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The annual conference of the American Corporate Counsel Association (ACCA), held last week, could have been called “In the Shadow of Enron.” The official name was more cheerful, but corporate scandal hung in the air just as the sniper attacks permeated Washington, D.C., where the meeting was held. Two sessions reviewed recent activity at the U.S. Securities and Exchange Commission (SEC). Michael Cahn, general counsel at Textron and chairman of ACCA’s corporate and securities law committee, opened one by remarking: “I can’t remember a time when there have been so many SEC updates.” Alan Beller, who directs the SEC’s division of corporate finance, detailed some of the changes dictated by the Sarbanes-Oxley Act. The SEC has also been trying to “harmonize” standards as the New York Stock Exchange and Nasdaq also consider a spate of corporate governance proposals, he said. In a different session, Howard Silverstone, a forensic accountant, cheerfully informed his audience that he was not going to talk about Sarbanes-Oxley. “Today I want to get back to the basics of good old-fashioned fraud,” he said. “Fraud that’s going on right now at your company while you’re enjoying this presentation today.” He spoke about embezzlement and padded expense claims. A CONFERENCE OF FIRSTS It was surely no coincidence that this was the first conference in ACCA’s 20-year history to sell out. A record 1,900 people attended, and the waiting list pushed 200. ACCA used the occasion to announce the results of its first member survey. The subject? What else but corporate responsibility. Among the highlights: 61 percent said they felt “very comfortable” reporting possible financial or accounting problems to senior management. However, 49 percent said they’re kept “out of the loop” on important financial developments. And — as if to prove the point — 37 percent didn’t even know if their companies’ boards of directors have revised committee structures to comply with Sarbanes-Oxley. “It’s an exciting time to be a general counsel,” Frederick Krebs, ACCA’s president, declared to a gathering of reporters. “It’s challenging, but the influence of the general counsel, and receptivity of the client, has never been higher.” The focus on governance has created plenty of work, added Elizabeth Wall, GC of the European Lawyer and ACCA’s new chairwoman. Between reviewing codes of ethics and advising audit committees, GCs have their hands full, she said. William Lytton, who sat next to her, is ACCA’s outgoing chairman and, until recently, was GC at International Paper Co. A month ago he left to take the same job at Tyco International, where his predecessor, Mark Belnick, was fired in June and indicted in September. Belnick allegedly had falsified documents to conceal that he had borrowed $14 million from his company. Lytton declined to discuss his new job, but after the room emptied, he answered questions about the kinds of GCs companies are now looking for. “A company that has a problem typically looks for someone who is anti-problem,” he said. In addition to his involvement with ACCA, Lytton noted that he’s a former prosecutor. “The type of person they’re looking for,” he said, “is not someone who just has a technical background. They’re looking for someone who may not know all the answers, but knows the questions.” They’re also looking for lawyers “with the intestinal fortitude to stand up to pretty senior people and say, “I don’t think you should do that.’” Many of the conference’s sessions focused on intestinal fortitude and challenging questions. Some even had questions in the title. “When Is a Lawyer Not a Lawyer?” was one. The answer: when the lawyer is offering business rather than legal advice. In such cases, the panelists said, lawyers should explain to employees that communications aren’t privileged. Panelist Diane Klein, a law professor at Texas Southern University, seemed to relish constructing academic solutions to this problem, while fellow panelist Matthew Revord, deputy GC at Brunswick Corp., insisted on bringing them down to earth. For example, the material the panel distributed included a suggestion that lawyers avoid commingling privileged information and business advice in one communication. “I remember the first time I sent my CEO two different memos” for this reason, Revord recalled. “What the hell are you doing?!” demanded the CEO, who had no patience for this exercise. Suffice it to say, Revord never did it again. “Taking the High Road: CEO? Management? Company? Shareholders? Who’s Your Client?” used hypothetical scenarios to drop in-house lawyers into ethical quagmires. The first involved a lawyer who discovered in the middle of litigation that another in-house lawyer had destroyed evidence, and that the GC had told her to forget the whole thing. What should the lawyer do? Go up the corporate ladder? Go outside and turn in the spoliating colleague? In discussing the options, panelist Richard Jeydel, GC at Kanematsu USA Inc., condemned ABA proposals to expand the Model Rules of Professional Conduct to permit or require lawyers to disclose client information when failing to do so would damage the company. “All of us who practice should be terrified of the changes to this rule,” Jeydel said. Panelist Ray Hansen, GC of Syncrude Canada, agreed. “The concept of privilege is not a rule,” Hansen said. “It’s a principle.” And it’s central to what a lawyer does. “If you’re going to pick a profession to require to report out” wrongdoing outside a company, “don’t pick the legal profession. Pick the accounting profession.” Not everyone on the panel agreed. Thomas Hickey, deputy GC at Nextel Communications Inc., and Mark Chandler, GC of Cisco Systems, played the roles of in-house lawyer and CEO, respectively, to demonstrate the pressures that are brought to bear on lawyers. “You know,” Chandler intoned, “you really have a bright future in this company.” When the laughter subsided, he sealed the deal: “You’re doing a great job! Keep doing what you’re doing!” Under Sarbanes-Oxley, Hickey and Chandler said, lawyers are obliged to take allegations of misconduct to the GC and, if necessary, to the board. In light of this, Chandler said, it’s hard to argue that the ABA rules shouldn’t change. Not that he underestimates the cost to the lawyer. Going to the board, he said, “isn’t necessarily consistent with our plans to continue getting a paycheck.” Several years ago, Chandler had a personal gut check — neither the first nor last recalled during the conference. “Either I’m not going to have a job at the end of the day or the CEO isn’t,” he told his wife as he left for work. He paused as he considered how to end the story. “I continued working at the company for three more years,” he finally said.

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