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Gone are the heady days of ballooning stock prices and near-daily initial public offerings by dot-coms. They have been swallowed up by a near-recession economy. Gone, too, are the big dreams that many Northern Virginia attorneys had of working on the inside at companies that would grow from a two-person operation into a megacorporation. For many general counsel in Northern Virginia’s new economy companies, those are just last year’s memories. Today, high-tech companies are shutting down Web sites, closing branch offices, and initiating mass layoffs. The first few months of 2001 have also been marked by plenty of bankruptcies, and just as many late nights, as GCs try to figure out if there is any way to save their troubled companies. Some in-house counsel have moved on to the next adventure, while others are still looking for new jobs. Several have remained on board during the hard times, feeling a personal stake in the companies they helped build. Surprisingly, no matter how severe a company’s troubles, many in-house counsel say they are not interested in moving to law firms. They say they want to be working in-house when the sun comes out again, even if their current company is gone. But for nearly all, things have changed drastically from only months ago. “It turns your world upside down,” says Pathnet Telecommunication Inc. Senior Vice President and General Counsel Mary McDermott. McDermott was thrown into a field where she had never practiced before when the Reston, Va.-based company filed for Chapter 11 bankruptcy on April 2. “It’s a whole new world and a new area of law that you have to learn at a time of enormous pressure,” she says. VIGOROUS WORKOUT Even those GCs with prior experience in employment issues or federal bankruptcy statutes are finding that the financial downturn has unexpectedly forced them to brush up on old skills. “I had a very deep background in workouts and crisis management,” says former Varsity Group GC Stuart Soberman, who counseled the educational bookseller through numerous employee layoffs and the departure of senior managers. “I wasn’t brought in to do that, but I had that background, and it was extremely helpful.” Soberman is now the vice president and general counsel of Bethesda, Md.’s OTG Software Inc., which develops online storage, data access, and e-mail management programs. But like McDermott, who calls regulatory work her “bread and butter,” most GCs have been forced to learn bankruptcy and employment law at a rapid pace. Juliette Pryor joined Herndon, Va.’s e.spire Communications Inc. in 1997 as an associate general counsel, creating customer and vendor agreements and negotiating the purchase of Internet service providers for the business telephone and Web site hosting service. But soon after Pryor became e.spire’s senior vice president, general counsel, and secretary last year, the former IBM Corp. attorney had to learn how to change gears quickly. In March, just one month after the company announced that revenue had grown by more than $100 million in 2000 and that earnings had edged into the black, the company filed a Chapter 11 bankruptcy petition. “That’s the significant, substantial change — the rapid pace that I’ve had to come up to speed on the federal bankruptcy laws,” says Pryor, who says she often has to be prepared to field questions from vendors and clients about e.spire’s ability to pay its bills and the future of the high-tech company. “This is a reorganization. This will come to an end and we will be a company operating out of bankruptcy when this ends,” she says. “We have to explain that to people. We’re not in bankruptcy because we don’t want to be in business anymore.” Similarly, McDermott is the one to whom Pathnet employees turn for answers, not only about the bankruptcy but also the company’s negotiations with potential purchasers. “As in-house counsel, they bring a lot of concerns to me,” says McDermott, who has spent two decades in the telecom field and whose last post was at a wireless trade association. “It’s an interesting job of learning all this stuff and then trying to sound as reassuring as possible.” LAST CALL Not everyone has reassuring answers for his fellow employees. Gary Ford, general counsel of Collaborex Inc., spends his days winding down the e-commerce company, all the while looking for his next job. “The controller and I are wrapping up the business. We’re handling all of the collections, we’re negotiating with all of our creditors,” says Ford, who adds that they are also closing Collaborex’s U.K. and Canadian operations. “We are now the business people,” he says. Once busy building the Fairfax, Va.-based business, Ford says he experienced what he calls a “dramatic reprioritization” of his life as a GC when Collaborex was not able to close the deal on its second round of financing. “You’re focused on growing the business, then all of a sudden it’s risk management,” he says. “We’re trying to do our best to make sure our employees come out of this with all of their rights protected,” he says. But employees are not Ford’s only concern. There are still bills to be paid. “You need to become pretty conversant in creditors’ rights, which is not something that general counsel are usually very conversant in,” Ford explains. “That’s all stuff I learned in law school but haven’t thought about since then. I’m doing it for a living now.” Administration of the company’s 401(k) plan has fallen into Ford’s lap as well, after the provider terminated the plan. Ford is dealing with some exotic matters, too: He has had to scramble to protect Collaborex directors based in the United Kingdom because British law permits, in certain circumstances, directors of financially insolvent companies to be held personally liable. Ford is certainly not the only GC to put his deal-making skills on hold in favor of contemplating a corporate restructuring or downsizing the work force. “We’re not working on financing kinds of issues,” says Keith Mendelson, general counsel and secretary of Herndon’s LifeMinders Inc. “We’re not working on public offerings and other financial issues which occupied a lot of people a year ago. I’ve spent a lot of my time on employment type of issues.” Stock for LifeMinders, an online direct marketer, peaked at over $90 per share in March 2000, then fell to its present price of approximately $1. With the declining stock price came layoffs — as of March 30, the company employed 138 people, down from over 200 last year — and the voluntary departure of senior managers for other companies. Mendelson, a former partner at Pillsbury Madison & Sutro (now Pillsbury Winthrop) and one of the co-founders of the firm’s Northern Virginia office, left a year ago for a position at Global TeleXchange. After six months there, he jumped over to LifeMinders. “I joined this company in November, so I came after the real rapid growth in the stock market,” says Mendelson. “By the time I got here, the stock price was already dwindling.” Mendelson observes that his life has changed considerably as of late. “It’s the difference between working with a company that’s sort of a rapid growth company, where you’re working on everything like hiring, space, everything associated with rapid growth. And now it’s not exactly the reverse, but it’s a company in a rapidly dwindling market. For example, we’re not looking for new space, but we’re looking to unload space,” he says. At those companies with no in-house counsel, like McLean, Va.’s ServInt Internet Services, the decision to proceed with a Chapter 11 bankruptcy filing has required them to hire specialized outside counsel to act as their attorneys. When ServInt prepared to file for bankruptcy three months ago, the Internet service provider brought in Jonathan Gold, an associate in the financial restructuring group at Washington, D.C.’s Akin, Gump, Strauss, Hauer & Feld. “We were called in specifically for the bankruptcy,” says Gold. “I am their counsel now.” But regardless of how job descriptions have changed, or how hectic lives have become, few GCs appear willing to consider law firm life. McDermott and Pryor are holding on while their companies reorganize. After living through much of Varsity Group’s decline, Soberman, who says he values his time at Varsity, decided to move to another tech company. Ford, who will see his company through to the end, also is looking for another new economy GC position. “I’d like to think I’d get a job at another company as in-house counsel at a tech company. I’m looking, but I haven’t found anything yet,” he says. “Being in-house counsel is a blast, and I’d be reluctant to go back to a firm.” Says McDermott: “Once you’ve been general counsel of a company, and particularly a small company where you feel like you have an impact, there’s no turning back.”

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