The corporate scandals of the past few years have brought renewed attention to the problem of curtailing dishonest and fraudulent business practices, a problem on which strategic, ethical, and law enforcement interests should be aligned. Unfortunately, several features of federal criminal law and federal law enforcement policy have driven a wedge into this alignment, forcing managers to choose between their ethical obligations and their obligation to obey the law or aid law enforcement. In this article, I examine the nature and implications of the growing divergence between managers’ ethical and legal obligations. After describing the traditional approach to business ethics analysis, I identify the features of federal criminal law and law enforcement policy that are responsible for the divergence and show how they are undermining the efficacy of the traditional approach. I illustrate this effect with the issue of workplace confidentiality. I then argue that the traditional approach must be reformed to give explicit recognition to the legal dimension of normative analysis, and demonstrate how such a reformed approach would function by applying it to three illustrative issues—organizational justice, privacy, and ethical auditing—and supplying a case study—KPMG’s allegedly abusive tax shelters.