Another GC Becomes CEO
February 27, 2007 | Filed Under GC as CEO Springboard, In the News
And this time it’s not a Jeff or a Frank: it’s an Angela!
Health insurer Wellpoint announced the appointment of general counsel Angela Braly as CEO. Ms. Braly then becomes the highest-ranking of the 10 female CEOs on the Fortune 500, according to USA Today.
It’s about time that a woman joins the fraternity of such ex-GC CEOs as Pfizer’s Kindler and Home Depot’s Blake. To say nothing of lawyer-CEOs at the helm of Goldman Sachs, Time Warner, Citigroup, Marsh, and Waste Mangement, to name more than a few.
Ms. Braly was an architect of WellPoint’s recent acquisition strategies and also was responsible for public affairs. Given the substantial regulatory and policy challenges faced by health insurers, a legal background here is a natural, and has some strong parallels to the appointment of Mr. Kindler at Pfizer.
I fully expect some press reports to comment on Ms. Braly’s experience in a somewhat negative way (such as this from the Chicago Tribune; it fails to note that she was previously CEO of a subsidiary). Perhaps down the road the appointment of a GC as CEO won’t be news on this fact alone, and a legal background will be seen as an asset.
Corporate Attorney-Client Privilege: A Prof Strikes Back
February 26, 2007 | Filed Under Criminal Liability, Investigations
It’s a privilege to be a tenured professor. No, not that kind of privilege.
University of Florida law professor and ex-federal prosecutor Michael Seigel writes an op-ed in today’s Washington Post.
The good professor has been watching the actions of business to control the erosion of corporate attorney-client privilege and his view can be summed up in three words: he no likey. I took a look at these efforts last month.
Professor Siegel makes a few good points on the nature of the corporate attorney-client privilege (it’s not absolute and waiver can be a necessary prosecutorial tool). Heck, he even works the Upjohn case into the mass media!
However, he then goes Hemingway:
But big business smells blood. Its reaction to the McNulty memo has been negative, and its goal continues to be the outright prohibition of waiver requests. Through reintroduction of the Specter bill, it is pressing its legislative “fix” in the new Congress, and the newly empowered Democrats — eager for lobbyists’ money — are likely to be as responsive as their Republican predecessors. The result of a waiver prohibition, of course, would be a significant slowdown of white-collar criminal prosecutions — exactly what the business lobby wants. And the losers, once again, would be the victims of white-collar crime: the American people.
What Professor Siegel fails to note is that some prosecutors have essentially abused waiver and used it to fashion paper-thin criminal cases out of what is really civil wrongdoing (if any). Prosecutors have demanded almost real-time production of all attorney-client communications, sitting back and seeing what they can reel in. For many companies, “cooperation” is tantamount to capitulation.
The professor should also recognize the tremendous pressure public companies face when a cloud of alleged criminality hangs over the boardroom. The need to cut a deal–any deal–is there, and prosecutors know it. And we won’t event comment on the government’s pressure for corporations to withhold funding the defense of targeted executives.
If all prosecutors were measured in their requests for waivers, these organized business efforts probably wouldn’t be necessary. But business, for all of its faults, operates in the real world.
Gatekeepers at a Premium
February 22, 2007 | Filed Under GC Liability, Investigations
Quick, what’s your employed lawyer’s policy deductible?
Susan Friedman of Marsh writes in the New York Law Journal about the increasing liability risks faced by GCs and other managing corporate counsel in their potential role as “gatekeeper.”
Of note, according to Ms. Marsh, are these issues:
In 2006 in-house attorneys were confronted with a myriad of potential exposures, many of which will continue through 2007 and beyond. The highlights of 2006 included: ยง307 of SOX, backdating stock options, new rules of federal civil procedure regarding electronically stored information, the McNulty Memorandum, Federal Rule of Evidence 502, liability to outside third parties, investigating boardroom leaks, and multi-jurisdictional practice and licensing.
The entire article is worth reading for GCs; it is also instructive for outside counsel who want to understand their clients’ situation better.
Even the footnotes are good (number 6 being a personal favorite).
Watch your step!
Code Red for jetBlue
February 21, 2007 | Filed Under Crisis Planning, In the News
Sometimes it seems like you can’t catch a break.
So it seems for jetBlue, an airline finally returning to a normal schedule after sending a different Valentine to some customers in the form of 10-hour waits on the JFK airport tarmac.
CEO David Neeleman has been a fixture on all news channels. The poor man looks like he could use a getaway to Aruba.
Mr. Neeleman dutifully followed crisis communications 101, and was out front stating that jetBlue was aware of the situation, heard the (irate) customers, acknowledged that jetBlue’s performance was intolerable, and was focused on making it right. Unfortunately for jetBlue and Mr. Neeleman, a combination of continued bad weather, communications and logisitical snafus, and FAA duty regulations all conspired to turn a bad day into a worse week.
Once you’ve said “I’m sorry” it’s hard to come up with something more for the next day (or news cycle).
So, in an attempt to shift the focus of the debate, jetBlue has offered up its own customer “Bill of Rights,” which includes a video on YouTube.
Former law review members can catch a footnote at the bottom of the BOR, probably courtesy of jetBlue Legal:
*These Rights are subject to JetBlue’s Contract of Carriage and, as applicable, the operational control of the flight crew.
Delays are defined in terms of a “Controllable Irregularity” which I will resist commenting on.
This approach may help, but it may appear a bit hollow right now, given their own shortcomings (when measured against the BOR) over the past six days. In addition, while compensating for delays is better than nothing, most people I talk to cringe at the notion of anything more than an hour’s wait on the ground. When you approach 10 hours, many passengers are thinking less about rights and more about self help.
(To be fair to jetBlue, part of the impetus for their BOR is the cacophony in Congress on the subject; if only that body would read the original BOR from time-to-time).
In the end, jetBlue will regain terminal velocity with great service for fair value (safety being a given).
And I’d advise against serving this:
Running Out of Options
February 19, 2007 | Filed Under On The Dock, Compliance, In the News
You go away for a week, and you know something is different when you see a former GC doing a perp-like walk on the CNBC monitor in the airport.
A good summary of the GC angle on the options backdating mess is from Bloomberg News, via the Philadelphia Inquirer; here’s a highlight:
The exodus is unprecedented among the ranks of corporate attorneys, who ensure the legality of commercial transactions, said Susan Hackett, vice president of the Association of Corporate Counsel. The departures reflect added responsibility that in-house lawyers now bear for company actions, she said.
“I have never seen as much turnover in high-profile positions,” said Hackett, who has been at the Washington-based group representing 8,000 corporations for more than a decade. “This has been a watershed.”
One interesting point is the description of one of the duties of corporate attorneys (and by implication particularly GCs) to “ensure the legality of commercial transactions.” As we are seeing in the options backdating cases, the level of involvement of the GC and the legal department can vary. Rather than looking at just at legality, some of those involved could have started with propriety.
A former officer of ACC gets it right:
“Ten or 15 years ago, general counsels were mainly just asked whether a corporate action was legal or not,” said Al Gonzalez, 52, a past vice president of the Association of Corporate Counsel and currently general counsel at Tyson Foods Inc., based in Springdale, Ark., which is not involved in the scandal. “Today, the first questions they are asked is, ‘Is it ethical? Does it conform to the company’s code of conduct and core values? Is it the right thing to do?’ “
A sign that things may have gone way past “legality” is contained in today’s Wall Streeet Journal ($$$) which recounts alleged options practices at Mercury Interactive. The story quotes documents produced in a court proceeding as referring to “magic backdating ink,” presumably the sort that can lead to a change in an option grant date.
I don’t remember hearing about “magic backdating ink” in law school. But it doesn’t sound like something that would require much research. Perhaps a case study for this upcoming show on Fox?
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