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When a history of the corporate accounting scandals gets written, June 2003 will likely go down as the worst month for GCs. First, federal prosecutors indicted Jay Lapine, the former top lawyer at HBO & Co., (see “A Long Time Coming”) for allegedly participating in a scheme to inflate the company’s revenue prior to a 1999 merger. A few days later, Michael Salsbury, the GC at bankrupt WorldCom, Inc., resigned after two investigative reports questioned the effectiveness of his legal oversight. And at the end of the month, former Rite Aid Corporation chief counsel Franklin Brown was trying to decide how to respond to criminal charges of engaging in accounting fraud. At press time, he hadn’t made up his mind between going to trial or striking a plea. Brown, Salsbury, and Lapine all deny the claims against them. It’s a big shift from last summer. When the accounting scandal investigations began, the toughest scrutiny was reserved not for in-house counsel, but for chief executives, financial officers, audit committees, and lower-ranking bean counters [see "Teflon Counsel," September 2002]. But last fall the Manhattan district attorney’s office charged Mark Belnick, the ex-GC of Tyco International Ltd., with multiple counts of falsifying business records [see "Losing It All," February 2003]. Ever since, investigators and prosecutors alike have adhered to a new principle � call it the Belnick Doctrine � that where there’s wrongdoing, there’s often a lawyer nearby. In a statement issued after the Lapine indictment, deputy U.S. attorney general Larry Thompson said, “Major corporate fraud cannot happen over an extended period of time without the complicity of accountants, lawyers, and other professionals.” No More Professional Courtesy? The Lapine, Salsbury, and Brown cases all involve unprecedented scrutiny of the lawyer’s role, according to David Gourevitch, a former state prosecutor now at New York’s Stueve Helder Siegel. “As a prosecutor, it used to be a professional courtesy that you didn’t really go after attorneys � you left that to the disciplinary committees of state bar associations,” Gourevitch says. “All that’s changed in the past few months.” Is all the lawyer-hunting a good thing? Many think so. Christopher Bebel echoes the views of several Justice Department and Securities and Exchange Commission veterans now in private practice when he says that the recent attention on in-house lawyers is “long overdue.” A former federal prosecutor, Bebel is now a partner at Houston’s Shepherd, Smith & Bebel. He argues, “Intricate financial frauds can’t be perpetrated without the help of attorneys. Finally, federal prosecutors seem to be acknowledging that.” Marvin Pickholz, a former assistant director of the SEC’s enforcement division now at the Pickholz Law Firm in New York, agrees. “The government is finally saying to in-house lawyers, ‘You have a responsibility to say no to your superiors if what they’re doing crosses a line,’ ” he says. “ Frankly, I don’t have a problem with that.” Other legal experts see a danger, however. “[The recent events] set a terrible precedent,” says Seth Taube. A former prosecutor with the SEC, he now chairs the securities litigation practice at McCarter & English in Newark. In Taube’s opinion, the current climate will lead in-house lawyers to report the slightest hint of wrongdoing to the government. And that, in turn, means corporate officers won’t go to them for advice. This will “chill the ability of in-house counsel to do their jobs and protect their shareholders,” Taube says.

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