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After the scandal, the books, the movie-finally, it’s judgment day in a Houston courtroom for Enron Corp.’s former chairman, Kenneth Lay, and ex-CEO, Jeffrey Skilling. Amid boatloads of details about related-party and off-balance sheet transactions, an old question is likely to resurface: “Where were the lawyers?” The proceedings probably won’t provide answers. Ten former in-house attorneys are listed as potential witnesses, but none played a major role in the scandal, and no Enron lawyer has been indicted. Instead, the trial will likely be dominated by questions about alleged accounting irregularities and insider trading. A host of interesting questions about the in-house legal team will likely go unasked and unanswered. So, four years after the company filed for bankruptcy, and not long before the trial began, Corporate Counsel, a sister publication of The National Law Journal, asked former Enron lawyers for their thoughts on the energy company’s controversial business methods, and if their time there changed how they do their jobs now. And the most important question: What lessons all in-house lawyers could learn from their experiences. Little central control When the legal department alumni discussed their post-Enron job searches, it quickly became clear that the taint of Enron hasn’t washed away. Few of the in-house legal corps (once 250 strong) were willing to speak on the record, in part because they fret that they will be called to testify at the trial. But the dozen former Enron attorneys who spoke ruminated long and hard about what would have made their department more effective. They fingered several culprits. The legal department was decentralized: most of the company’s lawyers worked for the business units. This isn’t a problem in itself, but in Enron’s case the business-unit executives often pressured attorneys to keep misgivings about controversial deals or accounting practices to themselves. Plus, the lawyers say, there was little central control from the company’s general counsel, James Derrick. Finally, under Enron’s compensation system, business executives effectively decided most lawyers’ pay. This mix limited the attorneys’ ability-and incentive-to play grown-up to the company’s often reckless entrepreneurs by nixing their deals. “Laws and regulations only get you so far,” said Stephen Wallace, referring to the Sarbanes-Oxley Act reforms that were passed within months of the Enron implosion. A member of the Enron diaspora and now general counsel of Westlake Chemical Corp. in Houston, Wallace said that a company culture of hands-on management and strong governance is more important in promoting an ethical workplace than legislation. The story of Enron, four years later, is still a powerful reminder of that lesson. A lawyer’s reputation may become entwined with a company’s-and the connection between the two can survive long after they part. Michelle Hoogendam Cash has seen this firsthand. She was an employment lawyer at Enron-in effect, the hiring partner-and now she’s the managing director of the Houston office of the world’s largest legal search firm, Major, Lindsey & Africa. She saw the talent the company attracted on the front end, and continues to work with Enron alums. The energy company’s lawyers were among the best the profession had to offer. “They were at the very high end,” Cash said, many graduating from prestigious colleges and law schools. Quite a few were recruited from large firms. Most Enron lawyers appeared to love their jobs-and embrace the company. “I believed. I drank the Kool-Aid,” said Richard Sanders, now in-house at a Houston energy company, Kinder Morgan Inc. “It was the place to be,” said Wallace. The ‘Scarlet E’ But for many alumni, their stellar credentials were tarnished by their time at Enron. Finding work over the last few years hasn’t been easy. “Some people view Enron on the resume as a scarlet E,” and some former Enron lawyers are turned down flat, Cash said. Some lawyers said that when they approached outside attorneys with whom they had spoken almost every day, their contacts wouldn’t return their calls. Peter del Vecchio, now a partner in the Houston office of Dallas’ Gardere Wynne Sewell, said a former law department colleague made it through rounds of interviews at a firm before the partnership decided they couldn’t hire an Enronite. Del Vecchio had a frustrating experience of his own. In 2002, when he was still working at Enron, he discussed a job opening with a financial-restructuring business that had once been a client of his when he worked at White & Case. The ex-client, he said, remembered him well and praised his qualifications, but explained that the company couldn’t hire a lawyer from Enron. Del Vecchio tells the ultimate taint story. A former Enron law department colleague was sitting at an airport bar not long after the company’s collapse. He fell into conversation with the woman sitting next to him, who confided that she worked for a business that sells sex toys. “And what do you do?” she asked. “I work at Enron,” came the reply. “Aren’t you ashamed when you tell people that?!” she responded without missing a beat. The lawyer’s analysis: “When you’re looked down on by the dildo salesmen of the world, doesn’t that say it all?” Despite the stigma, Enron attorneys are finding jobs. Enron alums have been helped by the resurgence of the energy industry. Constellation Energy Group Inc. has hired several of them. “We evaluated people based on their own merits. Enron recruited and attracted some of the best in the industry,” said a spokeswoman for the Baltimore-based company. Others went to work for someone they knew. Sanders’ company, Kinder Morgan, is run by a former Enron president, Richard Kinder. Wallace went back to his pre-Enron employer, which offered him his old job in 2002. “Legal recruiting and being a lawyer is a relationship game,” said David Marcus, who runs his own recruitment firm in Houston and has helped place several Enron alums. He couldn’t place any in 2002, he said. Now the tide has started to turn, he said, thanks in part to a cohesive network of ex-Enron lawyers. They’ve gone to bat for each other, hiring former colleagues and introducing prospective employers. “People play to the relationships they already have,” Marcus said. Enron lawyers were insulated in silos-the business units for which more than half of Enron’s lawyers worked. One lawyer likened them to “a bunch of football teams” that kept to themselves. Not that there’s anything inherently wrong with decentralization, say experts. It encourages lawyers to get close to the business and the client, which is a good thing, said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. The danger, he said, is that it can lead to erratic performance across a department. “The key is creating a tight code of conduct and tight oversight by the general counsel.” By itself, a code of conduct may have little impact on a company’s ethics. Management gurus say strong leadership is more important, and a lack of direction from the top was a serious flaw in Enron’s legal department. GC Derrick was disengaged from the business; lawyers interviewed for this story say they had little if any contact with their boss after they were hired. The only time Derrick consistently communicated with lawyers in the business units, they say, is when they had to hire outside counsel, which Derrick insisted on approving. The gulf between the business units and the corporate center widened, said del Vecchio, who worked in the wholesale trading unit and later in industrial markets. Enron’s law department was more than decentralized, it was “balkanized,” he said. “It was like two different legal departments.” Most of the business-unit lawyers reported to Mark Haedicke, who at one time was GC of at least four divisions. (Neither Derrick nor Haedicke responded to requests for comment.) Enron alums said that business managers pressured attorneys to wave through deals, with little resistance from Derrick or Haedicke. “The worst thing you could do at Enron was to be viewed as an obstructionist,” said del Vecchio. He recalled one lawyer in his business unit who made the mistake of taking too seriously the risk memos they were required to write that spelled out potential problems with deals. The business side complained to Haedicke, who ordered the attorney to write another draft, which was still seen as impeding the deal. Del Vecchio was then asked to rewrite it. The lawyer wasn’t fired, but the dealmakers shunned him, forcing him to move to another unit.

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