
                                              

duty of disclosure arises  as soon as counsel becomes  "aware" of

facts), a bankruptcy court ruling should be obtained.  See, e.g.,
                                                                

In  re Martin, 817 F.2d at 182 ("There  must be at a minimum full
                                                            

and  timely disclosure of  the details of  any given arrangement.
                                      

Armed with  knowledge of all  the relevant facts,  the bankruptcy
                            

court  must  determine, case  by  case, whether  [a  conflict ex-
                                      

ists].") (emphasis  added); see also  In re Huddleston,  120 B.R.
                                                      

399, 400-01 (Bankr.  E.D. Tex. 1990) ("The case law is clear that

the burden of disclosure is upon 'the person making the statement

[of  qualification for  employment]  to come  forward with  facts

pertinent to  eligibility and to make candid and complete disclo-

sure.'  . . .  '[T]his decision  should not  be left  to counsel,

whose  judgment may be clouded  by the benefits  of the potential

                                9

employment.'") (citations omitted); In  re O'Connor, 52 B.R. 892,
                                                   

894 (Bankr. W.D. Okla. 1985)  (counsel, who disputed existence of

disqualifying  conflict, requested  court's "instructions  on how

[to] proceed").3 

          Absent the spontaneous, timely and  complete disclosure

required  by section 327(a) and Fed. R. Bankr. P. 2014(a), court-

appointed counsel  proceed at their own  risk.  See,  e.g., In re
                                                                 

Roger J. Au &amp; Son, Inc., 71 B.R. 238, 242 (Bankr. N.D. Ohio 1986)
                       

(failure  to disclose  facts material  to potential  conflict may

provide  totally independent  ground  for denial  of fees,  quite
                            

apart from the actual  representation of competing interests); In
                                                                 

re Thompson, 54 B.R. 311, 317 (Bankr. N.D. Ohio 1985) (same);  In
                                                                 

re Whitman, 51 B.R. 502, 507 (Bankr. D. Mass. 1985) (same); In re
                                                                 

Guy  Apple Masonry Contractors, Inc., 45 B.R. 160, 163 (Bankr. D.
                                    

Ariz. 1984) (same); see  also In re Kendavis Indus.  Int'l, Inc.,
                                                                

91 B.R. 742, 748-49 (Bankr. N.D. Tex. 1988) (summarizing legisla-

tive history  of    327(a) and 330,  noting congressional concern

                    

     3Of course, disclosure of facts suggesting a conflict is not
invariably followed by disqualification.  In special circumstanc-
es, for  example, the  bankruptcy court  could determine,  in the
sound exercise  of its discretion, that  any potential impairment
of its  institutional integrity, or  risk of  divided loyalty  by
counsel,  was  substantially outweighed  by  the  benefits to  be
derived  from  counsel's  continued  representation  of  multiple
entities  or  the   impracticability  of  disentangling  multiple
interests "without  unreasonable delay and expense."  In re Hoff-
                                                                 
man, 53 B.R. 564, 566 (Bankr. W.D. Ark.  1985).  See In re O'Con-
                                                                 
nor, 52  B.R. at 895 (noting countervailing interest in "curtail-
   
ment of administrative expenses"  where potential for conflict is
dormant  or remote).  In  no event, however,  may counsel presume
                                                                 
dispensation from the full disclosure required by   327(a) or the
sanctions  authorized under   328(c).  See also Fed. R. Bankr. P.
                                               
2014(a).

                                10

that in earlier corporate  reorganization proceedings "the finan-

cial well-being of investors and the public [had been] sacrificed

to  the  [corporate]  insiders'  desire for  protection  and  for

profit").   Thus,  Rome's failure  to make  full  and spontaneous

disclosure of the financial  transactions among CHM, Leavitt, and

Leavitt's  family  members  shortly  before Rome  filed  the  CHM

chapter 11 petition,  see infra note  5 (and accompanying  text);
                               

see also Fed. R. Bankr. P.  2014(a), and to obtain explicit court
        

authorization to represent  Dickerman, provided sufficient ground

for  the  discretionary  denial  of  compensation  under  section

328(c). 

B.   The Risk Posed by Competing Interests
                                          

          Second, in a bid to  vindicate his failure to disclose,

Rome  claims there  was no potential  conflict of  interest since

Leavitt's and Dickerman's interests were never "adverse" to those

of the chapter 11 estate. 

     1.  The Leavitt Interests
                              

          Rome  argues that  section  327(a) does  not absolutely

prohibit concurrent  representation  of  a  corporate  debtor  in

possession  and its  sole shareholder,  absent  evidence affirma-

tively  demonstrating  an "actual"      as  distinguished from  a

"potential"    conflict of interest.  Moreover,  there could have

been  no "actual"  conflict, he  suggests, because:   (1) between

December 1989 and May  1990, Rome did not represent  Leavitt; (2)

between May  1990, when  the involuntary chapter  7 petition  was

                                11

filed  against  Leavitt, and  August  1990,  when Braunstein  was

appointed the CHM  chapter 11  trustee, it was  not Rome but  the

chapter  7 trustee who represented the  Leavitt chapter 7 estate;

and (3) none of the transfers from CHM to Leavitt  prior to CHM's

chapter 11  petition have yet been  proven improper, preferential

or fraudulent.  These arguments are specious.

          The fact that Rome did not  represent Leavitt until May

1990 is  immaterial, since section 328(c)  expressly empowers the

bankruptcy  court  to  disallow compensation  if  court-appointed

counsel, "at any  time," is either  not a "disinterested"  person

"or  represents or holds an  interest adverse to  the interest of

the  estate  with respect  to the  matter  on which  [counsel] is

employed."  Bankruptcy Code   328(c), 11 U.S.C.   328(c).  Rome's

post-May 1990 representation of chapter 7 debtor Leavitt, against

whom the  CHM chapter 11  estate    also  represented by Rome    

held claims for the avoidance of alleged preferential and fraudu-

lent  transfers, created  a  clear conflict  of interest  without
                                                                 

regard  to whether the Leavitt chapter 7 estate itself was repre-
                                                                 

sented  by a  trustee  in bankruptcy.    After all,  Rome  sought
                                    

compensation for services rendered to  the CHM chapter 11 estate,
                                                                

not to Leavitt, the chapter 7 debtor.  Cf. In re Hoffman, 53 B.R.
                                                        

564, 565 (Bankr.  W.D. Ark.  1985) (  327(a)  is inapplicable  to

appointment or compensation of counsel to chapter 7 debtor).  Yet

Rome's  representation of  Leavitt in  the involuntary  chapter 7

proceeding plainly  undermined  confidence in  Rome's ability  to

provide  impartial  advice to  the  CHM  estate  relating to  the

                                12

prospects  for recovering  the alleged  prepetition transfers  to

Leavitt and Leavitt family members.

          As concerns  Rome's third contention     that no trans-

fers  from CHM to Leavitt prior to CHM's chapter 11 petition have

yet  been proven improper,  preferential or fraudulent     we are
                

bound by  the bankruptcy court's factual  findings unless clearly

erroneous.   See In re La Roche, 969 F.2d  at 1301; In re Martin,
                                                                

817 F.2d at 182-83 (noting that "[t]he bankruptcy judge is on the

front line, in the  best position to gauge the  ongoing interplay

of  [  327(a)] factors  and to make  the delicate  judgment calls

which such a  decision entails");  In re Huddleston,  120 B.R  at
                                                   

402-03  (favoring  case-by-case  analysis).    And  since section

327(a) is designed  to limit even  appearances of impropriety  to

the extent reasonably practicable, doubt as to whether a particu-

lar  set of  facts  gives rise  to  a disqualifying  conflict  of

interest normally  should be  resolved in favor  of disqualifica-

tion.  Cf. In re  Freedom Solar Ctr., Inc., 776 F.2d  14, 17 (1st
                                          

Cir. 1985).4

          Even if we were  to set to one side  Rome's unexplained

failure  at the outset to  apprise the bankruptcy  court of facts

that might generate an  appearance of impropriety, the bankruptcy
          

court's section 328(c)  ruling is well  supported by the  record.

                    

     4Although In re Freedom Solar involved an application of the
                                  
Maine Bar Rules in a bankruptcy proceeding, we cite to it throug-
hout  this  opinion  in  contexts legitimately  informed  by  its
closely analogous discussion.  See, e.g., In re Kendavis, 91 B.R.
                                                        
at 752 ("The Bankruptcy Code provisions dealing with conflicts of
interest  find their counterparts in the ABA Code of Professional
Responsibility."); In re Roberts, 46 B.R. at 829-37 (same).
                                

                                13

As the bankruptcy court  was informed at  the hearing on the  fee

applications, see supra  at p. 4, CHM  creditors had commissioned
                       

the Peterson  Report, a  pre-chapter 11 investigation  into CHM's

financial condition,  which  disclosed that  Arnold  Leavitt  had

caused  large  prepetition transfers  from  the  CHM treasury  to

himself  and immediate  family members.5   In addition,  Rome had

shown considerable intransigence to efforts by Peterson to obtain

access  to  certain CHM  records,  even  informing Peterson  that

access  must  await "litigation"  and  "discovery."   See  In  re
                                                                 

Martin, 817 F.2d at 182 (noting relevance of "adverse"  interests
      

which  threaten  "to hinder  or to  delay  the effectuation  of a

[reorganization]  plan"); cf. In re Freedom Solar, 776 F.2d at 16
                                                 

(noting  shareholder interest  "in delaying  the turnover  of the

assets [in order] to use his possession of  them as a negotiating

chip,  while the  debtor's interest  was in cooperating  with the

trustee  to achieve  the  swiftest resolution  possible"); In  re
                                                                 

Kendavis,  91  B.R. at  750-51  (describing  counsel's resort  to
        

dilatory "scorched earth" tactics in behalf of insiders "adverse"

to  debtor).    Coupled  with the  preferential  "insider"  terms

proposed in  the three CHM  chapter 11 reorganization  plans Rome

presented to  CHM creditors, his continued participation promoted

                    

     5Appellee Braunstein, the CHM chapter 7 trustee, represented
to the bankruptcy court that he had objected to Leavitt's chapter
7 discharge, and was preparing to initiate an adversary  proceed-
ing  against Leavitt's  wife  and son  to  recover an  automobile
allegedly  transferred to Leavitt by CHM a few months before Rome
filed the  chapter 11  petition  in behalf  of CHM.    Cf. In  re
                                                                 
Freedom  Solar, 776 F.2d at 17  (potential adverse interest looms
              
where shareholder of corporate debtor may have received preferen-
tial transfer).

                                14

the  readily foreseeable  perception  that he  was attempting  to

insulate Leavitt's personal and family financial interests at the

expense of the CHM chapter 11  estate and its creditors.  See id.
                                                                 

at 750 (internal corporate communication suggested that attorneys

improperly represented family controlling debtor corporation, and

not their client of record    the debtor); In re Hoffman, 53 B.R.
                                                        

at 565 (first loyalty of corporate debtor's counsel must lie with

corporation, not with its individual officers).

     2.  The Dickerman Interests
                                

          Rome argues, in a similar vein, that after Braunstein's

appointment  as  the  CHM  chapter  11 trustee  in  August  1990,

Braunstein  alone represented CHM's interests.  Thus, as a matter
                                                                 

of  law, there  could  have been  no  disqualifying "conflict  of
       

interest" in Rome's concurrent representation of Dickerman in her

successful purchase of CHM's assets.  Moreover, even as a factual

matter,  he argues,  there  could have  been  no actual  conflict

because Dickerman was the only bidder and the sale benefited both
                              

buyer and seller.

          As with  other arguments insistently advanced  by Rome,

this one presupposes that there can  be no disqualifying conflict

absent proof of actual loss or injury.  On the contrary, simulta-
                                     

neous  representation of  the buyer  and the  seller in  the same

transaction  is a prototypical disqualifying conflict of interest

even if it is not  invariably disqualifying in all circumstances.

See  In re Tidewater Memorial  Hosp., Inc., 110  B.R. 221, 228-29
                                          

(Bankr. E.D. Va. 1989)  ("[D]ouble representation [in acquisition

                                15

of  debtor's assets] can  be allowed, if  at all, only  under the

strictest adherence  to the  statute and  regulations," including

full  disclosure.).  Even if Dickerman was the highest bidder for
                

these  CHM assets, or even the only one, Rome's longtime position

as corporate  clerk  and counsel  to  CHM, both  prepetition  and

postpetition, presumably  afforded him  unique  access to  inside

information  concerning  the  nature  and value  of  its  assets,

information that Rome could have used (or been tempted to use) to

enable  his other  client     Dickerman      to submit  a  better

calibrated bid than  arm's-length bidders could venture,  thereby

potentially  chilling  bidding at  the  expense  of CHM  and  its

creditors.  Cf. In  re Freedom Solar,  776 F.2d at 16  (corporate
                                    

debtor's shareholder had legitimate  interest in buying assets at

lowest  possible  price; debtor  in  selling  at highest  price).

Furthermore,  counsel  to a  chapter  11  debtor owes  continuing
                                                

loyalty  to the  debtor  throughout the  chapter 11  proceedings;
                       

appointment  of  a chapter  11  trustee  does  not end  counsel's

obligation to  the debtor  entity.   See id. at  18 (noting  that
                                            

"[f]ederal law imposes enduring duties on the debtor . . .  [and]

[i]n these  situations, the debtor needs  real representation and

advice";  ethical rules  are designed  "to avoid  the possibility

that  [the attorney] will succumb  to temptation and give tainted

advice").  In our considered view, therefore, Rome's unauthorized

representation of Dickerman  generated a palpable appearance  and

risk  of divided loyalties,  see In re Thompson,  54 B.R. at 316,
                                               

                                16

placing  the CHM  estate at  "more than  acceptable risk,"  In re
                                                                 

Martin, 817 F.2d at 180.
      

C.   Severity of Sanction
                         

          Finally,  Rome argues,  even  if  the bankruptcy  court

supportably  determined that  he represented  "adverse" interests

that should have  been disclosed  ab initio, the  most it  should
                                           

have done is reduce  his compensation since there is  no evidence

that  any conflict  of interest,  however suspect  in appearance,

actually harmed the chapter  11 estate or its creditors,  and the
        

trustee concedes  that Rome  provided "valuable services"  to the

estate.6

          An attorney retained pursuant to section 327(a) assumes

a fiduciary responsibility to refrain from rendering any unautho-

rized service in furtherance of an interest adverse to the client

he serves by court appointment.   See In re Kendavis, 91  B.R. at
                                                    

753 (citing Wolf  v. Weinstein, 372  U.S. 633,  641 (1963)).   "A
                              

fiduciary  . . . may  not perfect  his claim  to  compensation by

insisting that, although he  had conflicting interests, he served

his  several masters equally well or that his primary loyalty was

not weakened  by the pull of  his secondary one."   Woods v. City
                                                                 

Nat'l  Bank &amp; Trust Co., 312 U.S. 262, 269 (1941); In re Roger J.
                                                                 

                    

     6We need not address Rome's argument that it was inequitable
to  allow the Braunstein and R &amp;  B fee applications in full, yet
disallow Rome's application in full.  Rome informed the bankrupt-
cy  court that he was  "not opposed" to the  Braunstein and R &amp; B
fee    applications.   Hence,  the reasonableness  of  the former
ruling is an  issue which has been waived.   See Mark Bell Furni-
                                                                 
ture  Warehouse, Inc. v. D.M. Reid Assocs., Ltd. (In re Mark Bell
                                                                 
Furniture Warehouse, Inc.), 992 F.2d 7, 9 (1st Cir. 1993).
                         

                                17

Au,  71 B.R.  at 241.   Especially where  there has  been a clear
  

failure to  make timely and  spontaneous disclosure of  all facts

material  to a  disqualifying conflict  of interest,  counsel ap-

pointed pursuant to section 327(a) can lay no claim of right to a
                                                                 

lesser sanction than the bankruptcy court is authorized to impose
               

pursuant to section 328(c). 

          Like  other  courts  which have  considered  the issue,

however, we  adopt  no  per  se  or  brightline  rule  invariably
                               

requiring  denial  of  all compensation  under  section  328(c).7
         

Nevertheless, based on its  familiarity with the CHM proceedings,

the bankruptcy court in  this case acted well within  its discre-

tion  in  finding that  Rome's  services  "produced virtually  no

benefit."   See,  e.g.,  Bankruptcy Code    330(a)(1), 11  U.S.C.
                      

  330(a)(1)  (compensation may  be  based on  assessment of  "the

value  of such services"); In re Kendavis, 91 B.R. at 762 (reduc-
                                         

ing fees by 50% for conflict of interest, but citing "exceptional

circumstances"); In  re  Whitman, 51  B.R.  at 506  (noting  that
                                

"results  obtained" are  relevant  consideration).   Furthermore,

where  court-appointed counsel  has  served under  an undisclosed

                    

     7See, e.g., In  re Kendavis,  91 B.R. at  762 (general  rule
                                
favors  total  denial of  compensation,  but  equities may  allow
lesser sanction as facts warrant); In re Roger J. Au,  71 B.R. at
                                                    
242-43  (since   328(c)  says  "may deny,"  the bankruptcy  court
retains discretion to depart from  general rule of total  denial,
where equities  demand); In re GHR  Energy Corp., 60  B.R. 52, 68
                                                
(Bankr.  S.D. Tex.  1985) (penalty  for   327(a) conflict  may be
adjusted to reflect gravity of breach); In re Roberts, 46 B.R. at
                                                     
846-48,  850  (same, noting  that  bankruptcy court  is  court of
equity).  But cf. In re Chou-Chen Chems., Inc., 31 B.R. 842, 850-
                                              
51 (Bankr. W.D. Ky. 1983) (favoring denial of all compensation if
conflict exists, regardless of benefit from services rendered).

                                18

disqualifying conflict  of interest, the bankruptcy  court cannot

always assess with precision the effect the conflict may have had

either on the  results achieved  or the results  that might  have

been  achieved by following "the road not taken."  See Woods, 312
                                                            

U.S.  at 269 ("[T]he incidence of a particular conflict of inter-

est  can seldom  be measured  with any  degree of  certainty [and

[t]he bankruptcy  court need not speculate as to [] the result of

the conflict . . . ."); In re Tidewater, 110 B.R. at 229 (denying
                                       

compensation  even though  there  was "[n]o  doubt  the law  firm

performed  valuable services in the  chapter 11 case").8   Yet as

an appellate  court, we are  poorly positioned to  second-guess a

bankruptcy  court's judgment  call  in these  circumstances,  and

neither we nor the  district court have been shown any reason for

doing so in the present case.

          The district court judgment is affirmed. 
          The district court judgment is affirmed.
                                                 

                    

     8For example, the bankruptcy court observed that Rome's role
as counsel to  CHM, qua debtor in  possession, generated vigorous
                       
opposition to all three reorganization plans, as well as unusual-
ly  intense antagonism  from CHM's  general  creditors (including
Rome's longtime  law partner).  The  clear implication, unverifi-
able  in hindsight,  is that  CHM's reorganization  prospects may
have  been better  but  for Rome's  insistence  on serving  three
clients simultaneously in these proceedings.  In  re Kendavis, 91
                                                             
B.R. at  748 ("[E]thical violations or conflicts  of interest may
lessen the value  of services.   If an  attorney holds an  undis-
closed adverse interest, a court is empowered to deny all compen-
sation.")  (citation  omitted); In  re  Whitman, 51  B.R.  at 507
                                               
(same).   Retrospective damage assessments are  made all the more
difficult where  counsel has labored  under several  simultaneous
conflicts of interest.

                                19
