When the troubled private-security company formerly known as Blackwater USA was sold to a group of investors in 2010, the new owners changed the name and brought in a new in-house legal team to clean up the company’s lingering legal woes and create a new culture of compliance.
They turned to crisis expert and former O’Melveny & Myers lawyer Suzanne Rich Folsom, whom American International Group Inc. had hired in 2008 to lead the cleanup of the bailed-out insurance giant. When Folsom moved to the McLean, Va.-based security firm as chief compliance officer, she brought along two colleagues from AIG: former Hogan Lovells associate Victoria McKenney and former Gibson, Dunn & Crutcher associate Patrick Speice.
The challenges they faced were daunting. Now known as Academi LLC, the company, which provides contract training and security services to the State Department, Defense Department and a number of U.S. allies, was embroiled in number of controversies stemming from its work in Iraq and other hot spots. When Folsom’s team arrived, it was still litigating a suit filed by family members of four Blackwater contractors killed and mutilated in Fallujah, Iraq, in 2004. It faced a suit stemming from a 2007 Blackwater shooting incident in Baghdad that left 17 Iraqis dead. Meanwhile, federal agents had opened a probe into alleged violations of the Arms Export Control Act and International Traffic in Arms Regulations.
"We are the types of people that get into the weeds on everything," McKenney said. "We’re probably more involved than most outside counsel expect. When outside counsel send me a draft for review, I’ll spend hours going through it and sit in on all interviews."
In January 2012, the company settled both the Fallujah case and the last remaining suit stemming from the Baghdad shootings. In August, it agreed to pay a $7.5 million fine as part of a deferred-prosecution agreement with the Justice Department on the arms charges.
Cleaning up old problems is good, but avoiding new ones is at least as important. One of Folsom’s first acts was to reach out to regulators and clients to learn about the company’s weaknesses. Although privately held, Academi established a number of oversight boards to improve governance and appointed heavy-hitters including former Attorney General John Ashcroft and former White House Counsel Jack Quinn as members.
Befitting a company whose main facility in Afghanistan is called "Camp Integrity," Folsom and her team have put in place a new anti-corruption policy that goes beyond the Foreign Corrupt Practices Act to ban so-called "facilitation payments" to foreign officials. Additionally, they instituted a training and monitoring program that electronically notifies supervisors if employees fall behind on their requirements.
They’ve introduced a due-diligence program for outside contractors and a hospitality pre-approval process to review expenses like buying dinner for a foreign government official. In addition, Academi’s legal team rolled out a 33-page code of conduct that emphasizes ethical behavior, respect for human rights and protections for whistleblowers. The efforts have brought better results on audits of the company’s firearms and export procedures and its operation of classified facilities.
Academi’s lawyers have sought to repair relations with regulators, including the State and Defense department and the Bureau of Alcohol, Tobacco, Firearms and Explosives. "We learned this at AIG: You want to engage regulators before there is a crisis," said Folsom, who was promoted to general counsel in December 2012. "We’ve gone from a company that had either nonexistent or less than positive relationships with regulators to having extremely positive and interactive relationships. Heaven forbid this company should have another crisis, but if we do, we’ll be sitting across the table from a regulator that knows the company’s commitment to governance and knows we come with integrity." — Jason McLure
|Academi LLC, a privately held training and security company|
|Industry:||Private security and training services company for governments and commercial industries|
|Number of lawyers in the Washington area:||3|
|Number of lawyers in the U.S.:||5|
|Number of lawyers worldwide:||5|
|General counsel:||Suzanne Rich Folsom|
|KEYS TO SUCCESS|
"We are being more creative with billing. We have a preferred list; however, we’ve also introduced some new firms because of the type of work that they do."
On compliance: "You need to be pro-active. You need to be attentive always and on the lookout for red flags and be willing to address any issues that come to the forefront."
"You want to engage regulators before there is a crisis."
— Suzanne Rich Folsom, general counsel
"When you’re new, one of the ways to assess a company’s weakness is to reach out to key regulators and clients and find out what they’d like to see going forward. That buys a lot of goodwill and credibility so that if something — God forbid — does happen, there is a relationship and a level of dialogue that can be helpful."
— Victoria McKenney, associate general counsel