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NAME AND TITLE: David J. Zarfes, executive vice president and general counsel AGE: 42 ORGANIZATION: Paris-based Cap Gemini Ernst & Young is the third-largest management and technology consulting firm in the world, with offices in more than 30 countries. Its clients include Coca Cola, Ford, Eli Lilly, Sprint, Nissan and Nextel. The company advises virtually every type of enterprise, from energy and chemical manufacturing to financial services and pharmaceuticals to biotech and media, and its largest consulting area is in health care. Cap Gemini employs 53,000 people worldwide, about 10,000 of them in the United States. Zarfes is GC of Cap Gemini’s U.S. division and works in New York, the headquarters of the company’s operations in the Americas. Cap Gemini’s worldwide revenue for 2002 totaled about $7.58 billion. LEGAL DEPARTMENT: Zarfes oversees 23 lawyers, all but five of whom work with him in New York. Two telecom attorneys are based in Clark, N.J., U.S. headquarters of the company’s telecom practice. A lawyer in Chicago handles immigration matters so foreign employees can work in the U.S. and American employees can be sent overseas. Two Toronto-based attorneys take care of Canadian matters. The New York attorneys include several specialists: one labor lawyer, one government-contracts lawyer and two litigators. But they sometimes handle transactional matters as well. The rest of the New York staff are corporate attorneys who negotiate and draft client contracts concerning various joint ventures and licenses. The lawyers also work on finance and tax, telecom and health care matters and handle intellectual property rights registrations. ZARFES’ RESPONSIBILITIES: “I spend a fair amount of time on our more complex transaction agreements [and] outsourcing agreements. I also spend quite a bit of time overseeing our litigation-making strategic decisions and overseeing external counsel,” Zarfes said. In addition, he works closely with the company’s chief financial officer and other senior executives to make sure that his department is properly serving the company’s business needs. He runs an ongoing training program in information technology law for his in-house attorneys as well. BIGGEST CHALLENGE: Zarfes said it is more difficult nowadays for his department to maintain its current level of service while staying within budget. Cap Gemini has significantly cut costs in response to the severe downturn in business during the last two years. Although the legal department’s budget wasn’t reduced (he won’t reveal what the budget is), “We’re all trying to work within a slightly leaner framework without jeopardizing service,” he said. Lately, he’s spent a lot of time reviewing the firm’s legal expenses to determine if he should hire more in-house attorneys or rely more on outside counsel. He concluded that the company should hire several more senior attorneys and cut back on its use of outside counsel. OUTSIDE COUNSEL: Five law firms do the bulk of Cap Gemini’s outside legal work. New York’s Shearman & Sterling and the New York office of Chicago’s Winston & Strawn both handle litigation. The latter also works on transactional and real estate matters. Two Toronto-based firms, Stikeman Elliot and McCarthy Tetreault, help negotiate and draft client contracts and service-level agreements in Canada. Chicago-based Mayer, Brown, Rowe & Maw works on transactional and health care matters. Zarfes also uses about 15 other law firms when the company needs local representation elsewhere. ERNST & YOUNG ACQUISITION: Zarfes spent nine months working as lead in-house attorney in the Americas on Cap Gemini’s $11.1 billion purchase of the consulting arm of Ernst & Young in May 2000. The acquisition tripled the size of Cap Gemini’s North American operations. Cap Gemini Ernst & Young’s director of legal affairs in Paris was in charge of the overall deal. Zarfes worked with outside counsel Sullivan & Cromwell of New York on negotiating and drafting contracts, performing due diligence and dealing with personnel and tax issues. LAYOFFS: Hard times forced Cap Gemini to lay off more than 10,000 employees worldwide over the past two years. Zarfes worked with his in-house labor lawyer and the company’s head of personnel on the U.S. layoff plans to ensure compliance with the myriad of employment laws. Several in-house attorneys did a disparate-impact analysis to make sure the layoffs didn’t discriminate against any particular class of worker and to make sure all proper notice requirements were met. LITIGATION: Although Zarfes would not discuss details of most litigation, he said the company typically has three or four large, complex lawsuits at any given time and that most of its litigation concerns commercial or employment disputes. Zarfes said the firm is generally the plaintiff in commercial cases. He said Cap Gemini mainly sues to recover unpaid fees or sues over the scope of services subcontractors are supposed to provide. The company also occasionally sues to protect trademarks and patents on its business methodologies and its IT services. “It’s unusual for us to find ourselves in a particularly ugly dispute,” Zarfes said, since all of the company’s contracts “give [us] strong legal positions to avoid litigation down the road.” That also explains why the company has so few lawsuits, he said. He declined to discuss in detail the firm’s most significant ongoing dispute, which he said is now in private arbitration. He would say only that Cap Gemini is seeking to enforce its intellectual property rights in the matter and hasn’t yet taken it to court. In November, Cap Gemini scored a legal victory. A former employee in its Los Angeles office, John Nackel, sued the company in California, claiming he’d been fired in violation of state law in retaliation for complaining about discriminatory behavior by one of his superiors. “We investigated and found the allegations were completely groundless,” Zarfes said. Cap Gemini Ernst & Young subsequently sued Nackel in New York to compel him to arbitrate his claim in New York in accordance with his employment agreement. Nackel contended that California wouldn’t enforce the arbitration clause since it limits his remedies and procedural rights. But the U.S. District Court for the Southern District of New York ruled in the company’s favor, halting the California case. Nackel is appealing the decision in the 2nd U.S. Circuit Court of Appeals. Meanwhile, the arbitration is still in the very early stages. Winston & Strawn is representing the company in the litigation. Zarfes said he helped formulate the strategy and reviewed all the pleadings and other filings. ROUTE TO THE TOP: Zarfes earned a master’s degree in English from the University of Chicago in 1983 after having received his undergraduate degree from the school the year before. He earned both a master’s in public policy from Columbia University and a law degree from Yeshiva University’s Benjamin N. Cardozo School of Law four years later. He said he always planned to be a lawyer even though he also studied other subjects. He obtained his L.L.M. in tax from Georgetown University Law Center in 1991 while working as an IT lawyer at Reed Smith’s New York office. Cap Gemini was one of Zarfes’ clients at Reed Smith. The company’s general counsel approached Zarfes about taking over at Cap Gemini since he planned to take another job. Zarfes joined the firm as deputy general counsel in 1994 and become general counsel when his predecessor left six months later. “I wanted to be more involved in some of the inner business workings of the company as opposed to just being the external legal advisor,” he said. FAMILY: Zarfes is single. LAST BOOK READ: “Katharine Graham’s Washington,” edited by Katharine Graham.

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