Inhouse, Indict
January 25, 2006 | Filed Under Compliance, In the News
This story goes into the “Read and Think Carefully While Drafting” file on the corporate attorney’s credenza.
Last week US Attorney Patrick Fitzgerald (yes, the special prosecutor in the Valerie Plame leak case) announced in Chicago an indictment against Siemens Medical Solutions USA Inc. and two employees (including an in-house lawyer) on fraud charges related to the awarding of a $49 million Cook County, Illinois hospital contract. The structure of a Siemens entity is alleged to have been designed to appear as qualifying for minority bidding status.
The in-house lawyer involved is alleged to have drafted documents creating the bidding entity, and was indicted on one count each of wire fraud, mail fraud and making false statements to the FBI.
The Chicago Tribune has more on the story, including a suggestion that these allegations may have come to light by litigation filed by GE Medical Systems, the initial losing bidder on the deal.
The obligatory DOJ press release is out and refers to the Siemens in-house lawyer involved as “formerly” with the company. The indictment is found here.
Of primary interest to any employee swept up in an indictment: will the company provide a defense? No word on that yet in this case. Professor Henning notes that this issue is gaining in importance, mainly due to the government’s expanding policy of leaning on employers to stop payment of the attorney fees of indicted employees. The good professor provides a link to a brief filed in the KPMG tax shelter case that alleges that this policy denies the constitutional rights of individual defendants.
Peter Lattman of WSJ Law Blog was the ace on the case, first spotting this story last week; Professor Ribstein has further thoughts here, with an interesting angle on the potential applicability of Sarbanes-Oxley.
Update (26 Jan 06): Tom Kirkendall extends the analysis here; Francis G.X. Pileggi raises an interesting question about D&O coverage for in-house counsel.
Elsewhere, it’s a tough week for inhouse counsel and “the law.” Law.com reports that a former GC of Xpress Pharmacy Direct was indicted on federal charges. The Houston Chronicle has more. The attorney for the indicted GC is apparently one Earl Gray, who has some star power himself.
Peter Drucker Remembered
January 24, 2006 | Filed Under Technology, Managing
Anyone with even a passing interest in management has hopefully read some of the writings of Peter Drucker.
Tomorrow at Noon EST, Microsoft Live Meeting is hosting an online tribute to the life and work of Peter Drucker. An A-list of speakers, led by Tom Peters, will provide a convenient overview. Here’s a list of what the speakers plan to deliver to participants:
– How Peter Drucker has influenced our speakers’ lives and work.
– How you can leverage Peter Drucker’s teachings toward your own success including actionable take-aways.
– Where you can learn more about Peter Drucker’s teachings.
David Maister is also speaking–he has a new weblog, by the way. Thanks to Matt Homann and Bruce MacEwen for spotting that.
I’ve participated in a few of these Live Meetings and found the free registration relatively painless and the technology user-friendly.
I’m in.
I’ll close with a dose of “The Daily Drucker“:
Know Thy Time
Effective executives start with their time.
“Know thyself,” the old prescription for wisdom, is almost impossibly difficult for mortal men. But everyone can follow the injunction “Know thy time” if one wants to, and be well on the road toward contribution and effectiveness.
Effective executives do not start with their tasks. They start with their time. And they do not start out with planning. They start by finding out where their time actually goes. Then they attempt to manage their time and to cut back unproductive demands on their time. Finally they consolidate their “discretionary” time into the largest possible continuing units.
Action Point for the Day: Find out where your time goes by recording, managing, and consolidating your time.
(Hmmm… Sounds like a time sheet to me; I gave these up long ago–so here’s a time log that’ll have to do).
Revenge of the Nerds?
January 23, 2006 | Filed Under Legal Resources, In the News
Last week, a view of the prospect of GCs sending more business to outside counsel.
This week, a gentle reminder that law firms cannot take anything for granted.
UK publication Legal Director sees an interesting trend of in-house counsel taking on work, instead of handing it off to outside counsel. This is not just on routine commodity-type work, but also on key strategic transactions. Reporter Ed Thornton provides a detailed review, starting with a large outsourcing contract recently completed between BOC Group and Marks & Spencer.
Note this observation from BOC senior counsel Andrew Brackfield:
“As business lawyers, we aim to know the business really well and provide a service,” says Brackfield. “Economically, it makes sense to do as much in house [as possible].”
Another deal involved BT Group, which did a large outsourcing deal with Reuters. Kimon de Ridder, senior legal counsel for BT, gives perhaps the best reason of all for handling it in-house:
“After all, we, as an in-house function, are the ones who are principally called to account by our board for all legal actions and costs, as well as decisions taken.”
I find it interesting that both deals highlighted involved outsourcing, but the company lawyers were insourcing legal work.
Does this all add up? BOC’s Mr. Brackfield has apparently done the math:
“If you did a calculation about how much it costs to employ in-house and external firms, in-house is significantly cheaper. We are good value from that point of view.”
What metrics could Mr. Brackfield use to validate these calculations? Well, try the lagging indicator of large firm associate bonuses.
That said, if I owned a bar in Manhattan or LA, I’d double-up on the Grey Goose order.
Update (27 Jan 06): More from Legal Director.
Wired GC — Unplugged: Show #5
January 19, 2006 | Filed Under Unplugged - Audio, New Services, Legal Resources
“Time-Shared Legal Services for Full-Time Businesses”
An interview with Kent Larson, Founder and CEO, The General Counsel, Ltd.
Today’s show is here (just click on the “mp3″ link):
mp3 (12:48 min; 2.9 mb)
Show Notes:
– The General Counsel, Ltd. is found here.
– Kent Larson bio.
– GCL’s client list.
– The GCL team.
– Original Wired GC article on Rent-A-GC.
Outsource the Insiders?
January 18, 2006 | Filed Under Legal Resources, Managing
Earlier this month, Patrick Lamb raised an interesting question–why don’t general counsel outsource more legal work? Mr. Lamb quotes an industry consultant who observes that many GCs are reducing their in-house staff. He uses the example (first mentioned in an earlier post on the subject) of whether hiring a junior lawyer in-house to oversee litigation makes sense from an economic or service quality perspective, and noting that this could be done better by more experienced outside counsel, possibly at a fixed fee.
Two observations. First, on the subject of GCs reducing in-house staff, it is usually not unique to the legal department. It is best done when it is part of an overall strategy of a company to operate more leanly. This is not fun, real people are involved and I loathe the term “headcount.”
Nevertheless, this process can have the effect of forcing the GC to take a hard look at what work is being done. Some may be outsourced to law firms. Some may be redistributed internally to lawyers, given to non-legal staff, or restructured using appropriate technology. And–possibly best of all–some work may no longer be done at all.
Note that in only one of these options does decreased internal staffing lead to more work for outside counsel.
Now to Mr. Lamb’s specific example of a company thinking of hiring a junior lawyer to “oversee” litigation. The facts almost drive the proper result here. If a company is really doing this, the GC needs to take a time-out. You can put a junior lawyer on a case, but if it’s just “overseeing it” without substantive responsibilities, it’s a loser’s game. Many large companies in the late 80’s and through the 90’s (the go-go days of corporate legal departments for those who lived through it) tried to bring almost all legal work inside, including litigation. This was akin to empire-building, virtually all of these experiments failed, and most of the GCs involved are now doing something else. Perhaps this very work on the outside?
So this is all good for outside counsel, right? Not entirely.
If we are only talking about “overseeing” litigation (whatever that really means), perhaps I can find a lawyer who will do this on a fixed fee. We assume that it is not a lawyer at the primary litigation firm. It should come as no surprise that most litigation is billed the good ol’ fashioned way–by the hour. I don’t know how many lawyers would want to “oversee” litigation for a fixed price when the underlying case is being billed by the hour. Part of me thinks that if you need someone to oversee a case, you may have the wrong person handling it in the first place.
Recall that the original reason any company or GC reduces staff is to do things more efficiently (read better service and results at a lower cost). Some of this work may go to lawyers like Mr. Lamb. But at the same time I see news reports like this and think that nothing has really changed in the world view of some outside counsel.
Further, any GC who only looks at outsourcing to law firms is missing the boat. Yes, that boat is sailing offshore, but it is also directed at other service providers outside the traditional law firm bathtub.
One way a GC can look at the proper balance of inside and outside resources is to look to lawyers with in-house experience who are now in private practice.
One firm has been providing this service option for over 20 years. Tomorrow, an interview with its founder, when The Wired GC again goes:
Update (19 Jan 06): Patrick Lamb responds.
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