In-house lawyers, we said yesterday, are now caught between their duty as advocates on the one hand, and the modern concept of ethics and compliance on the other hand. Talk about a headache.
But that’s not all. Making it worse are attacks on in-house types by the biggest guns around, either because the in-housers were being advocates, or because they were trying to be ethics and compliance officers. If it looks like there’s no shelter from the storm (thanks, Bob), that’s because there isn’t.
Who’s kicking around in-house lawyers and compliance officers? Walmart and Siemens come to mind. As do the U.S. Department of Justice and the federal courts.
Consider three examples, two out of today’s headlines, and one from a few years ago.
The older case is from 2011, when the DOJ twice prosecuted the former associate general counsel from GlaxoSmithKline, Lauren Stevens.
The feds said information she provided to the Food and Drug Administration about GSK’s promotion of an anti-depressant drug for weight loss wasn’t accurate or complete. The DOJ charged her with four counts of making false statements, one count of obstruction of justice, and one count of falsifying and concealing documents.
Stevens won a dismissal without prejudice after she produced extensive evidence showing she acted on the advice of counsel and without any intent to violate the law. But the DOJ re-indicted her. No one really knew why.
Earlier in 2011, Lanny Breuer, who was then head of the DOJ’s criminal division, had told a meeting of corporate counsel that Stevens was a high-priority target.
“As I have said before, he said, “if we find credible evidence of criminal conduct – by corporate executives or the lawyers and accountants who advise them – we will not hesitate to charge it, Indeed, as I am sure you are aware, a grand jury in the District of Maryland recently indicted Lauren Stevens, a former in-house attorney for a major pharmaceutical company, charging her with obstructing justice in connection with an investigation by the Food and Drug Administration into the off-label marketing of a pharmaceutical drug.”
After the DOJ indicted Stevens a second time, Judge Roger Titus of the U.S. district court in Maryland tossed the case.
“I conclude on the basis of the record before me,” Judge Titus said, “that only with a jaundiced eye and with an inference of guilt that’s inconsistent with the presumption of innocence could a reasonable jury ever convict this defendant.”
Despite the happy outcome for Stevens, her two-time prosecution still worries company lawyers who deal with federal agencies, including in-house lawyers handling FCPA investigations and answering compliance-related questions from the DOJ and SEC.
Judge Titus was equally alarmed. When he ordered her second acquittal, he said there’s “an enormous potential for abuse in allowing prosecution of an attorney for the giving of legal advice.”
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The next example comes from Walmart.
Maritza Munich, a former in-house lawyer and compliance officer, wrote internal reports and emails about the progress of an internal FCPA investigation that started in 2011. Then she abruptly resigned.
As Mike Scher said last week, “There has been no indication that she did anything other than an excellent job as a compliance professional.”
A Congressional Committee wanted to hear from Munich but Walmart apparently refused to allow her to testify in public, invoking its attorney-client privilege. Walmart is now asking the Delaware Supreme Court to keep Munich’s files a secret in a civil shareholder suit against the company.
We don’t know what Munich is doing or thinking these days. But if she’s out of a job and muzzled from defending herself, life could be tough.
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The final example involves not a lawyer but a compliance officer. What happened to him could also happen to any in-house lawyer working outside the United States.
The Taiwan-born compliance officer for Siemens’ healthcare business in China sued the company in U.S. federal court. He said he was fired for internally reporting potential FCPA violations.
Meng-Lin Liu alleged that in China and North Korea, Siemens was submitting inflated bids for big-ticket equipment sales to public hospitals, then selling the same equipment at lower prices to middlemen designated by the hospitals’ procurement officials.
After Liu reported what he thought might be FCPA violations to his bosses, he was fired. A month later, in June 2011, he reported the alleged FCPA violations to the SEC. Then Liu sued Siemens for retaliating against him.
The federal court in New York threw out his suit. Unlike the FCPA, the court said, the anti-retaliation provisions of Dodd-Frank don’t apply to what happens outside the United States. And because Liu didn’t report possible FCPA violations to the SEC until after he was fired, the court said he never became a federal whistleblower during his employment. So he couldn’t invoke U.S. law for protection as a whistleblower.
Liu has appealed the dismissal to the Second Circuit, and the SEC has filed an amicus brief supporting him.
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Next time: How Congress and the SEC may be hurting in-house lawyers by trying to help them.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.