May 31, 2006

Jenner & Block Partners Larry P. Ellsworth, Ronald L. Marmer, J. Kevin McCall, Thomas C. Newkirk and Andrew Weissmann joined a select group of corporate secretaries and in-house counsel to discuss today’s most pressing corporate governance, risk and compliance issues at the 2006 Corporate Secretary Think Tank, held May 17 at the New York Marriott Marquis in Times Square.  The Think Tank provided the senior corporate executive participants with a unique opportunity to candidly share experiences, express ideas and discuss best practices.

Partner Ronald L. Marmer chaired and moderated the “Litigation Society” program, one of four interactive programs planned for the day.  “Litigation Society” offered steps that corporate secretaries can take to reduce the risk that their companies will become enmeshed in government investigations and high-stakes litigation.  In addition to Mr. Marmer, the session featured Paul T. Cappuccio, Executive Vice President and General Counsel at Time Warner; Jeffrey Eglash, Senior Counsel, Investigations/Compliance at General Electric Company; and Michael W. Smith, President of AIG Financial Lines Claims.

Litigation is something that every corporate legal department worries about, said Mr. Marmer in his opening remarks, “because it comes without any advance warning, and the scope of the risk and the dangers are often unknown.”

According to the panelists, the stakes for companies facing litigation are higher than ever.  For instance, Mr. Smith noted that while he has seen a decrease in the number of securities litigation related insurance claims over the last few years, the settlement value of such claims has gone up.  In total, “the value [of such settlements] in 2004 was $2.9 billion and it’s risen to $3.5 billion – and that excludes both the WorldCom and Enron litigation,” he noted.

The panelists agreed that one key to preventing an investigation by the Securities & Exchange Commission or the Department of Justice is to ensure that employees at every level of the company understand what information needs to be disclosed to the finance and audit committees.  “No one wants to think of their company as bad people,” said Mr. Cappuccio, “but even in good companies, there’s not always the right communication.”

High-level executives oftentimes argue that it’s “impossible” for them to know what’s going on below them, added Mr. Marmer.  So it’s important that general counsel know how to address that concern.

This is especially critical in today’s litigation environment, said Mr. Eglash, because there has been a dramatic increase in the type of conduct for which corporate executives could find themselves in court.  “When you combine that with the Draconian sentences that are called for under the sentencing guidelines, the consequences for corporate executives are significant,” he said.

Later in the day, Partner Andrew Weissmann participated in a pre-lunch discussion with Corporate Secretary’s Senior Editor, Brendan Sheehan.  Mr. Weissmann, the former Enron Task Force Director for the U.S. Department of Justice, discussed the extent to which the DOJ and the SEC cooperate in civil and criminal actions brought against companies accused of wrongdoing.  He also highlighted typical mistakes made by companies and individuals when responding to government investigations.

Mr. Weissmann advised the attending executives that large companies “need to have a plan now” for how to respond to a government investigation, even if there’s no sign of immediate trouble.  And, he said, too often executives mismanage the public’s perception of the crisis.  He suggested that if there is bad news, “get it all out at once” because if the news slowly leaks out, it can be a “death by 1,000 cuts” at the hands of the media and potentially be far more damaging to a company’s reputation and other assets.

Messrs. Marmer and Weissmann also participated in the other discussions during the day, including the “Evolution of the Corporate Secretary,” “Compensation Matters” and “Managing Your Time.”

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