4 Tips To Help In-House Counsel Avoid Becoming a DOJ Target

Paul Mandell

Corporate Counsel

12-17-2012

Last year’s decision in U.S. v. Stevens was a wake-up call for corporate litigators. While Federal District Court Judge Roger Titus dismissed the indictment against GlaxoSmithKline’s former associate general counsel Lauren Stevens, who had managed GSK’s response to a Federal Drug Administration investigation into off-label promotion of Wellbutrin, the case vividly highlighted the personal risk that comes with corporate litigation work. Make no mistake—given their understanding of the business, high level of responsibility, and role as trusted advisers of top corporate brass, in-house counsel are and will remain big targets of federal investigators.

Mark Califano, managing litigation counsel of American Express Company, and Elizabeth Hallyburton, assistant general counsel of GSK, revisited the Stevens case at the 2012 Corporate Litigation Forum hosted by Consero Group LLC. In doing so, they skillfully framed the risk to in-house counsel of becoming a U.S. Department of Justice target, and they provided valuable guidance to their corporate peers on keeping both their companies and themselves out of trouble.

Here are four key tips taken from their remarks:

1. If a Transaction is Too Risky, Make a Note of It

Doing business on a global scale comes with risk. As an in-house lawyer, your job is to spot that risk and help the business team to determine how to proceed. In some cases, you may conclude that a particular corporate activity creates too much law enforcement risk, and that the company should not proceed. In such circumstances, consider putting your thoughts in writing. Without a paper trail, you face potentially as much exposure as those other members of the executive team who rejected your advice—despite the absence of any personal gain.

2. Pay Attention to Employee Complaints

Among the biggest mistakes that in-house counsel can make is to ignore employee complaints. Once an employee flags a potential issue of noncompliance—either formally or in a mere comment—you must follow up and document your response.

Ignoring complaints can yield bigger problems for the company, as those complaining employees can become whistleblowers. And you can be virtually certain that any conversations between you and a whistleblower that went unaddressed are sure to increase your own personal liability.

3. When in Doubt, Seek Outside Counsel

In some cases, it may be objectively unclear whether a certain corporate activity is legally permissible. It goes without saying that in such circumstances, it is a good practice not to rely on your instincts, but rather to rely on outside counsel.

Except in extreme circumstances, an outside counsel’s opinion, and even the effort to pursue assistance from outside counsel, may be enough to defeat mens rea and to keep yourself and the company out of trouble.

4. Avoid the Team Mentality

One of the more positive trends for in-house lawyers is the opportunity to participate more actively in managing the business. Lawyers are increasingly involved in important strategic decisions, and with good reason. However, as lawyers are drawn ever deeper into the fold of corporate management, they must keep in mind their primary function—helping the company mitigate legal risk—and avoid adopting a team mentality.

If the lawyer seeks to be “part of the team” at the expense of thoughtful analysis of legal risk, the company may lose the protection for which the lawyer was hired in the first place. Moreover, the in-house lawyer, along with the rest of the business team, may face greater personal exposure if and when wrongdoing occurs.
 
Any in-house legal job comes with risk—particularly when it involves dealing with accusations of corporate wrongdoing. But by following the above guidance, and by keeping the management team informed of the enforcement landscape and your role as a gatekeeper for the business, you can minimize your personal risk while serving the company’s best interests.

Paul Mandell is a founder and the chief executive officer of Consero. Prior to entering the business world, Mr. Mandell practiced law at Arnold & Porter, in Washington D.C., and Sullivan & Cromwell in New York City, where he focused primarily on antitrust and pharmaceutical litigation.

See also: “How Ex-GSK GC Lauren Stevens Fought the Law—and Won,” CorpCounsel, October 2012.