Weil Gotshal, Skadden Arps, Boies are called often
General Counsel look to New York and D.C. lawyers for help
The crisis of 2002 raise a troubling question for in-house counsel everywhere: whom to call?
The answer to that question is as complex as the predicaments faced by some of the nation’s biggest companies during the past year or so.
One Enron-style meltdown spawns a host of legal troubles, each of which may demand specialized outside counsel.
An examination of 10 companies and some of their problems reveals a few trends. Name recognition counts. So does knowing one’s way inside the Washington, D.C., Beltway, if a federal probe is on the table.
In a year where big corporate bankruptcies hit unprecedented levels, New York’s Weil, Gotshal & Manges landed three whoppers: WorldCom Inc., Enron Corp. and Global Crossing Ltd. David Boies’ near rock-star status helped launch him and his firm as key counsel to Adelphia Communications Corp. And Tyco International Ltd. In some of the legal morass created by a year of scandal. When prosecutors went after the corporate executives at places like Enron, WorldCom and Tyco, a number of those under fire hired Reid Weingarten, a former federal prosecutor and Irangate veteran.
Enron turned to New York’s Skadden, Arps, Slate, Meagher & Flom to handle the government-investigations angle of its legal mess, and the firm also defended the brokerage house Merrill Lynch, Pierce, Fenner & Smith Inc., a unit of Merrill Lynch & Co., where New York Attorney General Eliot L. Spitzer took aim at the company’s research practices last spring.
"There are times when you want a pit bull, and there are times when you want someone who is more conciliatory," said Jonathan Lindsey, manager of the New York office of legal search firm Major, Hagen & Africa. "There are times when it’s extremely important for a company to have a lawyer who has credibility." When government investigators are knocking, for example.
When Global Crossing got into trouble, the company went with household names in the legal community. John B. McShane, general counsel to Global Crossing, did not have to agonize over whom to hire to handle the legal issues stemming from the company’s massive bankruptcy: Weil was on board three or four months before McShane took his post. Nor did McShane have any reason to change direction with bankruptcy counsel, he said, since the company had landed the "premier" firm in that realm. When Global Crossing filed for bankruptcy in January 2002, renowned bankruptcy lawyer Harvey Miller at Weil signed off on the company’s petition. Miller has since left the firm. McShane said that Weil partners Paul Basta and Michael F. Walsh are the lead attorneys on the case. Fried, Frank, Harris, Shriver & Jacobson of New York handles conflict work (the same role the firm occupies vis-à-vis the Adelphia bankruptcy).
Global Crossing had another heavy hitter to handle government investigations and securities litigation: New York’s Debevoise & Plimpton, with partner Ralph C. Ferrara as the go-to man. A recent Wall Street Journal article depicted Ferrara as an effective-if splashy-advocate who has carved out a lucrative niche defending companies against the Securities and Exchange Commission, the office he once called home as general counsel.
Having someone like Ferrara on your side, "can reduce the number of grains of salt that the regulators will apply while they are listing to you," Lindsey said.
Boies’ recognition in legal circles may be one reason that he and his firm are taking the lead representing Adelphia and Tyco in legal battles flowing from scandals involving top executives. The federal government chose Boies to go after Microsoft Corp. on antitrust violations, and Al Gore picked Boies to wage war over the 2000 presential ballot count.
Boies’ firm, Boies, Schiller & Flexner, was already doing some work for Adelphia when accusations regarding self-dealing by Rigas family members emerged, according to Adelphia spokesman Eric Andrus. On the Adelphia matter, Boies’ son, Christopher, is one point partner on the case, along with partner Philip Korologos, said Andrus.
"They’re looking for big names and people who have been inside the beltway in prosecutors’ offices," said legal consultant Peter Zeughauser of The Zeughauser Group of Newport Beach, Calif.
Confluence of events
An idiosyncratic confluence of events and personal connections can forge a legal team, as in the case of outside counsel who defended Arthur Andersen in its criminal trial last spring. Just ask defense lawyer Rusty Hardin of Houston’s Rusty Hardin & Associates why Andersen’s corporate counsel tapped him.
"I have no frickin’ idea, Hardin said. Actually, he has a clue: Look at his past life, when he worked with Robert B. Fiske Jr. on the Whitewater independent counsel team. Fiske eventually returned to Davis Polk & Wardwell of New York.
Davis Polk was retained by Arthur Andersen in October 2001, Hardin said, noting that he was hired that November. Hardin’s original mission was to defend Andersen in Enron-related civil class actions filed in Houston. Then there was the document debacle and criminal charges, and Hardin found himself a key part of Andersen’s criminal defense team. By the time of the criminal trial, that team also included Chicago-based May,er Brown, Rowe & Maw and Wiggin & Dana of New Haven, Conn.
Wiggin & Dana point partner David B. Fein had a past link to the people at Davis Polk: He once worked with Davis Polk’s Denis J. McInerney at the U.S. attorney’s office for the Southern District of New York. McInerney and Fiske worked together as special counsel in Whitewater (with Hardin). Fein also knew his way around Washington: He went from his job as a federal prosecutor to a post as associate counsel to President Clinton, though he said that his tenure did not overlap with Fiske and McInerney’s Whitewater work.
Sometimes a company does not have to go lawyer-shopping when trouble hits. Arnold & Porter partner Richard Rosen had represented Computer Associates International Inc. for seven years by the time he took on a federal antitrust suit that resulted in a $638,000 penalty to the company. That representation was part of the continuing relationship. Rosen said.
Old relationships pay off
Relationships may go dormant, then revive when trouble strikes. Simpson Thacher & Barlett of New York was MCI’s outside counsel when the company was purchased by WorldCom, said partner Paul Curnin.
For a while, things were quiet on the WorldCom front for Simpson Thacher. Then WorldCom called on Curnin to handle one securities matter, liked the result, and turned to Curnin again to take on the securities litigation stemming from Worldcom’s current situation, he said.
Corporations are not the only ones tapping into heavy-duty big-firm legal talent. Weingarten, a partner at Steptoe & Johnson of Washington, D.C., is defending a host of ex-executives, including Richard Causey, former chief accounting officer for Enron; Bernard Ebbers, ex CEO of WorldCom: and Mark Belnick, former general counsel at Tyco.
W. Neil Eggleston, partner at Washington D.C.’s Howrey Simon Arnold & White, represents most of Enron’s independent directors for litigation and government investigations. Washington, D.C.’s Covington & Burling represents Adelphia’s committee of independent directors concerning the company’s investigation of internal misconduct.
In the insider-trading debacle at ImClone Systems, Inc., ex-CEO Sam Waksal counts among his defense lawyers Mark F. Pomerantz, a partner at New York’s Paul, Weiss, Rifkind, Wharton & Garrison. Martha Stewart has hired, among others, Washington, D.C.’s Arnold & Porter, which represents her in the congressional investigations.
Even attorneys for ancillary players may find themselves in the spotlight, according to Zeughauser: "Who your client is determines what role you play."