In 2007, ten general counsel faced criminal fraud charges, marking an unprecedented year for legal scrutiny in this sector. The charges mainly involved stock-option backdating and included high-profile executives from several major companies. Legal experts suggest that the SEC's heightened focus on general counsel may be leading to overreactions and paranoia regarding potential wrongdoing.

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10 General Counsel Charged This Year
[By Brooke Heath]
2007 has been a record-breaking year for general counsel—but not in a good way! By the beginning of September of this year, 10 general counsel had been
charged with criminal fraud.
According to The National Law Journal, In April charges against general counsel In response to these claims, Linda Chatman
David Bayless, former head of the U.S. for Apple Inc., Tenet Healthcare, Amkor Thomsen, director of SEC enforcement,
Securities and Exchange Commission’s San Technology Inc., and Mercury Interactive said that the cases brought against the
Francisco office, said that the large number were filed. companies and their general counsel
of incidents surrounding general counsel this involved “secret slush funds, forgery, grants
year is “unprecedented.” In August Lisa Berry, formerly of KLA- to fictitious employees, falsified corporate
Tencor Corporation and Juniper Networks documents, self-dealing, self-enrichment,
“In the five years I headed the [SEC] office we Inc., became the latest general counsel and lying” to auditors, according to The
might have one case. They have done 10 in to face charges. As General Counsel National Law Journal.
one year,” Bayless explained. Consulting reported last month, Berry
allegedly backdated stock options for the two “Are we overreaching?” Thomsen asked.
The majority of the charges brought against companies from 1997 to 2003. “You tell me.”
the general counsel were regarding stock-
option backdating. This disturbing “trend” While the number of charges against general On the Net
started as early as 10 days into the year counsel this year is unparalleled, some,
when William Sorin, general counsel for like Melinda Haag, an attorney with Orrick, Record Number of General Counsel Charged
Comverse Technology Inc., was fined by Herrington & Sutcliffe, feel that the high in 2007
the SEC for backdating, according to The number of charges is a result of the SEC’s www.law.com/jsp/ihc/PubArticleIHC.
National Law Journal. He agreed to pay heavy focus on the group of attorneys. jsp?id=1191229387776
$3.1 million to settle a civil conspiracy
claim. One month after that, Kent Roberts, According to The National Law Journal, Fraud Charges Filed Against Former General
former general counsel for McAfee, was also Haag represented at least three general Counsel
charged with backdating. counsel who had been charged by the SEC. www.lawcrossing.com/article/index.
She said that there “is little doubt the SEC php?id=3537
In March charges were brought against is focused on GCs as potential wrongdoers.
multiple attorneys, as two of Enron’s lawyers The problem, in my view, is that the SEC’s SEC Charges Former General Counsel
were accused of lying to auditors in a civil suspicion about GCs has almost reached a of KLA-Tencor and Juniper Networks for
enforcement case. That same month, Myron level of paranoia—if they believe someone Fraudulent Stock Option Backdating
Olesnyckyj, general counsel for Monster within the company committed financial www.sec.gov/news/press/2007/2007-170.htm
Worldwide, settled a claim brought by the fraud, they assume in-house lawyers were
SEC for civil securities fraud. involved. It is difficult to convince them
otherwise.”
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