Bad corporate execs may have to foot own legal bill

[mainegreen]

http://www.law.com/jsp/ihc/PubArticleIHC.jsp?id=1128947761608">Misbehaving May Cost You
Dee McAree - The National Law Journal

A move by prosecutors to attack the legal fee agreements of corporate executives in a high-profile white-collar crime case has raised concerns among corporate and defense counsel.

Most companies have similar advancement agreements, modeled on Delaware law, that provide legal fees to executives sued in connection with their office.

Prosecutors had argued that the defendants' right to legal fees was connected to their alleged misconduct, and thus forfeitable, said Wittig's attorney, Jeffrey Morris of Berkowitz Oliver Williams Shaw & Eisenbrandt in Prairie Village, Kan. Defense lawyers countered that advancement was an independent right written into the company bylaws.

Thought I toss this one out there. At first I thought "Gee, thats swell", but the more I think about it, the less I like it. I've been pretty close to being on the receiving side of some company lawsuits, and I would hate to have to foot the bill for a legal defense related to my work for the company. This may be one of those slippery slope things, where companies just hang people out to dry as a way of saving money. I'm all for screwing the man, but some how I could see this backfiring in a big way. At what point does the employee separate from the company?

Thoughts?

[klook]

1. How many employees can expect their employer to foot their legal bills?

If I were to so something illegal in the course of my employment, I guarantee you my employer would not be paying my legal bills! Then again, I'm not the CEO....

[mainegreen]

3. Here's the problem: If your getting sued, it's for doing something illegal

Even breach of contract is technically illegal.

[klook]

4. So if I do something illegal

it's really my problem, isn't it? Why should my employer cover my legal bills?

I mean, if my employer commands me to commit illegal acts as a condition of employment, I have an obligation to report my employer to the authorities. (Many companies have set up whistleblower phone lines for this purpose, following Sarbanes-Oxley.) And if I commit illegal acts in the course of my employment on my own initiative, that's my problem.

This seems pretty cut and dried to me. Am I just too much of a Boy Scout?

[KurtNYC]

2. Thought this was going to be about KPMG

The government MADE KPMG agree to cut off financial support for former partners defense in a case involving their alleged hawking of tax shelters (shelters which have yet to be proven illegal). The speculation is that the government is trying to make the individual employees cop a plea. In other words, since the former employees can't afford their own defense (at $400/hour), they will be forced to settle.

so much for due process...lemme see if I can pull the article...

[Igel]

5. Bad idea. At least for civil suits.

I've come close to being on the receiving end of acivil lawsuit brought not for my goof ups, but just to get more money after a forced retirement.

As a grad student at the time, it wouldn't have even taken $2k in fees to sink me.

It's bad enough that a prosecutor could target a company and just bleed it with legal fees: intermediate guilty verdicts would be enough to kill many companies, even if the ultimate verdict is 'not guilty'.

Targeting a CEO would probably be a worse form of pressure: it's easier to knock off his assets.

Ultimately it should be up to the board (and, in principle, the stockholders ... ha-ha).

[NorCalDem]

6. I would suggest

that if the lawsuit were against the company in general (i.e. the lawsuits filed against Phillip-Morris and the tobacco companies) then the company can pay for legal fees.

If the CEO is getting sued/indicted for accounting mismanagment (i.e. Enron), then he pays his own way.

Basically, if the crux of the lawsuit deals with the companies practices IN GENERAL, then the company pays for it. If the crime is personal to the CEO or one of it's board members, then they foot the bill. It's that simple!