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NAME: Lawrence O’Donnell III TITLE: Executive vice president, general counsel and corporate secretary AGE: 43 THE BUSINESS: The largest waste service company in North America, Houston-based Waste Management Inc. provides collection, disposal and recycling services to 25 million residential and 2 million commercial customers. It operates 284 landfills, 16 waste-to-energy plants, 73 gas-to-energy facilities, 160 recycling plants, 293 transfer stations and 1,400 collection facilities. The company has 57,000 employees and had $12.5 billion in revenues in 2000. LEGAL DEPARTMENT:O’Donnell oversees 32 lawyers and may increase the number to 35 or 40. RESPONSIBILITIES: O’Donnell splits his time evenly between the business side and legal department matters, with considerable time spent on well-publicized litigation the company is trying to resolve. DUE DILIGENCE: When a headhunter approached O’Donnell in November 1999 to entice him to leave his general counsel post at Baker Hughes Inc., an oil field services company, for the top legal slot at Waste Management, O’Donnell had some major due diligence on his hands. Waste Management was embroiled in a morass of litigation — class actions, derivative suits and a Securities and Exchange Commission investigation — involving its restatement of financials from 1991 to 1997. And it faced similar legal and financial troubles when USA Waste Services Inc. took the company over soon after. Even though O’Donnell would be part of a new management team brought in to clean up the problems, and although he liked the new chairman, A. Maurice Meyers, he was wary of embarking blindly on this new adventure. So he talked to as many people as he could — outside auditors at Arthur Andersen, internal investigators and primary outside counsel. “I was very impressed with Maury, but the company I was concerned about,” he says. But after initiating his own “due diligence,” he says, “I was convinced this was a tremendous opportunity and decided to come on board.” He joined the management team in February 2000. REORGANIZING A MESS: There really wasn’t much of a legal department when O’Donnell arrived at USA Waste, which was renamed Waste Management with the merger. There were five corporate lawyers, some field attorneys who reported to area supervisors and labor lawyers who reported to human resources. There wasn’t a single employment lawyer in the company and there were so many outside law firms, O’Donnell says, he couldn’t get a count. So in his first week as general counsel, he called a meeting. He didn’t call it a meeting of the law department, but simply invited everyone in the company who was “functioning like a lawyer.” At that meeting evolved the structure in place today. The model rests somewhere between the scaled-down USA Waste approach and the centralized approach of the old Waste Management, which was headquartered in Chicago with a legal department of some 120 lawyers. Before O’Donnell reined the lawyers in, he says, there was “nothing really shared, there was a lot of reinventing the wheel and huge costs in terms of outside legal fees. They were just having to fight fires everyday.” Now the department has a distinct structure. Below O’Donnell is David Steiner, vice president and deputy general counsel in charge of M&A/securities. Then there are vice presidents and assistant general counsels Mark Schwartz, labor and employment, and Steve Morgan, environmental, health and safety. For litigation, O’Donnell tapped someone he knew and trusted, Gerard Sonnier, who is VP and assistant GC-litigation. Sonnier worked with O’Donnell before, first as outside counsel serving the needs of Baker Hughes, then as the in-house litigation chief there. ONGOING LITIGATION: This restructuring put Waste Management in a position to deal with what O’Donnell views as his primary role — to resolve all the old litigation. O’Donnell organized it into “two buckets” and whittled down the number of outside firms involved to two primary firms for the 1999 problem, and one firm for the “Old Waste” litigation. (Old Waste is the term O’Donnell says is used to describe Waste Management, pre-USA Waste.) Both buckets contain similar types of issues: class actions, SEC investigations, derivative suits and related litigation. And though the Old Waste derivative suits involving sellers settled before O’Donnell took over, he had the rest to contend with. Under his supervision, Waste Management has settled with the SEC regarding the 1999 litigation, and resolved several of the sellers’ cases. “We still have a ways to go, but I feel very pleased with the progress we’ve made to date,” he says. LEGAL AUTOPSY: Once litigation is ended, in-house counsel love to close the file and walk away. Not O’Donnell. Instead, he has begun to use a tactic he employed at Baker Hughes, in which a team from his legal department will analyze a case — win or lose, to find out what could be learned. He calls it a “legal autopsy,” and shares the results with the operations personnel affected by the lesson. “This might have been an expensive lesson,” he says, so “let’s at least learn from it so we don’t make the same mistake somewhere else in the company.” ADR: To make early case assessments, O’Donnell says in-house lawyers ask three questions: Where are we? Where do we want to go? How can we get there? Instead of assigning litigation immediately to outside counsel only to find out after years of expensive discovery that there may be a problem, O’Donnell says his department develops the case and uses any form of alternative dispute resolution that makes sense. “It costs a little bit more money on the front end” but is worth it, says O’Donnell, who serves on the board of directors for the American Arbitration Association. The strategy makes particular sense in states like Texas, where courts are ordering mediation more often. “Rather than wait for the court to order it, we like to utilize those techniques very early on,” he says. PRIMARY OUTSIDE COUNSEL:Handling the Old Waste litigation is Skadden, Arps, Slate, Meagher & Flom, with William P. Frank in New York and Matthew R. Kipp in Chicago. For the 1999 litigation, Waste Management relies on Debevoise & Plimpton’s Ralph C. Ferrara in Washington D.C., and D. Gibson Walton and Walter B. Stuart of Vinson & Elkins in Houston. For most antitrust issues, O’Donnell has selected James R. Weiss of Preston Gates & Ellis in D.C.; and for M&A, corporate and securities work, the company has selected J. David Kirkland Jr., of Houston-based Baker Botts. PET PEEVES: There are two things O’Donnell finds annoying about outside counsel. The first — charges of $1 to $3 per page for faxes — may be petty, he says, but it drives him crazy. “If I fax over a 100-page acquisition agreement, I just about bought the machine,” he says. “In today’s business environment, no business can function without a fax machine. And I just think it is outrageous for firms to be charging $1 to $3 a page just to receive a fax.” The other matter, for which the legal department regularly elects to use a line-item veto, is something he calls “stealth timekeepers.” These are the people you’ve never heard of who charge for work the value of which is impossible to determine, O’Donnell says. “We don’t pay for those people. When I see it on the bill, it gets deducted.” ROUTE TO THE TOP: A 1980 University of Texas graduate in architectural engineering, O’Donnell earned his J.D. in 1983 from the University of Houston. Before going in house, he practiced M&A, corporate and securities law at Houston’s Wood, Campbell, Moody & Gibbs and later was a shareholder of Campbell & Riggs in Houston. He joined Baker Hughes as deputy general counsel in 1991 and became vice president and general counsel in 1995. While there, he served as corporate secretary from 1992 to 1996, and was general counsel of the company’s oil field operations from 1994 through 1995. FAMILY: Married to his wife, Dare, for 20 years; the couple has two children, a daughter, 16, and a son, 12. LAST BOOK READ:“Attitude is Everything” by Keith Harrell.

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