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Name and title: Raymond G. Smerge, executive vice president and chief legal officer, general counsel and secretary Age: 57 Master builders: Established in 1950, Dallas-based Centex Corp. has grown to be one of the nation’s premier companies in commercial building, homebuilding, construction and related services. A Fortune 250 company with 16,000 employees in 1,500 offices and construction job sites across the United States, the United Kingdom and Mexico, Centex has annual revenues that exceed $12 billion. It is ranked first in domestic general building revenue. The conglomerate includes Centex Homes, a 26-state home- building operation, and various subsidiaries with such specialties as affordable housing, housing on customer-owned lots, resorts and urban townhouses. The parent company also encompasses a residential pest-management company, CTX Mortgage Co., Centex Home Equity Co., Centex Title and Insurance and the Centex Construction Group. Mold/asbestos/termites: Smerge said that you can’t be in the home building business today without defending mold litigation, but he also said that “it’s all very manageable, and none of it presents any material risk to the company.” When mold initially surfaced locally as a potential problem, “we became very proactive.” If necessary, Centex pays for cleanup and relocation. Asbestos-related litigation, said Smerge, is “nothing to speak of,” and he predicts that Centex will be exiting the pest-control business as, in his view, “pest inspection is neither an art nor a science, and the risks substantially outweigh the benefits.” Recent projects: Texas’ Gaylord Opryland, a convention center and hotel, is one of Smerge’s largest transactions, coming in at $400 million. He was also in the loop in several recent, military-oriented Centex construction projects in Virginia: the $41 million National Museum of the Marine Corps and the Air Force and Pentagon memorials. In the past year, Smerge was involved in two company spinoffs: Centex’s construction products group and its manufactured housing company, both of which are now publicly held. Smerge has given his seal of approval to two initiatives helpful for the environment. Centex today designs some of its houses to use less electricity, thus indirectly reducing air pollution by lowering greenhouse emissions. Furthermore, the company limits its lumber purchases to old forests instead of harvesting younger trees. Smerge also signed off on Centex’s double-length warranty now offered to home buyers. New homes get a two-year warranty, which is double the industry standard. In addition to increasing customer satisfaction, the longer warranty serves to reduce potential litigation costs for the builder, he said. Smerge plays a supporting role with lobbying firms to influence the development and passage of building-related legislation, primarily on a state, rather than federal, level. He also does lobbying through various trade groups, including the Mortgage Bankers Association, the National Association of Homebuilders and the Council of Housing Producers. Centex has been a publicly held corporation since 1969, and the Sarbanes-Oxley legislation for corporate and financial transparency has generated a fair amount of work for the Smerge legal team. “You can’t avoid it,” he admitted. He was also instrumental in the creation of “The Centex Way,” a code of ethics and guide to decision-making and business-conduct issues that is mandatory reading for all employees. Legal team: Centex Corp.’s substantial legal department comprises 108 professionals, of whom there are 41 attorneys, 39 paralegals, 24 administrators and four managers. Among the lawyers, 25 are dedicated to homebuilding operations, nine to financial services, a pair to general contracting and five to general matters. A change that Smerge instigated was to elevate many of them, whom he describes as very transaction-oriented, to senior management positions in their respective business units. He is proud to have helped develop a “world-class law department that is an exciting place for lawyers.” Smerge calls himself a generalist with a concentration in mergers and acquisitions, corporate governance, litigation and claims, and as a member of the Centex senior management team, he “plays a significant role in strategic planning and risk management.” He is ultimately responsible for all company policy. Smerge estimates that 67% to 75% of Centex’s legal work is done in-house. He pointed out that in fiscal year 2003, the company’s total external legal expenses were slightly below $20 million, which represented less than one-half of 1% of total revenue. He said: “We have an inverse relationship between revenue growth and case growth,” which he attributed to Centex’s customer-oriented culture. In the past 13 years, he added, Centex’s revenues have quintupled, while the number of pending cases has increased by only 5%. Outside legal counsel are sought primarily for litigation. Smerge maintains an “approved attorneys’ list” of a couple of hundred firms around the country, with a few in Mexico and England. From time to time, the GC also looks for new firms if he feels that they can bring fresh insight or a new approach to particular issues. He surveyed all the relevant laws to get Centex prepared for its business operations in the United Kingdom and Mexico, and he hired the firm’s first U.K. general counsel. Career building blocks: Excluding a one-year stint working with a Chicago bonding company, Smerge has basically spent his entire working life with Centex. He joined in 1968 as a closing officer in the homebuilding and development area, and then began his climb up the company pyramid. From 1972 to 1985, he was vice president and general counsel of Centex Homes. In 1985, he was elected vice president and chief legal officer of Centex Corp., and in 1993, was named secretary. He achieved executive vice president status in 1997. Smerge, a native of Portales, N.M., attended Northern Illinois University (earning a B.S. in 1967) and DePaul University College of Law (earning a J.D. in 1971). Personal: Centex’s chief legal officer enjoys swimming, reading and traveling in his spare time. He and his wife, Patricia, are the parents of three children: Paul, 25, Jessica, 23, and Mark, 19. The Smerges are also raising Morgan, their 3 1/2-year-old grandson. Last book and movie: Never Give In! The Best of Winston Churchill’s Speeches, and Seabiscuit. —Roger Adler

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