I assume most of you have been following the spectacular collapse of FTX, the cryptocurrency exchange that was once worth $34 billion and is now worth less than the coins in the cushions of your couch, with theft, fraud, and a host of other felonies thrown in for good measure. If you’re like me, you probably had this reaction: “What the f**k happened here?!” If you are a regulator or law enforcement, you might also be thinking (among many other things): “Where were the lawyers, and what did they do to stop this?” Sadly, these are now common questions as expectations regarding the responsibilities of in-house counsel to spot and stop corporate malfeasance have changed dramatically over the past two decades. These expectations (and new laws) are driving more in-house counsel to look for ways to beef up their role as the “watchdogs” of the company, on the prowl for trouble and wrongdoing – and one clear way to show the value of the legal function. It’s not an easy task, however. It’s can be fraught with risk and conflicting loyalties. And it often seems like the in-house lawyers are bringing a water gun to a knife fight, i.e., they need more help. Warren Zevon said it best way back in 1978:
“Send lawyers, guns, and money. The shit has hit the fan!”
(Lawyers, Guns, and Money)
The problem for lawyers is that guns and money may not be enough (though they certainly help, especially the money bit). They need a plan and a process for how best to identify problems and what to do if they uncover (or suspect they have uncovered) serious wrongdoing. This edition of “Ten Things” walks you through a plan for doing just that:
I was in-house counsel for over 20 years and served as Chief Compliance Officer for a good part of that time. One of the challenges I recall for me and my legal team was finding practical advice for in-house counsel around ethics issues. We held a number of CLE presentations on ethics every year — helpful in terms of yearly mandatory ethics-related CLE hours. While welcomed, the presentations generally left me less than satisfied because most of them were heavily focused on parsing out the text of the relevant Rules of Professional Responsibility (in our case, Texas), with a lot of focus on words like “shall” and “may.” I am not saying this is not important, but what I came to realize is that many of the ethics issues I dealt with as in-house counsel were broader than what a specific section of the rules did or did not mandate me to do. Instead, what I really needed was a general awareness of my different ethical obligations (including those under the rules) and whether I knew or could easily find the answer to my problem, or if I needed to ask someone for help to figure out the next move.
This edition of Ten Things will take on that challenge and discuss some of the basic ethics issues faced by in-house counsel and how to deal with them or what to keep in mind as you analyze the situation. There are definitely some traps out there for the unwary. Hopefully, after reading this you’ll have a better understanding of some of the key things around ethics you need to keep in mind as in-house counsel and when you may need to ask for help. Apologies to my international readers as this is a pretty U.S.-centric discussion though I think the themes apply globally.