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Not only have an unprecedented number of general counsel gotten into legal trouble in recent years � they’re getting nailed too. As far as Corporate Counsel has been able to determine, 18 GCs have been hit with criminal charges or serious civil claims since the current wave of corporate fraud scandals began with Enron Corp. in 2001. Of the nine cases that have been resolved, only one ended in acquittal; the other eight resulted in a conviction, guilty plea, or settlement. What’s the latest on all 18 GCs? We wanted to find out. Here’s an update on former legal chiefs who have been indicted by federal or state prosecutors, who have been hit with major enforcement actions by the Securities and Exchange Commission, or who have been the target of a significant lawsuit by shareholders or other plaintiffs since 2001. (General counsel whose civil suits were resolved with nothing more severe than a cease-and-desist order are not included.) Many of these individuals are dealing with numerous legal actions; we’ve only listed the most important case each faces. In all instances where an individual’s current occupation is described as unknown, defense attorneys declined to comment on what their clients are presently doing. Civil Defendants Main Case Case Status Current Occupation James Fitzhenry, 50 Formerly GC at FLIR Systems, Inc. (Portland, Oregon) Found by SEC to have improperly recognized certain sales as revenue. The sales, which took place in 1998, were conditional and had not been consummated at the time of recognition. Settled in 2002. Neither admitted nor denied the SEC’s findings. Suspended from practicing law before the SEC for five years. Still at FLIR, as senior vice president for corporate operations and law. James Gorton, 43 Formerly GC at Global Crossing Limited (Florham Park, New Jersey) Sued by JPMorgan Chase Bank, the agent for a syndicate of banks that loaned money to Global Crossing before it filed for bankruptcy. The banks accused Gorton of ignoring “swap” transactions designed solely to boost revenue at the company in 2001. Earlier this year a federal judge dismissed some of the plaintiffs’ claims. No trial date has been set for the remaining claims, which Gorton denies. A partner in the New York office of Latham & Watkins. John Isselmann, 36 Formerly GC at Electro Scientific Industries, Inc. (Portland, Oregon) Sued by the SEC for failing to detect and report financial fraud that occurred in 2002 at his company. Settled in 2004. Paid $50,000 without admitting or denying wrongdoing. A legal consultant in Portland. Jonathan Orlick, 47 Formerly GC at Gemstar-TV Guide International, Inc. (Los Angeles) Sued by the SEC for helping his company misreport revenue from 2000 to 2002. Settled in 2005. Paid more than $305,000 in penalties without admitting or denying wrongdoing. Also agreed not to serve as an officer or director of a public company for ten years. Unknown. Stanley Silverstein, 53 Formerly GC at The Warnaco Group, Inc. (New York) Accused by the SEC of signing documents that failed to follow accounting rules and that mischaracterized inventory mistakes at Warnaco from 1996 to 1999. Settled in 2004. Paid more than $165,000 in disgorgement without admitting or denying wrongdoing. Ordered not to sign documents filed with the SEC for two years. Still at Warnaco as executive vice president-corporate development and chief administrative officer. Philip Smith, 63 Formerly GC at Trace International Holdings (New York City) Sued by the creditors committee of Trace, which filed for bankruptcy in 1999. The committee faulted Smith for failing to detect fraud at Trace, a privately held company founded by businessman Marshall Cogan to manage his assets. In 2003 a federal court judge found Smith liable for $21.4 million of the creditors’ losses. That verdict was overturned this year by the Second Circuit, which ruled that Smith was improperly denied a jury trial. A new trial is scheduled for March 2006. Does legal work for Foamex International, a publicly held company in which Trace holds a significant position. (This year Foamex also filed for bankruptcy.) Drake Tempest, 52 Formerly GC at Qwest Communications International Inc. (Denver) Sued by Qwest shareholder Stichting Pensioenfonds ABP, a Dutch institutional investor. Stichting claims that Tempest and other Qwest executives engaged in securities fraud at the company in the 1990s. Pending. Earlier this year a federal court judge rejected a motion for dismissal by Tempest, who denies the claims against him. A partner since 2003 in the New York office of O’Melveny & Myers, where he worked before joining Qwest. Mark Belnick, 59 Formerly GC at Tyco International Ltd. (New York) Indicted by New York state prosecutors for stealing $30 million from Tyco in undisclosed salary, bonuses, and interest-free loans during his tenure as GC from 1998 to 2002. Acquitted by a jury of all charges in a 2004 trial. A solo practitioner in New York City with a focus on litigation. Franklin Brown, 77 Formerly GC at Rite Aid Corporation (Camp Hill, Pennsylvania) Indicted by federal prosecutors for securities fraud and wire fraud that took place in the late 1990s, and for obstruction of justice and witness tampering during a subsequent government investigation. Convicted by a jury of all charges except wire fraud in a 2003 trial. After lengthy appeals, began serving a ten-year prison term in March 2005. Leonard Goldner, 58 Formerly GC at Symbol Technologies, Inc. (Holtsville, New York) Indicted by federal prosecutors for orchestrating a scheme from 1999 to 2002 that allowed some executives to exercise stock options retroactively in order to maximize profit and minimize tax. Pled not guilty in 2004; awaiting trial. Unknown. Bruce Hill, 41 Formerly GC at Inso Corporation (Boston) Indicted by federal prosecutors for securities fraud, wire fraud, and perjury. Accused of helping create a sham transaction in 1998 designed to boost earnings at Inso, now defunct. Convicted of perjury this year by a jury, which deadlocked on five additional counts. Awaiting sentencing on the perjury conviction. Prosecutors intend to retry Hill on the other charges, to which he has pled not guilty. Unknown. Mark Kipnis, 58 Formerly CLO at Hollinger International Inc. (Chicago) Indicted by federal prosecutors for allegedly helping company executives skim profits from the sales of media properties between 1999 and 2001. Pled not guilty this year; awaiting trial. A solo practitioner in Northbrook, Illinois, with a focus on real estate. David Klarman, 41 Formerly GC at U.S. Wireless, Inc. (San Ramon, California) Admitted to federal prosecutors that he and the company’s CEO embezzled more than 500,000 U.S. Wireless shares between 1996 and 1999. Also acknowledged laundering more than $9 million of the proceeds. Pled guilty in 2003 to mail fraud and money laundering. Agreed to cooperate with the government. Awaiting sentencing. Unknown. Jay Lapine, 54 Formerly GC at HBO & Co. (Atlanta) Indicted by federal prosecutors for conspiring with other executives to artificially inflate revenue in the 1990s at HBO & Co., which was acquired by McKesson Corporation in 1999. Pled not guilty; trial is scheduled for September 2006. Worked for a time at LaRoche Industries, Inc. Present employment unknown. James Moen, 46 Formerly GC at Katun Corporation (Minneapolis) Indicted by federal prosecutors for defrauding airlines in his use of extended-stay plane tickets in the late 1990s. Also charged with illegally obtaining pricing information from competitors’ Web sites in 2002 and 2003. Pled guilty in 2004 to wire fraud and computer-related fraud. Agreed to pay $200,000 in fines and restitution. Placed on 18 months’ probation. Law license was suspended. Doing research and drafting memos for a Minneapolis-area law firm until his law license is reinstated, which he expects will be in December 2005. Charles Spadoni, 56 Formerly GC at Triumph Capital Group, Inc. (Boston) Indicted by federal prosecutors for bribery, racketeering, wire fraud, and obstruction of justice. Accused of agreeing to award “consulting contracts” to associates of Connecticut’s state treasurer so that Triumph could manage the state’s pension fund. Convicted by a jury in 2003, but has yet to be sentenced. Has filed a motion for a new trial based on withheld evidence. Unknown. Scott Wiegand, 37 Formerly GC at PurchasePro.com Inc. (Las Vegas) Indicted by federal prosecutors for conspiring with other company executives to arrange sham revenue-boosting transactions with AOL in 2001. Pled not guilty. Scheduled for trial in December 2005. An in-house lawyer at Harrah’s Entertainment, Inc., until indicted. Present employment unknown. Stephen Woghin, 58 Formerly GC at Computer Associates International, Inc. (Islandia, New York) Indicted by federal prosecutors for participating in accounting fraud at the company from 1998 to 2000, and for obstructing justice in a subsequent government investigation. Pled guilty in 2004. Awaiting sentencing. Unknown. Sources: Public documents, Martindale-Hubbell, and interviews with defense lawyers and ex-GCs.

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