Ethical Dilemmas - PowerPoint Presentation

Slide1

Ethical Dilemmas

Burt M.

Fealing

Executive Vice President

General Counsel and Secretary

Southwire

CompanySlide2

Ethical Dilemmas

All lawyers are subject to professional responsibility rules and

a

fiduciary relationship with their clients.

In

private

practice, ethical rules that deal with fees, trust accounts and advertising are clear.

But the

in-house

counsel face different and often thorny situations not directly addressed by these rules.Slide3

Ethical Dilemmas

An

in-house

lawyer has one client. The business, be it a corporation, partnership or sole proprietorship that hired him is his sole client.

He

is NOT the lawyer for the executives, management or employees other than when the interest of those parties directly aligns with the

business.

This

means there are a lot of ethical dilemmas

in-house

with no clear cut answers or rules to directly turn to for guidance.Slide4

Scenario 1 - $1 for Your Representation

An

employee or more likely a high level manager or executive comes to you with a story “for your ears only.

”

When you hear something like that, a warning bell should

go off

in your head.

These situations

generally arise when you are conducting an internal investigation.

For

example,

what

if your

employee is subpoenaed by the government in connection with some price fixing allegations? Slide5

GC Responsibility - $1 for Your Representation

You,

as the corporate

attorney,

have an obligation to insure the company complies with the subpoena and produces the relevant information.

Your employee may see it differently and feel entitled to you representing him directly.

If your employee acted within the guidelines of corporate policy, his interests align with the company’s interest. Defending the company is the same as defending the employee.Slide6

GC Responsibility- $1 for Your Representation

What

if the employee acted in a different

manner than what the company rules proscribe?

They are willing to give you $$$.

You have to be able to tell that manager or executive that they can and should get their own

lawyer.

[Rule 1.7 Conflict of Interest.]

You are in a difficult position if the most

senior exec is the one asking for “your ears only” and holds the keys to your reviews, promotions or

whether you

are fired. Slide7

GC Responsibility-

$1 for Your Representation

What do you do?

The

best advice I’ve been given is to look at the rules of professional responsibility, apply common sense and your conscience and ask, how would your actions affect corporate value

and

shareholders

and

how

would your

actions

appear

to

your

Mom? Slide8

Scenario

2

– U.S. Too Litigious

Another common situation is “up the ladder reporting”

.

Imagine

a scenario where your CEO has engaged

in

activities that do not appear to comply with the law. In fact, imagine he has acted to further along what you suspect is a bribe

of

a foreign official in

another

country. You know the

behavior

in

question

could

be a violation

of

the FCPA.

(Foreign

Corrupt Practices Act).

Slide9

GC Responsibility - U.S. Too Litigious

What do you do? Today in-house lawyers

are viewed as gatekeepers. We are the ones who are in the cross hairs of the regulators and are implicitly as well as explicitly charged with “keeping the company honest.” We in effect are the ones who act to prevent fraud and corporate bad acts

.

A common way to describe this is the

in-house

lawyer

in effect performs

the whistleblower function.Slide10

GC Responsibility - U.S. Too Litigious

First look to the rules. They state

you cannot assist in a crime or bad acts and must take steps to prevent bodily harm

.

[Rule 1.16 – Terminating Representation]

In this instance, you

as the in-house

counsel have an obligation to conduct an initial internal

investigation and escalate to an audit committee if the investigation yields something that seems suspicious. Situations like

this can arise from seemingly innocent circumstances and

in-house

counsel

has to be on

his

game to know when to ask questions.Slide11

GC Responsibility - U.S. Too Litigious

At

this point, it is time to call outside

counsel?

YES!

In

particular, a white collar attorney should evaluate. And, it is time to contact the Audit Committee and inform them an investigation is going to

commence and

they have to conduct that investigation.

You

, as

in-house

counsel have done your part. You are no longer directly involved and you must hand the issues off to your outside counsel and the Audit Committee. You DO NOT conduct the investigation past the initial assessment.Slide12

Scenario 3 - Germany

Imagine

a situation where

you know that an employee is embezzling funds and stealing information. They are intentionally setting up a competing company to go head-to-head with your company.Slide13

Scenario 3 - Germany

Now imagine the

reason you know this information is because the employee sent an email by error to their boss and the email contained all of the details.

You have an investigation but you have come across privacy rules in Germany.

Individual has conducted private activities on their work computer. Works council? International police? Criminal prosecutor?Slide14

Scenario 4 - Bribery / FCPA

What if your outside counsel tells you that you can just effectively turn a blind eye because what you’ve uncovered so far fits within a “gray area.” Let me ask you. What does your gut tell you?

The

people I know who have gone through real situations like this knew they were being advised to close their eyes to what was going on, keep everything running smoothly as if there were no bribery allegations, and

they

would keep their jobs with no one the wiser.Slide15

GC Responsibility

- Bribery / FCPA

In

this real life situation

,

the

people I

know followed

their

gut,

fired their outside

counsel, made

the

appropriate disclosures

and eventually

left the

company when

the

issues

were not resolved.Slide16

GC Responsibility - Bribery / FCPA

The very real problem here for

inhouse

counsel

is, once we know there is wrongdoing going on, we cannot turn a blind eye, no matter

how

outside counsel advises us. We have a fiduciary obligation to our client. It puts us in a position of having to resign from our positions if, after advising the company of wrongdoing, the company refuses to step up and work on the solution

.

We have no whistleblower protections. Yes, we are obligated to take action and are the only profession which has to resign in the face of these types of circumstances

.

The questions of ethics plagues us humans. It also is a fundamental part of

who we are.Slide17

Executive Summary

Always

remember who your client is.

You are there to prevent fraud and corporate bad acts

.

Understand

where your line is in the sand as far as personal ethics and what it would take for you to leave employment if there was no other solution.

Stay

up to date on the latest in ethics

training.

The regulators will go after the gatekeepers and that is a practice we can already start to see happening.

Know there

is a “target” on the back of GC’s and

in-house

counsel today.

Be

smart, diligent, have

common

sense, and remember to behave so that your

Mom/Dad

would be proud of you

.