Thursday, September 14, 2006
The Sarbanes-Oxley Act increased the pressure on in-house lawyers by requiring that a company's "chief legal officer" be the key conduit for reviewing claims of potential wrongdoing and advising the independent directors on how to act in response to potential legal violations. This week, that seat got even hotter as Bristol-Myers Squibb fired its general counsel, Richard Willard, along with CEO Peter Dolan because of their involvement in a transaction that could trigger a violation of the company's deferred prosecution agreement. In a company press release (here), however, Bristol-Myers asserted that there was no criminal conduct or violation of the agreement, asserting that the company's outside monitor "and the U. S. Attorney did not find that there had been any violation of the deferred prosecution agreement. No finding of any unlawful conduct by the company or any of its employees has been made. The inquiry did not involve any matters that are the subject of the ongoing investigation by the Antitrust Division of the Department of Justice into the PLAVIX settlement agreement. The Monitor may make additional recommendations with respect to governance matters when he makes his final report on the inquiry." If that's the case, then was Willard fired for public relations purposes? It certainly was a move to assuage the government, and shows that a company's general counsel is among those whose heads will roll when questionable conduct comes to the government's attention.
The Hewlett-Packard situation is perhaps even more threatening to its general counsel, Ann Baskins. An e-mail exchange between the company's outside counsel, Larry Sonsini, and a former board member, Tom Perkins, discusses the role of Baskins' office in the internal investigation that involved "pretexting" to obtain private records of board members. Sonsini wrote, "I was not involved involved in the design or conduct of the investigation. The investigation was run by the HP legal department with outside experts. I reviewed the report after the investigation for Board process. Pattie [Dunn, chair of the board], was not involved in the design or conduct of the investigation either, to my knowledge. I am sure that Ann Baskins looked into the legality of every step of the inquiry and was satisfied that it was conducted properly." That certainly puts Baskins squarely in the line of fire now that California Attorney General Bill Lockyer has stated that criminal conduct occurred at H-P and he expects individuals to be charged. The U.S. Attorney's Office is also investigating, and will certainly look at the role of the company's general counsel's office in the internal investigation. Even if Baskins is not directly involved in the pretexting, and avoids any criminal entanglement, ultimately it looks like her office was responsible for the internal investigation. I would not be surprised if she took the hit for this, much like Willard was dumped after 14 years at Bristol-Myers. It can be mighty tough to be a general counsel these days. (ph)