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The Corporate CounselorLJN NewslettersNewsSections

Claims Risks

By Susan F. Friedman

Over the past 12 months, in-house counsel have likely read about their contemporaries:

  • Charged with obstructing justice by misleading government investigators in their probes of off-label uses for pharmaceuticals;
  • Sentenced to federal prison for defrauding the Internal Revenue Service;
  • Found liable for damages for the unauthorized disclosure of confidential information;
  • Terminated from employment for the unauthorized practice of law;
  • Attempting appeals for convictions involving conspiracy, fraud, and making false statements to the Securities and Exchange Commission (SEC);
  • Accused of negligently supervising brokers who attempted stock market manipulation;
  • Disciplined or sanctioned for spoliation of electronic evidence; and
  • Found in violation of the Foreign Corrupt Practices Act (FCPA) by engaging in bribery.

There were other in-house counsel indicted on weapons charges, conspiracy and obstruction of justice; sentenced to prison for obstructing proceedings before the Food and Drug Administration (FDA) and the Federal Trade Commission (FTC); used as scapegoats by senior executives; suspended from employment due to ethical violations; and disbarred and imprisoned for conspiracy and money laundering. Many in-house attorneys continued to endure the fallout from the financial crisis and stock option backdating cases.

As in-house counsel continue to juggle their roles between corporate gatekeepers and confidants, they face a host of emerging risks. The passage of new statutes, creation and rejuvenation of regulatory bodies, and the revitalization of existing laws all pose new potential liabilities around compliance and due diligence. Examples include:

  • The Dodd-Frank Wall Street Reform and Consumer Protection Act and its '922 whistleblower bounty provision or '1502 requiring disclosure of the source of conflict minerals, the use of which companies are being asked to track. Examples of such minerals are tin, tantalum, gold and tungsten;
  • The FTC's privacy protection framework and its Red Flags Rule;
  • Mandates from the Patient Protection and Affordable Care Act;
  • Amendments to the False Claims Act;
  • Modifications to the U.S. Sentencing Guidelines clarifying standards for determining effective compliance programs;
  • The multi-agency initiative to increase criminal prosecutions of individuals for violations of the food and drug laws;
  • The FDIC's current agenda as to failed banks;
  • The Environmental Protection Agency's crackdown on everything from greenhouse gas emissions to oil spills;
  • The IRS' launch of 6,000 compensation probes;
  • The application of Rule 34 of the Federal Rules of Civil Procedure as it relates to cloud computing and electronically stored information; and
  • The application of the Sarbanes-Oxley Act's '1519 prohibiting the destruction or concealment of documents to influence a department or agency of the U.S.

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