Wednesday, May 03, 2006

You don't have to give it back!

I am sure many of you noticed the headline today that former Tyco GC Mark Belnick has agreed to pay a $100,000 civil fine to settle allegations that he "received around $14 million in unauthorized and undisclosed company relocation loans." You can see the story here.

Many in-house counsel have witnessed the business people doing something that may not be per se wrong, but that is questionable, in order to hit the profit goals and reap the big paycheck in return.

As we in-house counsel know, there is not always a bright line between what is ok and what crosses the line. Sometimes, even if the business people have crossed the line (something that is hard to decide, except in hindsight), they never seem to have to give the money back, or at least not all of it. There is always therefore a strong incentive to get as close to that line as possible. Some people say this is a good thing for business, others note that it flies in the face of many of the speeches from CEO's about "building cultures of corporate compliance."

Most of the in-hosue lawyers I know interpret their ethical obligations in a way that means drawing the line a little closer to the safety zone.

The Belnick case is interesting because it appears he got the same deal the business people got- a chance to score big, and not having to give any back. I do not know Mr. Belnick, and of course he was acquitted in the criminal case, so it appears he did not cross the line in that case. There is still a class action pending, but, for now at least, his choice appears to have paid off (and some of business people were not as lucky and were convicted, although it doesn't look like they had to give back all the money).

Question for in-house counsel: Would you do the same thing as Mr. Belnick if you could negotiate the compensation deal he obtained? Do you think would it affect your ability as counsel to provide legal advice?

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