CCBJ September - October 2021 by Corporate Counsel Business Journal

Corporate Counsel Business Journal Sept  Oct 2021

VOLUME 29, NUMBER 5

INSIDE

Client Focused, With A Collaborative Spirit

Hyping the Hype Cycle

New Administration, New Trends For the White Collar Space

Space Exploration: A Bold New Legal Frontier

Meeting Client Expectations in a Changing World

JUL • AUG 2021

Client-Focused, With a Collaborative Spirit YVETTE OSTOLAZA, CHAIR-ELECT OF SIDLEY AUSTIN’S MANAGEMENT COMMITTEE, DISCUSSES HER LEADERSHIP STYLE AND WHAT SHE LOOKS FOR IN LAWYERS FOR HER TEAM.

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JANUARY • FEBRUARY 2021

In This Issue LAW BUSINESS MEDIA

Kristin Calve

EDITOR & PUBLISHER

Kimberly Fine

MANAGING DIRECTOR PROGRAMMING

Dylan Shepard

EDITORIAL COORDINATOR

Neil Signore

SVP & MANAGING DIRECTOR OF EVENTS

Lainie Geary

DIRECTOR OF CLIENT SERVICES

Amy Lemel

DIRECTOR OF CLIENT SERVICES

Jennifer Coniglio VP FOR EVENTS & SPECIAL PROJECTS

Matthew Tortora

SENIOR DATABASE MANAGER

Pat Hanelt

OFFICE ADMINISTRATOR

Rob Williams

VOLUME 29, NUMBER 5

AT THE TABLE . . . . . . . . . . . . . . . . . . . 2

37 Private Companies Also Need D&O Insurance

Client-Focused, With a Collaborative Spirit

Carrie Maylor DiCanio & Robert M. Horkovich

Kristin Calve

FRONT . . . . . . . . . . . . . . . . . . . . . . . . . 7

Austin Waters

GRAPHIC DESIGNER

SEPT  OCT 2021

PULSE . . . . . . . . . . . . . . . . . . . . . . . . .13

40 The Legal Spend Guessing Game

Nathan Cemenska

42 Flipping the Script on Litigation

Benjamin Rubinstein, Maxwell Herman and Chris Emch

13 New Administration, New Trends for the White Collar Space Parvin Moyne & Claudius Modesti

OPS . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

17 Arbitrating Energy Disputes Benefits All Parties Involved Ingeuneal Gray

22 Leaders in Color Series with Civil Rights Champions McGuireWoods

47 Meeting Client Expectations in a Changing World Ken Crutchfield

50 Why In-House Legal’s Digital Transformation Starts with Your Contracts

Rick Ralston

24 Anticorruption as a Key U.S. National Security Issue Meena Sinfelt and Katie Matsoukas

52 ILTACON Tackles Changing Legal Service Delivery Models

IDEAS . . . . . . . . . . . . . . . . . . . . . . . . . .31

LEGAL TECH . . . . . . . . . . . . . . . . . . . 56

31 Space Exploration: A Bold New Legal Frontier Thomas McCarthy

56 Legal Tech Startup Spotlight

Brad Blickstein

WRITER

POSTMASTER: Please send address changes to Corporate Counsel Business Journal, 104 Old Kings Hwy N., Darien, CT 06820; by emailing info@ccbjournal.com; or by calling 844-889-8822. CORPORATE COUNSEL BUSINESS JOURNAL (ISSN: 1073-3000), September/October, volume 29, number 5. Published bimonthly by Law Business Media, 104 Old Kings Hwy N, Darien, CT 06820. Subscription price: $110 a year. Periodical postage paid at Darien, CT, and additional mailing offices. The material in this publication contains general information, is not intended to provide legal advice and should not be relied on to govern action in particular circumstances. The sources of material contained in this publication are responsible for such material, and any views or opinions expressed are solely those of the source.

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Kristin Calve At the Table

Client-Focused, With a Collaborative Spirit Yvette Ostolaza, chair-elect of Sidley Austin’s management committee, discusses her leadership style, what she looks for in lawyers for her team, and the best career advice she’s ever received. CCBJ: What led you to join Sidley? Yvette Ostolaza: What originally attracted me to Sidley was the global reach of the firm, its premier brand, and the strength of the firm’s leadership team. I was very impressed with Larry Barden and others I met early in the process. Larry is the current chair of the firm’s management committee, whose giant shoes I’ll be filling as I transition into this role. One of our early meetings was over dinner and I was struck by the fact that Larry and his wife joined us. That spoke volumes to me and is something I’ve referred to as a “triple scrabble points” with my team. In business and in life, it’s about seizing opportunities to be genuine and human because that is what people react to in various settings, including at the office. Authenticity is very important to me. As I learned more about Sidley’s collaborative culture, its global client base, diverse leadership, and the vision that management had for the firm, I became intrigued. For example, Sidley already had women in meaningful leadership positions running large groups and offices. I was impressed by the firm’s track record of diversity. It became clear to me that the firm was motivated by attracting and retaining talent that reflects the clients’ priorities. Sometimes it really is as simple as giving clients exactly what they want. At the time, I was also referring a significant amount of business to firms in Southern California and Chicago. As my practice grew, I found myself needing talent in markets where Sidley already had significant strengths and strong

SEPTEMBER • OCTOBER 2021

ties to local business communities. The firm’s practice depth, including transactional, litigation, and regulatory work, along with its regional strengths make for a potent combination that I knew I could leverage and build upon. The team of lawyers who worked with me for two decades and joined the firm with me felt the same way, which made it easy for me to pick Sidley over other firms. Please tell us about your leadership style, and who or what has influenced it. I try to focus on making sure we get the best out of all of our talent, as well as understanding that leading an organization is not one size fits all, especially when you are working with professionals in different parts of the world who have different practices and cultural norms. I apply a flexible leadership style that focuses on the individual while also trying to look around the corner for trends that others may be

NETWORK

The participants in the CCBJ Network demonstrate, through their many contributions, their unwavering commitment to the advancement and success of corporate law departments. The engagement and support of these “partners of corporate counsel” assure we continue to develop and distribute the news and information this unique and sophisticated audience relies on to meet the evolving legal and business needs of their organizations.

Strategic Partners American Arbitration Association

In business and in life, it’s about seizing opportunities to be genuine and human because that is what people react to in various settings.

Akin Gump Strauss Hauer & Feld LLP Barnes & Thornburg Clifford Chance H5

missing in the marketplace, so that we can be at the forefront of providing the best legal work and value for our clients.

Jones Day

I try to remember that this is a talent business first and lead with that in mind. I also work hard to instill an understanding within my teams that a career is a marathon, not a sprint. There will be times in their career where they need to focus on their children, other times perhaps on their parents, and always on themselves in addition to their dayto-day client responsibilities that we have as professionals in a law firm. I try to empathize with those shifting priorities as much as possible.

McNees Wallace & Nurick LLC

My approach to leadership was shaped early in my upbringing in a middle-class Cuban family in Miami. I played a lot of different roles in various family businesses but was always reminded of what was truly important – family and community. I also understood clients are the reason we had a business. I work hard to incorporate that understanding into my leadership approach daily. I think a balanced approach plays a key role in attracting the industry’s top talent, who want a platform to practice at the highest level, but also a winning team. Mentoring is also very important to me and I have learned a great deal in my career. As a leader, I value and encourage mentoring and long-term relationships. What qualities do you look for when hiring new people for your team? There are many good lawyers out there. Because of Sidley’s strength in the market, we have plenty of opportunities

McGuireWoods LLP National Association of Corporate Directors (NACD) Nuix Weil, Gotshal & Manges LLP

Advisors Exterro Computershare Contract Logix FRONTEO FTI Consulting iDiscovery Solutions JAMS Logikcull NAM (National Arbitration and Mediation) OpenText™ Discovery Wolters Kluwer’s ELM Solutions Wolters Kluwer’s Legal & Regulatory

Contributors

Anderson Kill Cornerstone Research Fish & Richardson Herbert Smith Freehills Ipro Tech

Morae Global Neota Logic Society of Corporate Compliance and Ethics Zapproved

Please help us improve and expand our services to corporate counsel by sharing your ideas with our publisher, Kristin Calve, at 844-889-8822 or kcalve@ccbjournal.com.

CORPORATE COUNSEL BUSINESS JOURNAL

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I try to take a long-term, holistic approach with individuals. to bring top lawyers to the firm. I try to take a long term, holistic approach with individuals. They obviously have to have a proven track record of client service and legal acumen, but I’m also looking for attorneys who have common sense and will integrate well into Sidley’s collaborative culture. I want attorneys who work well in teams. There’s no room for sharp elbows. We “hunt in packs,” and want smart people who enjoy learning from others. You have to be willing to ask questions and know how to observe in order to be a life-long learner. That inquisitive nature and intellectual curiosity is a trait that I’m always looking for in all employees. Additionally, now more than ever, we are looking for leaders that can appreciate and seize the informal training and mentoring moments with their teams. The value of those opportunities has been made clear as we’ve adapted to this remote style of work during the pandemic. The informal mentorship opportunities have been missing; we want leaders who recognize that and are able to adjust accordingly. Can you describe the culture of your organization? The American Lawyer described our team as “Built to Win.” We’re looking to win for our clients, whether it’s in a transaction or in litigation. We value diverse, collaborative teams. Our clients represent society at large and are looking for a diverse range of experience and advice so they can make the best decisions for their business. And that’s at every level of the organization. Our wonderful staff all have to be client-driven and flexible. I don’t think the world is very linear nowadays, so individuals who are entrepreneurial, client-driven, service-oriented, at every level of the organization – that’s ultimately what we look for at Sidley.

What’s the best career advice you’ve received? One of the best pieces of advice I’ve received was when I was working in corporate America, in marketing, before I went to law school. Our corporation had gone through a reorganization and the leader had lost his job. He had spent his entire career with the company. His advice to me was to go to law school. He said, “You know, the great thing about lawyers is that as long as you keep your clients happy, you always have a job at the end of the day and can hang a shingle with your name.” My parents always had their own businesses, and I remember thinking that working in a large organization would provide less risk, but now I was seeing the ebbs and flows of business that made me realize the benefits of being independent. I’m so grateful for that advice and have held onto it throughout my career. I feel fortunate to not only have found a profession that I love but also a firm in Sidley that challenges me as a leader and offers me significant opportunities to provide top-tier legal work for clients. What changes would you like to see within the legal profession? I believe it’s important to ensure that diverse teams are tied together at every level to address client needs and reflect our communities – whether it’s in terms of gender, ethnic background, religion, or socioeconomic status. Our profession should continue to focus on making sure our talent is reflective of the needs in our communities. Our profession is making great strides in that area, but we still need to continually evaluate what we’re doing and make sure that we’re at the forefront in recruiting and retaining diverse employees. The serious manner in which Sidley approaches its commitment to diversity, equity and inclusion is a big part of what attracted me to Sidley in the first place and continues to inspire and motivate me as a leader. 

CORPORATE COUNSEL BUSINESS JOURNAL

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EXHIBIT A

SEPTEMBER • OCTOBER 2021

Front Hyping the Hype Cycle Gartner’s Hype Cycle has proven to be an enduringly popular tool for analyzing technology. By providing a graphical depiction of a pattern that arises with new technologies or applications, Gartner helps its consulting clients track tech's maturity and future potential, which helps guide deployment in light of an organization’s business goals. For General Counsel and their operations teams, the Hype Cycle for Legal and Compliance, (depicted above in abbreviated fashion), is especially interesting, revealing a shockingly low level of digital maturity for most corporate law departments. “As a result of acute workload pressures through the pandemic, technology solutions appear more attractive than ever for over-burdened legal and compliance teams,” says Zack Hutto, director, advisory in the Gartner Legal & Compliance practice. “Significant hype tends to follow more sophisticated technology innovation – like AI. As a result, many legal leaders get overwhelmed by technology opportunities.” You can read more at Gartner.com.

CORPORATE COUNSEL BUSINESS JOURNAL

Triangulating Tech Briefly AIG announces that Peter Zaffino, president & chief executive officer, will assume the additional role of chairman of the board of directors, effective January 1, 2022. McNees Wallace & Nurick announces the addition of trial attorney M. Abbegael Giunta to its Labor and Employment and Public Finance & Government Services Groups.

Wary of consultants bearing solutions? There’s an option. Rather than reading the tea leaves of the Hype Cycle, check out Reynen Court. This app platform, designed to make it faster and easier for law firms to adopt legal technology by making products available for roll-up-thesleeves test drives, recently rolled out a separate consortium for corporate law departments at major financial institutions (Barclays, BNP Paribas, Morgan Stanley, UBS) and other blue-chip brands (Cisco, Intel). According to Reynen founder and CEO, Andrew Klein, the law department cohort will meet from time to time with their law firm counterparts. “We are driven by the opportunity to establish clear standards for the legal technology sector,” Klein says. “Since the legal services market is triangular – defined by law firms, legal departments and the vendors of technology – it has always been our plan and ambition to bring into collaboration the in-house legal departments.”

Sabrina Conyers joins McGuireWoods’ Tax & Employee Benefits Department as a partner in the firm’s Charlotte office. Mike Kachel and Micol Scabbia are appointed global co-heads of Clifford Chance’s Client & Market Development (CMD) and will join the firm's Executive Operations Group. BigHand appoints Claudia Belardo to the newly created role of chief customer officer. Baker Botts announces partners Dr. Johannes Koepp and Andrew Behrman have assumed roles as co-chairs of the International Disputes Group. JAMS announces the addition of N. Damali Peterman, Esq., to its panel. Vancouver-based Clio acquires Californiabased automated courtcalendaring company CalendarRules. Paul Reynolds joins FisherBroyles as a partner in their Atlanta Office. Neil Roberts is appointed to senior advisor in FTI’s Strategic Communications segment in Australia.

SEPTEMBER • OCTOBER 2021

Straight (TED) Talk In this piece from Bloomberg Law, Nishat Ruiter, GC of TED Conferences LLC, the company behind TED Talks, dishes on her distaste for using “fashion shows” to vet outside counsel. She doesn’t find such sessions useful or interesting and prefers direct conversations to probe for the four things she looks for in outside counsel: creativity; non-traditional fee structures; diverse collaboration; and a world lens through people with varying life experiences. “I’ve had interviews with law firms where they’ve touted deals, and they’ve touted amounts of money that they’ve closed, and they’ve touted various clients that they’ve had,” she says. “But when I’ve asked direct questions about their knowledge of TED, they didn’t have much to say. It’s interesting how they represent themselves to be really formidable with qualifications that I just don’t align with.”

GC Comp Goes Sideways For many GCs, comp drifted down – or, at best, sideways – in the Year of the Pandemic. But don't get too choked up. GCs in the entertainment sector closed the gap with their counterparts in financial services, who historically have led the comp pack. Both sectors slumped, but it was a lopsided game, with finance firms dropping by $23M and entertainment dropping by a mere $4M. The pandemic’s impact is manifest in the scrambled rankings. Half the legal chiefs in the Top 10 weren't on last year's list, including four in entertainment outfits such as Netflix and Warner Music. The highest paid GC last year, Alan Braverman of Disney, fell to #73 this year as the theme park giant mothballed Mickey. Eric Grossman, the previous #2 from Morgan Stanley, fell off the list completely. Check out the top 10 men and women on this page.

Male GC/CLO Compensation Name

Company

Cash Compensation*

Viet D. Dinh

Fox

$6.8M

Bruce Campbell

Discovery

$6.1M

Michael J. Sharp

Jefferies Financial

$6.0M

David Hyman

Netflix

$5.5M

Paul M. Robinson

Warner Music

$5.2M

Michael Cohen

Playtika Holdings

$4.2M

Bradford L. Smith

Microsoft

$4.2M

Avrohom J. Kess

Travelers

$3.7M

Edward S. Nekritz

Prologis

$3.5M

Adam R. Kokas

Atlas Air

$3.2M

Morrison & Foerster announces the arrival of Hogene Choi as a partner in its Patent Strategy + Prosecution Group. Litera acquires Concep, a provider of B2B relationship marketing technology for law firms, corporations, and professional and financial services. Weil advises ABD Insurance and Financial Services, Inc. in its $1.35 billion merger with Newfront Insurance, Inc. McNees Wallace & Nurick announces the addition of public finance and government services attorney Frannie Reilly to its Devon office. Barnes & Thornburg adds entertainment lawyer Will Lewis as of counsel in the Atlanta office, joining their Entertainment, Media and Sports Practice Group. Morae Global Corporation expands the company’s North American and Asian operations and business with the acquisition of Philadelphia-based information management provider Adaptive Solutions, Inc. FTI Consulting appoints William McCausland as a managing director in the Risk and Investigations practice.

Female GC/CLO Compensation Name

Company

Cash Compensation*

Karen P. Seymour

Goldman Sachs

$4.9M

Katherine Adams

Apple

$4.6M

Laureen E. Seeger

American Express

$4.1M

Lucy Fato

AIG

$3.8M

Laura J. Schumacher

AbbVie

$3.8M

Christa A. D’Alimonte

ViacomCBS

$3.7M

Deirdre Stanley

Estee Lauder

$3.3M

Hilary Krane

Nike

$3.2M

Mary K. W. Jones

Deere

$3.1M

Sandra Leung

Bristol-Myers Squibb

$2.7M

Womble Bond Dickinson LLP partners with Everlaw, providing its legal teams with enhanced flexibility and control throughout the legal review process. ILTA launches the ILTA Innovation Hub during ILTACON, aiming to create a community that brings together developers, investors and buyers of legal technology products. Google taps O’Melveny & Myers and Morgan and Lewis & Bockius to fight antitrust litigation.

* Note: Salary, Bonus and Nonequity Incentive Compensation

CORPORATE COUNSEL BUSINESS JOURNAL

Nuix recruits investigations software industry veteran Abdeslam Afras to lead its worldwide strategy in digital forensics and incident response. OpenText™ announces the launch of OpenText Advisory Services, offering to support organizations in achieving maximum value from their information management investments. DLA Piper partner, Matthew Graves, is selected by President Joe Biden to run the D.C. federal prosecutor’s office. Lou Andreozzi is appointed to the board of directors of global managed services provider Integreon. Shariff Barakat joins Akin Gump as a partner in the firm’s Washington, D.C. office, a member of the firm’s project finance & development and tax practices. Aimee Adler joins Weil as a partner in their New York office. Baker Botts is partners with the Social Mobility Foundation to provide a virtual internship program for 16 university-level students. Randi S. Ellis, Esq. joins JAMS in their Houston office after ten years as an independent ADR practitioner. Akin Gump advises Stonebriar Commercial Finance in issuance of $227 million of fixed-rate reset cumulative preferred shares. Nuix acquires all shares in Topos Labs, Inc., a developer of natural language processing software.

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SEPTEMBER • OCTOBER 2021

Required Reading Too busy to read it all? Try these books, blogs, webcasts, websites and other info resources curated by CCBJ especially for corporate counsel and legal ops professionals.

Article:

ACC Resource Library We love this piece from Mark Roellig, Senior Client Advisor with Perkins Coie’s Client Advantage team, which is rooted in a longer article about transitioning to an in-house role. Entitled “Top Ten Tips to be Successful as a New In-House Counsel (and Beyond),” it was co-authored with Sarah Kalgaard, GC of Vital Images, Inc. Roelig’s piece, “Emotional Intelligence Matters,” calls on lawyers transitioning to in-house roles to shuck their perfectionist tendencies. “You do not need to be a great legal expert to be a great in-house lawyer,” he writes. “In private practice, you are paid by the hour, and the expectation is perfection in every aspect. For example, at a law firm, never send a memo to a client with a typo. A mistake is unacceptable. In the in-house counsel’s world, it is a little more ‘messy.’ The amount of information, effort and precision to employ takes judgment – your judgment and Emotional Intelligence (EQ) will likely be more valued than your IQ and legal knowledge.”

BLOG:

inhouseblog.com This piece by Valerie Fontaine, a legal search consultant based in Los Angeles, also looks at in-house roles and the very different attributes of “ideal” candidates vs. law firm roles. “In-house employers usually don’t value academic credentials such as law school prestige and the candidate’s class rank as highly as law firms do,” Fontaine writes. “Rather, they weigh legal experience, business sense, and interpersonal skills much more heavily.” The portrait she paints is of a business-minded generalist and juggler ready for anything and with different interpersonal skills than what law firms require. “Corporations usually don’t have attorneys, even junior ones, who work in back rooms, isolated from the businesspeople,” she says. “You share office space and meet with your client on a daily basis. Effective in-house lawyers get out ‘on the floor’ to see how people do their jobs and the issues they face, so they can give advice based on a thorough understanding of how the business really works.”

Thanks to the law firms, technology companies, alternative legal service providers, management consultants and other supporters of corporate law departments who share their insights and expertise through the CCBJ network. Your participation is appreciated.

Brad Blickstein is the founder and principal of Blickstein Group. He focuses on helping legal service providers better understand and serve their clients while providing information about law departments and legal operations. Brad is also the co-head of Baretz+Brunelle’s NewLaw practice group, where he helps clients see the future – educating them on the industry’s evolution of legal services and their consumption. P. 52 Nathan Cemenska is the Director of Legal Operations and Industry Insights at Wolters Kluwer's ELM Solutions. He previously worked in management consultancy helping GCs improve law department performance and has prior experience as a legal operations business analyst. P. 40 Ken Crutchfield is the president and general manager of Wolters Kluwer Legal & Regulatory U.S. He leads the Legal Markets group and is responsible for setting the vision and strategic approach with a focus on developing leading digital products. His group aims to provide legal professionals across a wide range of markets with expert content and analysis and leading workflow solutions. P. 47 Carrie Maylor DiCanio is a member of Anderson Kill’s insurance recovery group and founding shareholder of Anderson Kill’s Denver, Colorado office. Her practice concentrates on D&O and representations and warranties insurance and claims involving complex financial matters. P. 37

Chris Emch is an associate in the Dispute Resolution Practice at Herbert Smith Freehills in New York. Previously, he worked as a corporate PR professional, representing automotive and financial services companies. P. 42 Ingeuneal Gray is the vice president of the American Arbitration Association. With over 20 years of legal and dispute resolution experience, Ingeuneal is skillful in handling matters involving business, construction, government contracts and employment issues. She has a background in mediation, arbitration, law, psychology, and business. This background allows a practical approach to dispute prevention and resolution. P. 17 Maxwell Herman is a senior associate with Herbert Smith Freehills. He focuses on product liability, climate change and class action litigation. He represents domestic and international companies in disputes in U.S. courts and advises companies in disputes in Canada and South America. P. 42 Robert M. Horkovich is managing partner of Anderson Kill and co-chair of the firm’s insurance recovery group. He is a trial lawyer who has obtained more than $5 billion in settlements and judgments for policyholders from insurance companies. P. 37

Kathleen Matsoukas is a partner with Barnes & Thornburg. As cochair of the firm’s White Collar, Compliance and Investigations practice and lead of the White Collar and Investigations group, she focuses on internal investigations as well as assisting corporations and individuals under investigation by government agencies, including the DOJ and the SEC. P. 24 Thomas McCarthy is a partner with Akin Gump Strauss Hauer & Feld. He advises clients on U.S. law and policy affecting international trade and business. These include export control laws, sanctions programs, customs law, anticorruption laws, antiboycott regulations and foreign investment in the United States. P. 31 Claudius Modesti is a partner with Akin Gump Strauss Hauer & Feld. His practice offers extensive enforcement experience across a broad range of capital market regulatory and corporate governance matters, including representing corporations, accounting and other professional firms and investment firms. P. 13 Parvin Moyne is a partner with Akin Gump Strauss Hauer & Feld. She represents individuals, financial institutions and public and private companies in government investigations, white collar criminal and regulatory defense matters, internal investigations and complex commercial litigation. P. 13

Rick Ralston serves as the CEO of Contract Logix. Rick has over 35 years’ experience in various engineering, operations, and leadership roles including as the COO of iProspect, president & CEO of KeyCentrix, and managing director of IT Operations at Koch Industries. Rick has founded, cofounded, or held senior positions in over a dozen successful entrepreneurial ventures. P. 50 Benjamin Rubinstein is a partner with Herbert Smith Freehils. He is a commercial litigator in the New York Office and has particular expertise defending product liability lawsuits, including class actions and claims brought by governments, both in the United States and internationally. P. 42 Meena Sinfelt is a partner with Barnes & Thornburg. She advises clients involved in government investigations by the Department of Justice (DOJ), Department of State, Department of Treasury, Congressional inquiries, the Inspector General for various federal agencies, qui tam actions, FCPA matters, and tort and contract disputes. P. 24

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Pulse New Administration, New Trends For the White Collar Space PARVIN MOYNE & CLAUDIUS MODESTI AKIN GUMP STRAUSS HAUER & FELD  Parvin Moyne and Claudius Modesti, partners with Akin Gump Strauss Hauer & Feld, share their thoughts on the white collar space under new administration, recent increased activity in cases, and the industries they believe will be the subject of regulatory focus. What trends in the white collar space are we experiencing at this time? What is surprising you and what has been expected? Parvin Moyne: With the new administration, 2021 has seen new leadership at the DOJ and many financial regulators, including the SEC, and a shift in enforcement priorities. We are already seeing a significant uptick in investigations and prosecutions of individuals and companies for a wide-range of financial crimes, including fraud, corruption and AML offenses. Not

surprisingly, given the surge of government spending to address the economic consequences of the pandemic, the DOJ has been particularly focused on fraud related to COVID-19 relief programs. However, we are also seeing a focus on fraud and corruption more broadly. One interesting development we are seeing is a focus on the accuracy of company disclosures beyond traditional financial metrics, such as disclosures related to environmental impact, governance and board diversity. Claudius Modesti: To Parvin’s point, the SEC issued a number of directives that indicate more regulatory oversight in areas including climate and environmental, social and governance (ESG) disclosure and investment management, and special purpose acquisition companies (SPACs). As a follow through to the directive on SPACs, SEC enforcement brought a significant action related to a proposed merger between a SPAC, Stable Road Acquisition Company and a privately held target

CORPORATE COUNSEL BUSINESS JOURNAL

In the last few years, both the government and companies have built up their data analytics capabilities and automated market surveillance with an eye toward identifying potentially illegal manipulative trading. – Parvin Moyne company, Momentus. The SEC alleged that disclosures in the SPAC’s registration statement and other public statements were misleading as they misstated key testing results relating to the target’s technology and omitted disclosures as to certain national security risks related to the target’s CEO. We are also seeing regulators pursue new and expansive theories of liability. For example, the SEC recently brought an enforcement action against a biopharmaceutical executive under a new theory of insider trading called “shadow trading.” Shadow trading is a form of insider trading that involves the use of confidential information gained as an insider from one company to purchase stock of another company in the same industry. If the SEC has success with this litigation and theory of insider trading liability, we expect to see similar cases in the future. Why is the docket particularly active right now? Moyne: For one thing, as noted, with the new administration there is a new focus and energy being directed at white collar cases. The DOJ and the SEC have said they plan to aggressively pursue actions against individuals and corporations and we are seeing that happen. It is also the case that periods of financial volatility, which may provide incentives or opportunity for misconduct, tend to be followed by an increase in

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white collar investigations. Lastly, the government has become better equipped to manage the disruptions caused by the pandemic, and we are seeing prosecutors and regulators handling a backlog of cases that had been stalled or delayed due to pandemic-related shutdowns. Modesti: The changing of the guard at DOJ and the SEC has already gained traction in terms of renewed enforcement activity. Each agency likely will receive increased resources over the next several years, which will expand their capacity to investigate and prosecute additional matters. Main Justice has seen its leadership confirmed in many instances and new U.S. Attorneys are in the cue to be confirmed, all of which will have white collar prosecution as an important element of their enforcement agendas. Gary Gensler is the new chair of the SEC. Under the Obama administration, he was the chairman of the CFTC and was instrumental in drafting and implementing the Dodd-Frank Act’s provisions regulating derivatives and swaps markets. During his time as chairman, the CFTC brought a record number of enforcement actions and levied a record amount of fines for financial institutions. Chair Gensler has communicated his intent to pursue securities law violators who are “playing with working families’ savings.” Finally, there is an expectation that DOJ, the SEC and other regulators are going to invest more in technology for the detection and prosecution of fraud. Those investments require time to be deployed but they likely are on the horizon. How have your practices been adjusting to new trends and increased general activity? Moyne: One area of focus for the DOJ and financial regulators over the last few years has been market manipulation. In the last few years, both the government and companies have built up their data analytics capabilities and automated market surveillance with an

eye toward identifying potentially illegal manipulative trading. I am currently representing defendants in two charged cases involving allegations of market manipulation and fraud. The first is a DOJ prosecution against former traders for allegedly engaging in “spoofing,” which occurs when a trader places an order with the intent to cancel the order prior to execution. The second is a CFTC enforcement action brought against a former trader in which the CFTC claims the trader manipulated the price of an interest-rate swap to make the transaction more profitable for the trader’s employer. In both of these cases, the conduct happened years ago when laws, regulations and industry practices were very different, but the DOJ and the CFTC are trying to impose today’s standards. My involvement in these matters helps inform my counsel to clients on what best practices to institute now understanding that these practices may be scrutinized with a different lens at some future point in time. Modesti: Accounting and disclosure cases have been a main staple of SEC enforcement, as well as DOJ securities fraud prosecutions, and our practice is engaged in several matters in this area. As to accounting and disclosure enforcement, it is too early to tell how exactly chair Gensler’s investor protection agenda will play out. Financial reporting investigations take more time to develop and depend heavily on restatements and whistleblowers as sources for the investigations. Certainly, chair Gensler’s pronouncements suggest he will use all the tools at his disposal to rigorously enforce federal securities laws. First, he and his fellow Democratic SEC Commissioners are in the process of replacing the chair and other members of the Public Company Accounting Oversight Board (PCAOB), who are appointed by the SEC. The general expectation is that new leadership at the PCAOB will enhance its regulatory activity, in particular, its inspections and enforcement functions. Second, chair Gensler is committed to enforcing the three-year deadline under the Holding

Foreign Companies Accountable Act (HFCAA) to delist China-based companies listed on U.S. exchanges over a lack of U.S. access to their auditors in China. The HFCAA was signed into law by the Trump administration and it appears the Biden administration is following through on its requirements. The three-year deadline still provides the U.S. and Chinese governments with room for negotiations—negotiations I was involved in as Director of Enforcement at the PCAOB—but this is the first time the United States has set a specific deadline to reach an agreement on U.S. access. What industries are experiencing the highest impacts? Moyne: There are a few additional areas that we expect to be the subject of regulatory focus: • Accounting: There is a correlation between a market downturn and accounting enforcement. In those periods

Parvin Moyne is a partner with Akin Gump Strauss Hauer & Feld. She represents individuals, financial institutions and public and private companies in government investigations, white collar criminal and regulatory defense matters, internal investigations and complex commercial litigation. Reach her at pmoyne@akingump.com.

Claudius Modesti is a partner with Akin Gump Strauss Hauer & Feld. His practice offers extensive enforcement experience across a broad range of capital market regulatory and corporate governance matters, including representing corporations, accounting and other professional firms and investment firms. Reach him at cmodesti@akingump.com.

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of downturn, investors seek redemptions which can cause or expose problems. Fund managers may be tempted to exaggerate performance or investment returns to ward off redemption requests or to engage in valuation frauds. For public companies, in a downward business cycle, assets on the balance sheet may become impaired and, depending on the circumstances, that could trigger a restatement, to be followed by an SEC investigation. In response, the SEC and DOJ will be focused on traditional earnings manipulation (revenues, expenses, net income, EPS) as well as manipulation of non-GAAP metrics.

Financial reporting investigations take more time to develop and depend heavily on restatements and whistleblowers as sources for the investigations. – Claudius Modesti

• SPACs: The SEC has also recently been focusing on SPACs, or blank check companies. SPACs are shell companies which offer private companies a path to the public securities markets instead of an IPO. Earlier this year, the SEC issued a number of pronouncements about the risks posed by the increase of SPAC offerings.

• Cryptocurrency: We also expect SEC chair Gensler to be active in the cryptocurrency space. He has written extensively about cryptocurrencies and has been a vocal advocate for treating most digital assets as securities. At the same time, enforcement of the federal securities laws in the cryptocurrency space likely will not let up given how the market is evolving and continues to attract significant interest from investors.

Modesti:

What else can you share with our readers?

• Meme stocks: In late January, GameStop’s stock price rose nearly 2000 percent as a result of a huge volume of trading by retail investors motivated by online message boards, and with the goal of taking on large alternative investment funds that held short positions in the stock. This new market dynamic has posed a challenge for market participants and regulators alike. As a result of wild swings in prices, online brokerage firm Robinhood suspended trading in shares of GameStop and other stocks for a period of time in February while it replenished its liquidity with clearing brokers. The price volatility as well as the trading restrictions are now the subject of Congressional hearings, criminal and civil investigations and dozens of civil actions. GameStop continues to experience price swings—most recently, it was trading in the $200s. Time will tell how these criminal and civil investigations will turn out and whether the SEC and other regulators insist on rule-making to address some of the risks associated with this new market dynamic.

Moyne: I think we are going to see a continued increase in enforcement actions and prosecutions against companies and individuals for white collar offenses. It will be important to follow these developments and to continually assess policies and practices to ensure that they are consistent with legal requirements and expectations.

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Modesti: It’s always easier to prepare in advance – consider any appropriate corrective measures or actions without the pressure of a regulator’s investigation. Audit committees should be extra vigilant in their oversight of financial reporting. Management should take the opportunity to remedy internal control deficiencies before they balloon into larger issues for a company’s financial reporting. The SEC consistently examines whether companies and investment managers have well-designed policies and procedures, which actually are followed in all material respects. 

ARBITRATION INSIGHTS

Arbitrating Energy Disputes Benefits All Parties Involved INGEUNEAL GRAY AMERICAN ARBITRATION ASSOCIATION

Ingeuneal Gray, vice president of the American Arbitration Association (AAA®), discusses the various reasons arbitration is so effective for disputes in the energy industry. CCBJ: What are the benefits of arbitration versus litigation in energy disputes? Ingeuneal Gray: Arbitration allows parties to customize their dispute process. That’s a huge benefit. Arbitration of energy disputes is a fair, efficient, cost-effective process when administered properly. What I mean by that is that both parties have to recognize that this is arbitration – not litigation with an arbitration hat. And most of the time, the parties do understand that. Arbitration really is a creature of contract, which means that it’s the parties’ process. They design the arbitration process, which has to meet their respective needs, beginning with the drafting of the alternative dispute resolution (ADR) clause and moving forward. It’s a very flexible process.

What are some innovative solutions that have resulted from the arbitral process, and how has COVID-19 redefined the practice itself? With respect to the energy sector, before the COVID-19 pandemic began, oil prices were already plummeting to historic lows. There were already issues there. Then when the pandemic started, projects came to a standstill or were slowed down tremendously or canceled. As a result, oil producing and exporting companies faced a decrease in energy income. In addition to all that, there were lockdowns and travel restrictions, which of course negatively impacted the energy industry. This horrible combination of events created major problems for the energy sector. So if you would have asked me that question back in March or April of last year – to discuss the impact of the pandemic – I would have said there were major limitations placed on the industry for businesses and individuals. When the pandemic began, in many ways the world stopped and so much was unknown. Energy arbitrations were placed on hold, along with other arbitrations. Parties were requesting continuances. And that was just at the

Throughout arbitration, the parties are also able to select the arbitrators who preside over their case, which is another huge benefit over litigation. Arbitration allows individuals with the necessary expertise in energy to properly rule, as opposed to a judge who handles all types of cases without a specific area of focus. In energy disputes, the parties are able to select an arbitrator who has the necessary skills and qualifications to understand, let’s say, a midstream or downstream issue in an oil and gas case, or a solar issue in an alternative renewable-energy case. In these instances, additional time doesn’t need to be spent educating a judge or jury about the terminology or nuance of a particular kind of subject matter, as would be necessary in a court case before a judge or jury.

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beginning of the pandemic, and here we are a year and a half later and the pandemic isn’t over yet. In the field of ADR, just as everywhere else, we’ve had to make significant adjustments to the way we conduct arbitrations across the world. However, despite the challenges, we’ve seen incredible adaptability and flexibility, which actually has allowed arbitration to rise to new heights. At some point, everyone realized that this crisis is not going away anytime soon. People had to figure out a way to move forward and work to resolve cases, especially in energy, which is one of those industries that whether the economy is up or down, it doesn’t matter, because there are always going to be disputes in the industry. And with the pandemic creating issues and preventing businesses from fulfilling contracts, there were even more disputes – contract breaches, terminations of contracts, disrupted supply chains due to manufacturing issues, nonperformance, force majeure, and so on.

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All that said, the virtual world opened up. Parties began having virtual hearings. At AAA, conducting arbitrations in the virtual world was certainly not a new concept for us, but we knew it was a complex process for many, and we were able to create guides and resources that would be helpful for the parties – something that would help ease them through the virtual hearing experience. Fast-forward to today, and I think more and more businesses and firms are moving back to the office. But those innovative solutions that resulted from the pandemic have redefined the arbitral practice, as you suggested. Subject to changing circumstances, our AAA hearing rooms are open for in-person hearings again, but virtual hearings are still preferred by many. And I believe some forms of virtual hearings are here to stay. Moving forward, more arbitrations will go back to being held in person. However, I also think that having virtual options will allow for hybrid hearings when necessary, and in instances where the parties or witnesses and

We’ve seen just about every type of energy dispute you can imagine – and even ones that you can’t. our arbitrators are in different states or countries, that can definitely be a benefit. And it’s quite common for energy cases to be in different areas or other states or countries. Having a virtual or hybrid hearing can save on costs for the parties, since you don’t have to worry about travel expenses. What types of strategies are being employed to bring efficiency to energy arbitrations? For energy cases, which often involve large amounts in dispute, it’s important that arbitration continues to be a fair, cost-effective process. At AAA, case managers work with the parties to help them find the best solutions for resolving their case in an efficient manner. Our time-tested rules and highly skilled arbitrators keep the process on track. Our energy arbitrators are also well-established, trained and qualified in their specified areas of expertise in the energy sector. I am proud to say that our energy panel consists of 369 accomplished arbitrators and mediators, including attorneys, formal federal and state judges, and business owners specialized in the industry. We also offer services to keep the process as cost-efficient and effective as possible. For example, we have a streamlined threearbitrator panel option. In this scenario, when either the rules or the parties’ agreements calls for a panel of three arbitrators, the parties can agree to work with a single arbitrator first, through the preliminary and discovery stages, which helps keep the costs down a great deal. Then the full panel of three arbitrators comes together during the evidentiary hearing phase to issue the award.

We also offer alternative fee-arrangement options, where the arbitrator works with the parties at a fixed or capped rate for their services on the case. That’s another way to streamline the process and keep it cost effective. When it comes to energy-related contracts, tell us about the importance of having a well-drafted dispute arbitration clause. It’s important to note that a dispute does not begin with the filing of a demand for arbitration. I think that’s something that sometimes gets lost. It begins with issues in the contract. The less clarity you have in the contract, the more confusion there is when a disagreement or dispute arises. That’s why it’s so important to have an effective arbitration clause. The purpose of the clause is to resolve disputes, not create them. And when disagreements occur over the meaning of something in the clause, it’s often because it failed to address the particular needs of the parties. In energy contracts, there are so many complex issues to navigate. Time and money should not be wasted on the parties trying to figure out the number of arbitrators, the location of the hearing, or even the governing law, or any other issues that could have been easily resolved during the drafting of the contract or by inserting a good arbitration clause. Especially considering that the drafting process is like the honeymoon phase, when everyone gets along. So, when you’re working out that agreement or working through the contract or figuring out the clause, you really want make sure you have what’s important in there, and that all of the potential issues are figured out. That’s also why the AAA developed ClauseBuilder®, a free online tool to assist individuals, businesses and organizations in drafting a clear and effective arbitration and mediation clause.

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Energy can be a highly specialized industry. How does the AAA ensure that its executives are armed with the appropriate skills and knowledge base? The AAA has been in existence for almost 100 years. Since 1926, we have administered almost 7 million cases. We’ve seen just about every type of energy dispute you can imagine – and even ones that you can’t. We’ve seen it all. Our expertise in managing energy cases, combined with our rules and well-established panel of energy arbitrators, means we have the knowledge and skills to provide the necessary information, education and resources – from the drafting of the energy arbitration clause to the filing of the demand for arbitration to the issuance of the award.

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There has been a heated discussion about on the lack of diversity in various fields within the legal industry. What is the AAA doing to increase diversity and inclusion within the profession? At AAA, we recognize that everyone should have the same opportunities and operate on an equal playing field, regardless of ethnicity, race or gender. Clients, businesses, government and society as a whole are best served when the legal profession and ADR reflect the communities they serve. It’s also important that everyone who wants to utilize the services of arbitration is able to find diverse arbitrators. The world is a very diverse place, and that

diversity needs to be reflected in the people who make decisions that affect the lives of others. That’s why the AAA is so committed to diversity and inclusion.

and ethnically diverse individuals, and the number is steadily growing. And 51 percent of our new panel members are diverse.

What people might not know is that since the 1970s, the AAA has worked to make arbitration and mediation more diverse, specifically in terms of ADR professionals. For example, the AAA co-sponsored the first national women’s arbitrator development program to establish a method of recruiting and training qualified women arbitrators. The first programs to increase women and racially and ethnically diverse arbitrators were in the labor arbitration area, and they included large unions and companies as co-sponsors, along with the AAA and the Federal Mediation and Conciliation Service. And more recently, diversity efforts within the AAA have centered on recruiting diverse panelists of arbitrators and mediators to serve on cases, as well as in our education programs and to represent AAA in publications.

The AAA also believes in educating and developing the next generation of arbitrators and mediators. One example is the Higginbotham Fellows Program, launched in 2009, which was created to increase diversity and inclusion within the field of ADR by providing training, mentoring and networking opportunities to up and coming diverse ADR professionals.

The AAA also has a diversity and inclusion committee, which assists with coordinating initiatives, promoting events, and collaborating with firms and organizations, in order to increase awareness on the benefits of diversity and inclusion. Our Diversity Inclusion Council Committee, which consists of legal and ADR professionals, provides advice and recommendations to the AAA on how to increase the inclusion of women, racially and ethnically diverse individuals, and other individuals and groups that historically have not been included in meaningful participation in the ADR field. The AAA continues to build coalitions with national and local bar associations and law schools around the country, sponsoring and participating in events to provide training and create opportunities for diverse practitioners. Just to give you an idea of the results of these efforts, at the end of 2020, the active panel consisted of 27 percent women and racially

Another example is the AAA Diverse Student ADR Summit, which provides an in-depth understanding of what it really takes to become a successful arbitrator and/or mediator. Another initiative I would like to mention is the AAA Contribution to the AAA-ICDR Foundation for Diversity and Inclusion Grants. The fund grants diverse law students and professionals with up to $2,000 of financial assistance towards participation in a degree program or fellowship in alternative dispute resolution or attendance at a well-recognized conference. Increasing diversity and inclusion is and will remain a top priority at the American Arbitration Association. 

Ingeuneal Gray is the vice president of the American Arbitration Association. With over 20 years of legal and dispute resolution experience, Ingeuneal is skillful in handling matters involving business, construction, government contracts and employment issues. She has a background in mediation, arbitration, law, psychology, and business. This background allows a practical approach to dispute prevention and resolution. Reach her at GrayI@adr.org.

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Leaders in Color Series Features Civil Rights Champions MICHAEL SLUSS

 Recap the details of McGuireWoods’ first anniversary of their Leaders in Color discussion series, where three distinguished champions of civil rights joined McGuireWoods chairman, Jonathan Harmon in conversation in Washington, D.C. Three prominent civil rights champions joined McGuireWoods chairman Jonathan Harmon for a wideranging conversation on racial and social justice issues to mark the first anniversary of the firm’s acclaimed Leaders in Color discussion series. The July 15, 2021, event was held in the firm’s Washington, D.C., office before an audience of 60 people and hundreds more who watched on a live webcast. The panelists were Wade Henderson, noted civil rights lawyer and interim president of the Leadership Conference and Civil and Human Rights; Dr. Ronald Crutcher, president of the University of Richmond and author of “I Had No Idea You Were Black: Navigating Race on the Road to Leadership”; and Joan Trumpauer Mulholland, an activist who was confined for two months in a maximum security Mississippi prison for participating in the historic Freedom Rides.

“I knew this was not fair,” she said. “This was not treating people the way we wanted to be treated like they taught us in Sunday school.” She decided then that if she had an opportunity to advance racial equality in the South, she would “seize the moment.” She was arrested along with other Freedom Riders in Jackson, Mississippi, in 1961 and jailed in Parchman Penitentiary. She appeared at the Leaders in Color event wearing a T-shirt displaying an image of her police mugshot and the words, “This Is My Government Issued ID.” Henderson discussed the challenge of protecting voting rights at a time when numerous states are adopting election reforms that would limit early and mail-in voting, among other changes. “Voting is the language of democracy,” he said. “If you can be prevented from voting, you can be prevented from having a voice in our democracy.” What has changed since the voting rights struggles of 1960s, Henderson said, is the support of the business community.

The panelists shared personal experiences that shaped their views on racial justice and discussed voting rights, education and other challenges confronting the country in its pursuit of equality. They also offered advice for younger members of the audience, including McGuireWoods summer associates, on how to be effective and inclusive leaders. Mulholland said she first encountered the cruelty of racial injustice as a child while visiting family in segregated Georgia, where she saw the conditions in a dilapidated school for Black students.

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Pictured Above: Jonathan Harmon, Chairman

“The business community is supporting voting rights for the country because it recognizes that democracy is an issue,” Henderson said. “I think this conversation takes place against the backdrop of dramatic changes taking place in our country.” Crutcher, a national leader in higher education and distinguished classical musician, said “active listening” can help break down racial and cultural barriers and ease polarization. It is a practice he developed as a young cellist in a chamber orchestra and carried with him to academia. “When you sit down with someone who has a different perspective than you to have a conversation, the goal is

not necessarily to change their mind or vice versa,” he said. “The goal is to listen actively so you can have a better understanding, a deeper understanding of why that person holds their views.” McGuireWoods launched the Leaders in Color series in July 2020, weeks after the murder of George Floyd led to protests and a renewed conversation about racial and social justice in America. Harmon asked the panelists what advice they would give to aspiring leaders who want to take up the cause they have championed so effectively. “To students who want to bring about change: act together, stay nonviolent and don’t give up,” Mulholland said. “Just keep on keeping on.” 

Pictured Above (from left to right): Wade Henderson, Dr. Ronald Crutcher, Joan Trumpauer Mulholland and Jonathan Harmon

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Anti-Corruption as a Key U.S. National Security Issue MEENA SINFELT AND KATIE MATSOUKAS BARNES & THORNBURG

Meena Sinfelt and Katie Matsoukas of Barnes & Thornburg’s White Collar, Compliance and Investigations team discuss President Biden’s recent Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest, and how they’re advising their clients regarding this and related issues around compliance, whistleblowing and cybersecurity. CCBJ: President Biden has indicated that he views global corruption as a national security threat. His June 3 memorandum on the subject establishes the fight against corruption as a core U.S. national security interest, and further states that it threatens economic equity, global antipoverty and development efforts, and democracy itself. But given that the memorandum did not specify policy changes or new programs, what areas of global corruption are you advising clients will likely get the most attention? Katie Matsoukas: The first place you look is at the Foreign Corrupt Practices Act (FCPA) and its enforcement, both on the criminal side with the Department of Justice (DOJ) and on the civil side with the Securities and Exchange Commission (SEC). We watch carefully how the FCPA is enforced, what settlements come out and which industries are targeted – and that’s going to continue. Specifically, we’re looking at how it might be expanded. For example, the FCPA unit at the DOJ has approximately 40 or 45 prosecutors now, and I wouldn’t be surprised if it continues to grow. And as more prosecutors are added, that potentially means more strike forces or special task forces. That all seems consistent with this memorandum. The memo is clearly focused on financial transactions. So you may see, for example, more FCPA or other

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enforcement with respect to banks and other institutions and companies that could have exposure there. Meena Sinfelt: President Biden’s memo specifically talks about the freezing of assets and the recovery of stolen assets. Even though the first 200 days of this interagency review is still underway, we are advising our clients about the Corporate Transparency Act of 2019 and how it’s going to be implemented under this Administration, particularly with regard to the federal database of beneficial ownership information. We think there will very likely be increased efforts to collect financial information around anti-money laundering (AML). We have been encouraging our clients to look at their compliance programs related to all of their AML programs. Part of the president’s focus is on bilateral coordination with partner countries as well as international institutions in multilateral bodies. Given this focus, what is the likely impact on government investigations of corporations in the United States and abroad? Sinfelt: We believe there will be increased cooperation with global agencies. And there is a precedent that certain agencies within the United States share information with foreign law enforcement and investigative agencies. However, as seen in the Biden memo, there is now a greater emphasis on global sharing of intelligence in order to close existing gaps. We’ve already seen announcements about international cooperation surrounding cybercrime, fraud and other crimes. The memo mentions the Financial Action Task Force, for instance, as well as the World Bank and the International Monetary Fund. It will be interesting to see how FCPA prosecutions take off – or don’t take off, for that matter. But again, we expect financial prosecutions to increase, and we believe

We have seen that U.S. law enforcement does coordinate with law enforcement in other jurisdictions worldwide. –Katie Matsoukas there will be a focus on cybercrime and cybersecurity too. On July 19, there was an announcement by the White House regarding the cross-border sharing of information in relation to a cyber incident involving the People’s Republic of China. We think there will be requests by the government to private companies for increased sharing of information related to national security involving any type of cyber incident like this on a going-forward basis. Matsoukas: We do already see a fair amount of international cooperation. What I mean by that is that U.S. law enforcement, for the most part, coordinates with law enforcement in other jurisdictions worldwide – and that creates certain efficiencies, because if a matter is more closely related to, say, France or the United Kingdom, those authorities can take the lead on that front. It frees up resources in the United States and abroad when you have coordination and you don’t have duplicative efforts. I think that trend is going to continue and expand. I wouldn’t be surprised if you see efforts to get more nongovernmental organizations (NGOs) being tapped for their resources and expertise and ability to track, in particular, financial movement worldwide. Sinfelt: Let me just add that we also think there will be a focus on any type of fraud related to COVID-19. Not only in the United States, with COVID-19-related assistance generally, but also anything related to, for example, international trade of personal protective equipment

and price fixing, which could mean price-fixing cartels with a global reach. Do you anticipate an increase in whistleblowing? And if so, what will that look like? Has the government made it easier to report fraud and corruption? Matsoukas: We don’t think that we will necessarily see an increase in whistleblowing, because those opportunities are already out there. The opportunities for individuals to report and get rewards under the FCPA and under other governing laws already exist. But perhaps we may see higher rewards, or maybe more publicity of those whistleblowing opportunities. For instance, during the pandemic, there have been TV commercials about the U.S. Secret Service investigating COVID-19 fraud. You may see more things like that, not necessarily targeted at the general public, but targeted at compliance professionals and in-house lawyers. These people are generally already aware of the opportunities that exist for whistleblowers, but perhaps they don’t imagine the scope in which it could be relevant. Another thing that’s related here is cooperation incentives for corporations. I think the DOJ would say that its FCPA leniency program has been successful. A good number of organizations and corporations have come forward under that program to self-report violations, because it gives them a better chance of getting more lenient treatment when it comes to a settlement. Sinfelt: We might see increased whistleblowing related to professional service providers such as accountants, auditors or CPAs – people who enable the movement of wealth or whose job it is to help facilitate those transactions. They owe a duty of confidentiality to their clients, but also have professional responsibilities that are related to their licenses. Given the new focus on tying national security to corruption, we could

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see more of these professionals seeking the safety of whistleblower protections. How are you advising clients or individuals to prepare for this more intense focus on fraud, corruption and antitrust violations? And if organizations or individuals expect increased scrutiny, what steps should they take? Sinfelt: First of all, no matter the administration, we always advise our clients to regularly monitor and assess the effectiveness of their compliance program. We always tell them that bad actors are going to find a way to manipulate the system. The question they need to ask is whether the components of their compliance programs are sufficient such that if a bad actor is found or a weakness is found it can be contained, reported and addressed relatively easily. Is the company engaging in active compliance efforts? Are they detecting and assessing red flags? Those are the types of things that we’re going to continue to tell our clients. Beyond that, we like to emphasize the importance of understanding AML and know-your-customer rules.

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We think that increased knowledge and education is going to be really important right now. Our clients tend to get caught up in their own businesses, which is understandable, and it’s our job to inform them and educate them about how they’re going to have to start thinking about things from a broader scope, because they are required to know what the laws are in order to operate their businesses. Matsoukas: Many companies that we deal with, when we talk about FCPA violations, they say, “Well, we’re a good company. We’ve got a compliance program. We’re not in the business of wanting to violate the FCPA. We want to do things the right way, that’s what our company is about.” And we tell them that’s great. We agree. But that’s not going to keep you safe from an FCPA violation. The FCPA requires corrupt intent, and we’ve actually found that intent is one of the easiest elements of the FCPA to prove, because the government can point to any flaw in a corporation’s compliance program, any failure to enact a piece of the program by a subsidiary – and they can use that to imply corrupt intent by the organization, even when that organization is not a “bad organization” by their own estimation.

This could be an unprecedented time for intergovernmental agencies working together. –Meena Sinfelt The good news is that if you do have a strong compliance program in place, one that is targeted and tailored and scaled, that’s going to increase your organization’s chances of getting out of an FCPA investigation with a declination or favorable settlement. And that’s why we encourage a routine review, at least on an annual basis, of your compliance program, because many companies don’t know that their policy is missing something or that their actions may fall under a foreign jurisdiction’s investigative authority. There’s always something that can be improved upon. Sinfelt: Another thing I want to add is that it’s not just FCPA. As I mentioned earlier, it’s anti-money laundering. It’s the Computer Fraud and Abuse Act. When a company receives a third-party subpoena, sometimes their automatic thought is, “I’m just receiving a third-party subpoena. Obviously I’m not really involved. Do I have to comply with this?” From our point of view, we want to protect our client’s interests and their business secrets, naturally. But if the government is sending a grand jury subpoena for information, they likely have a valid reason for that. And it is really difficult to quash that subpoena. We’re always willing to try, but at the end of the day, it’s usually best to comply. We can try to narrow the scope or talk to the prosecutor and work out a way to ensure that our client’s business secrets don’t get disclosed in any public trial. But when subpoenas are received, you almost always have to comply with them. The best way to deal with this is to have a process in place to notify in-house counsel to respond quickly or another designated person to handle the response.

Ensuring your company has a chain of command in place to contact in-house counsel or outside counsel to respond to those subpoenas is essential. Ignoring or downplaying a grand jury subpoena can get your company in trouble quickly. Which agencies do you anticipate being the most active in carrying out the Biden administration’s anticorruption mandate? What laws, in addition to the Foreign Corrupt Practices Act, do you see them zeroing in on? Matsoukas: There’s a laundry list of agencies that could potentially touch this, but obviously the DOJ and SEC usually lead the charge in terms of anticorruption investigations. But what we have seen is that there are resources that other agencies can bring to the table. So, for example, the Department of Commerce has a great deal of information and resources and manpower to deal with import-export issues and foreign asset control, among other things. You’ve also got Homeland Security, which has an Office of Inspector General that’s been very involved in looking at fraud around COVID-19 issues and has resources in place to effectuate some of the mandates that are in this memorandum, given the agency’s focus on national security. Sinfelt: Another agency that I think will help carry out these investigations domestically and abroad is the Office of Foreign Asset Control – there will be a lot of economic sanctions that can be enforced there. There’s also the Directorate of Defense Trade Controls, and the National Security Division inside DOJ, along with the Computer Crime and Intellectual Property Section. There are a whole host of DOJ sections that carry out or assist prosecutions within the DOJ that will probably start coming to the forefront more.

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In his May 12 Executive Order on Improving the Nation’s Cybersecurity, President Biden said that incremental improvements will not give us the security we need. He went on to call prevention, detection, assessment and remediation of cyber incidents a top priority and essential to national economic security. What trends are you seeing in cybercrime and cybersecurity, and what do you see looming on the cyber horizon? Sinfelt: On July 19, the White House issued a press release stating that along with the European Union and our NATO allies, the United States has been working collectively to increase information sharing regarding cyber threats, and it also unsealed criminal charges against four hackers that were related to China. So there is going to be an increased focus on the private sector and government collaboration for reporting purposes, but also international collaboration on cyber incidents, as hackers become a more serious threat here and overseas.

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These hackers are working at a fast pace, and there’s a surge in hacking that calls for cooperation among private corporations, government entities and international bodies in order to keep up with and get ahead of what’s happening. Matsoukas: What we’re seeing now is an increase in the sophistication of things like phishing schemes. We hear from clients who are savvy and who do receive training on this, and yet they still have employees who get targeted by someone who’s posing as a vendor or a bank that the person typically deals with, from an email address that looks familiar. These intricate phishing schemes are sometimes difficult to detect in time to stop the money from leaving the country. A trend that I expect to see is more and more sophistication on that front. And unfortunately so far, education and training efforts to counteract it are just not keeping up with the efforts of these criminals. We are

We have been encouraging our clients to look at their compliance programs related to all of their anti-money laundering programs. –Meena Sinfelt advising our clients that this is an area where they really need to focus and invest in additional education efforts. The president’s anticorruption agenda signals that all enforcement mechanisms will be deployed. Discuss the relative importance of addressing three key areas: illicit financing, accountability for corrupt actors, and interagency and international cooperation. Matsoukas: With respect to our existing government enforcement operations, I think those three areas are all being addressed. We have seen a great deal of attention, really since 9/11, on illicit financing sources from abroad. We’ve seen an increase in accountability for corrupt actors in the way that FCPA enforcement in our country has been elevated and escalated. More resources have been devoted to it. You’ve seen things like the Yates memo, which talks about individual culpability for corrupt actors. We’re also seeing more interagency and international cooperation. Some of it is going to be hard. Many of these issues are tied up in the U.S.’s relations with China and Russia. That’s often where we see reports that bad actors come from. That’s where much of the illicit money and cybercrime come from. Sinfelt: The Biden administration, I believe, is looking at how effective illicit actors have become globally because they are working cooperatively with other illicit actors around the world. What we see on the white-collar defense side is that when bad actors work together,

they’re very effective. But if you follow the money, the illicit financing, you’re going to find the bad actors. So this administration may need to find additional support resources (perhaps support from the private sector), but then also build upon international cooperation and hold the bad actors accountable. If they do use this triple-threat strategy, they will be very effective in protecting national security, which is the goal. The way that private corporations fit into this is what we’re looking at now, and how it affects their businesses. Again, it is still the initial 200-day review of what this is going to look like and how it’s going to affect our clients, so we’re going to keep on top of that. But none of us think it’s going to be status quo. And we’re watching the FCPA and the financial statutes to see how it all goes. It’s going to be an interesting time, for sure. 

Meena Sinfelt is a partner with Barnes & Thornburg. She advises clients involved in government investigations by the Department of Justice (DOJ), Department of State, Department of Treasury, Congressional inquiries, the Inspector General for various federal agencies, qui tam actions, FCPA matters, and tort and contract disputes. Reach her at meena.sinfelt@btlaw.com.

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Inner Circle E-Discovery & Data Privacy In-Person Events Coming in 2022 (Dates to be Announced)

The Houston Club Houston, TX The Westin Fort Lauderdale Fort Lauderdale, FL CCBJ’s Inner Circle provides a lively, robust, peer-driven conversation about the everyday legal, technical and operational challenges faced by executives in the legal profession. This format offers peer-to-peer solutions along with insights from subject matter experts. For speaking opportunities contact jconiglio@ccbjournal.com.

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Ideas Space Exploration: A Bold New Legal Frontier THOMAS MCCARTHY AKIN GUMP STRAUSS HAUER & FELD Thomas McCarthy, partner with Akin Gump, talks about the incredible advances that have been made in the field of space exploration, what the laws and regulatory landscape around the industry look like today, and where it’s all going in the future. CCBJ: Please provide us with some background on commercial and government space-exploration activities and how the industry has changed recently. Thomas McCarthy: Until the last decade or so, governments led and dominated the industry. While governments still play the pivotal role in generating demand for launch, satellite, and spacecraft activities, in the last decade or so there has been an unprecedented growth of demand in the commercial sector. It’s been led

by innovators across all parts of the industry, including launch services providers developing rockets without an initial customer or specific mission, and there’s a hunger for everything from low-Earth orbit space exploration all the way out to deep space. The demand is being generated by new manufacturers, investors, and customers who are creating a range of opportunities in space to improve historic space activities and create new products and services – what is loosely known as “new space” or the new space economy. In the 1990s and 2000s, you had an industry that was largely focused on delivering government projects, both military and civil, into the atmosphere and space. There were commercial satellites to some extent too, of course, but now there’s a real hybrid of private sector and government growth. It’s created a model that has invited the expansion of the industry and brought a number of new actors into play. CORPORATE COUNSEL BUSINESS JOURNAL

What types of companies are engaged in the space industry? Historically, the industry has been broken up into launch service providers and satellite companies. Those are really the drivers. When I say satellites though, I should probably expand that to spacecraft, which can include other types of vehicles beyond those that orbit the Earth. But those two types of companies have had a long-standing presence in the industry. There’s typically been a fairly narrow view of the possibilities within launch services and satellites, deriving largely from the needs and demands of the government and, to some extent, government contracts. Over the past 25 or 30 years, uses for other types of private satellites have grown, particularly in the telecommunications and sensor industries. Growth in the private sector in satellites began in the 1990s and continues today. But what has changed is that the technology and the possibilities have opened up quite significantly. For example, the types of players involved on the launch vehicle side and the rocketmaking side have expanded significantly. We’ve seen multiple startups on the launch vehicle side doing very exciting things with new technologies, new types of propulsion and new manufacturing techniques, such as additive manufacturing. As a result, there have been remarkable advances in terms of driving down costs, led by companies that are reusing rockets, including the first stage of the rocket, landing them back on Earth. On the other side of it, satellites have evolved in really interesting ways as well – meaning the types of satellites, as well as the sizes of the satellites, which are being shrunk down into microsats and even nanosats. It has allowed many new and interesting market entrants in those fields. With smaller satellites, you can have

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There have been a great deal of new entrants in these areas over the past decade, and then obviously supply chain entrants there as well. more that go on single rocket launches. So the ability to push different types of satellites and spacecraft up into orbit and beyond has increased, for all of those reasons. In addition, you have people looking at deep space solutions, for exploration, transportation, refueling and resource extraction, beyond just lower Earth orbit. There have been a great deal of new entrants in these areas over the past decade, and then obviously supply chain entrants there as well. Those are the companies that make much of what go into rockets and satellites, which you might not know are part of the space industry. So the industry itself has grown as a result of the increased numbers and types of companies that are involved in manufacturing and producing, designing, and providing services around these new activities. What kinds of government bodies are involved in the industry, and how do they interact with each other? In the United States, by example, you have two types of government bodies. There are the actors – meaning the types of entities that are actually procuring, facilitating and leading space activities – but you also have the regulators of space-related activities. The government actors generate demand through design, development, and procurement of space products, technology, and services. The most famous is NASA, which historically has overseen civil government space activities and is the most well-known of all the agencies. On the military side, the U.S. Air Force and

now the Space Force drive much of the military space activities that are undertaken in the United States. These agencies look to create projects and programs and then procure services and products, such as launch services, satellites and spacecraft, from the private sector by engaging in partnerships with them. Like many private actors, they can be subject to oversight by regulators, which can lead to interesting dynamics within the government on space issues. On the regulatory side, you have entities like the Federal Aviation Administration, which is part of the Department of Transportation, as well as the National Oceanic and Atmospheric Administration, which is within the Department of Commerce. You also have the Bureau of Industry and Security, the Directorate of Defense Trade Controls, the Federal Communications Commission, to name a few, all of which have a regulatory role in managing the rules around what companies and government entities engaged in spacefaring activities are allowed to do and what kinds of requirements they need to follow.

Council is intended to coordinate the activities of all of these various bodies in the U.S. Government in furtherance of this objective. The Trump administrtion set a number of goals in terms of promoting U.S. leadership in space, and, while there were questions about whether the Biden administration would proceed with the National Space Council, it’s something the Biden administration is continuing – President Biden even has a moon rock in the Oval Office, which many take as a good sign. What are some relevant areas of law that affect participants in the space industry? Our clients in the space industry are working on highly sensitive items, such as rockets, satellites, and the sensors and other things that go along with those items. As you can imagine, governments are keen to make

Then there are the agencies that are involved in the types of activities that are inherent to regulating any manufacturing, design and other big industrial endeavors in the U.S. That includes environmental health and safety and labor laws, equal employment and then, of course, a range of other agencies, such as the Department of Justice and Homeland Security, that are keenly interested in the national security aspects of what companies in the space industry are doing. I’ll also note that one other agency, the National Space Council, which is a White House–appointed council that was revived under the Trump administration and is now being continued under the Biden administration, is responsible for establishing and executing a coherent national space policy across the government. The

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sure that those technologies, which can have national security implications, are regulated and controlled. So, one of the areas that’s a concern for a lot of companies in the space sector is U.S. export controls and U.S. foreign investment in the United States, as well as classified national security programs, which often intersect with the work they do with the Air Force or the Space Force. There are a number of other highly specialized legal areas that apply to space activities. Insurance, for example – there are special requirements for launches and other aspects of doing business in space. In addition, telecommunications is absolutely critical and is affecting the way that communications flow between items in space and the ground, whether in the private or public sector. Other relevant areas include the federal aviation law, which governs launches, government and commercial contracts, and intellectual property. There are also interesting new areas where companies are running into a need for legal services. Maritime

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law, for example, when they’re doing launches in the middle of the sea, or recovering spacecraft and objects that fall from the sky into the ocean. How do you deal with items that are falling from the sky into the waters of a particular country? There are a lot of interesting questions. One of the most interesting, I think, as we go out onto the moon and toward Mars, is that companies and governments have to ask, “Do we refresh our international treaties governing the way we look at the moon and Mars and the way that those bodies are managed, including their resources?” It’s another new frontier, if you will, from a legal perspective. There are ways that the legal community and academics are examining those questions, to determine what’s the best framework and what the good points of references are. For example, the treaty governing Antarctica has been discussed as an example of the way we should manage the moon and Mars and asteroid exploration. The international community has been able to sit on these treaties without any real

movement or discussion in the framework for fifty years because there simply has not been significant change in the industry – until recently. The same unanswered questions about private actors and activities in space remain unsolved. But change is here, and the way these debates play out will invariably affect the opportunities, requirements, and restrictions that apply to space industry actors. What are key legal considerations and priorities for companies entering or operating in the space industry? The capital costs are high, although they are dropping. There are a lot of long-standing commercial barriers to market entry that are now diminishing, which makes it inviting to jump into this growing and exciting area. But there are still legal barriers. You have to realize that you’re entering a highly regulated industry, as just mentioned, where specialized laws and policies can change quickly. Space industry companies need to have the right legal bench as you’re entering this market. Look at how you’re staffed to protect key areas and comply with the law to ensure that your growth is promoted by good and sound legal support within your company - that is really, really important to the success of companies in this area. Government and commercial partners expect it. Don’t be caught off guard or surprised by requirements or demands in these various areas. For smaller companies, determining and securing the right mix of legal support and staffing can be challenging, especially when the contributions to urgent and visionary extraterrestrial business goals may not be readily obvious. But as you’re looking to grow globally – personnel staffing, facilities, customers, supply chain – all of those international activities have an important

legal component, both a contractual component but also a regulatory component, because of the national security and other related aspects of doing business in this industry. Think about your business model, think about your goals, and look at the various regulatory areas to make sure you’re not going to find yourself exposed inadvertently or becoming the subject of an investigation by the U.S. government, the FBI, the Departments of Commerce, State, Homeland Security or any other agency. How can companies and governments meet those barriers and challenges? Companies, as I mentioned, really have to invest in ensuring, from a legal perspective, that they are keeping up with the changes that are occurring within the different agencies. They have to be prepared not only to continue to innovate in the exciting ways that they’re doing but also to engage effectively with the agencies to help shape policy, so that their innovations and business models are not stifled. At the same time, companies should be investing internally in legal resources to ensure that they have the right personnel models and the right talent – just like they do with engineers and other key people that drive their business – to help with the legal challenges in the various areas that are essential

Thomas McCarthy is a partner with Akin Gump Strauss Hauer & Feld. He advises clients on U.S. law and policy affecting international trade and business. These include export control laws, sanctions programs, customs law, anticorruption laws, antiboycott regulations and foreign investment in the United States. Reach him at tmccarthy@akingump.com.

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to growth. This includes intellectual property, national security issues, government contracts, litigation, public policy and a range of other areas. Governments have a set of complex challenges to address as participants, policymakers, and regulators. They have to determine what they want the future to be in terms of the new space economy, exploration, international cooperation, and how space should be used – and not used. There are heady questions that intersect with basic questions about the direction not only of public resources but of humanity generally. There’s little debate, though, that the new space economy represents an opportunity for jobs, economic progress, and innovative technology - it is a vital economic interest at stake, and governments need to recognize and support the emerging new space industry. And I think they are taking steps to do that - at least the U.S. government domestically has – looking to modernize through the National Space Council and efforts within these different agencies that regulate the space sector. It will be very interesting to see whether they continue to modernize and how they meet the big challenge of the growth of the private sector in this area. What excites you about the future of this industry, and how do you see it changing going forward? I’m in awe of what this industry has done in the past decade, and it’s just been amazing to watch it grow. To serve and work with the clients that we do at our law firm has really been an absolute pleasure and one of the highlights of my career. The space program has a history of not only contributing to discoveries in fundamental and applied sciences. It has inspired people in unexpected ways to consider something bigger than ourselves. Think about the

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A whole range of agencies are keenly interested in the national security aspects of what the space industry is doing. famous Earthrise photograph from Christmas Eve 1968 that helped launch the modern environmental movement. Consider the myriad benefits in a variety of fields on Earth, from lifesaving medical treatments to environmental and climate change monitoring to developments in energy. I can’t wait to see what the next decade brings. I believe it’s going to yield exciting new developments in low-Earth orbit activities, and all the way out to the moon and Mars and beyond. There are incredibly difficult scientific and engineering problems associated with these ambitious goals. These will lead to more discoveries and innovations to improvements that inure to all of us. Watching that happen and seeing these companies solve some of the hardest problems that can be faced is just amazing. And these are being solved by people half my age who were not alive during Apollo. The torch is being passed. Each of these innovations usually brings with it interesting new policy and legal problems, and that makes it fun and challenging for us to be part of. The information age took the baton from the old space age in terms of capturing the imagination of the public, but in a sense is now merging back into it, involving a wider range of people all over the world in the ability to become involved and contribute. How do we handle all of these new interactions, as there are more actors, more people in space and in places where we’ve never been before? The policy questions, the commercial relationships, and the regulatory requirements are headed towards more complexity in this area as the industry continues to create, grow, and thrive. 

Private Companies Also Need D&O Insurance CARRIE MAYLOR DICANIO & ROBERT M. HORKOVICH ANDERSON KILL I. Government Investigations Carrie Maylor DiCanio and Robert Horkovich of Anderson Kill address the misconception that D&O insurance is just for public companies, and outline the risks private companies should consider when looking to purchase it. It is a common misconception that company coverage under D&O policies is limited to liability arising out of the public sale of securities. This misunderstanding has led many private companies to believe that they do not need D&O insurance. In fact, several risks faced by private companies may be covered by D&O insurance – including government investigations, allegations of fraud, claims stemming from a private sale of securities and claims alleging breach of contract. These types of claims may raise coverage issues that risk managers for private companies should consider when purchasing D&O insurance.

Private companies and their directors and officers are subject to government scrutiny and may face regulatory action. Two issues arise repeatedly where a claim is made for coverage of a government investigation. One is whether regulatory investigations constitute a claim that triggers coverage under a D&O policy. The second is whether there is coverage and, if so, the extent of coverage for alleged fraudulent acts. A. Is There a Claim? In general, D&O policies cover claims for wrongful acts made against a company or its directors and officers during the policy period. The term claim often is defined to include a written demand for monetary or non-monetary relief. In Conduent State Healthcare, LLC v. AIG Specialty Ins. Co.

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(2019), the Superior Court of Delaware considered this question in the context of a Civil Investigative Demand (CID), a common investigative tool for a state attorney general to use to investigate potential wrongdoing. In Conduent, the Court found that there was coverage for a CID the policyholder received from the Texas Attorney General. The policy defined claim as “(1) a written demand for money, services, non-monetary relief or injunctive relief, or (2) a suit.” The insurance company denied coverage for the CID on grounds that it did not constitute a claim. The court disagreed, finding that the CID was a claim because it was a demand for non-monetary relief, as the attorney general could compel compliance with the CID without judicial intervention. It found that the CID alleged a wrongful act by asserting that the attorney general was investigating Medicaid fraud, and there was no substantive difference between a document which states that it is investigating an unlawful act and a document that alleges an unlawful act.

against public policy. The Delaware Supreme Court recently rejected this argument in RSUI Indem. Co. v. Murdock (March 2021). Murdock reasoned that providing coverage for alleged but not proven fraud is in line with the broad indemnification rights provided by Delaware statute, which permits indemnification so long as the director or officer acted in good faith and in a matter reasonably believed to be in the best interests of the corporation. Generally, Delaware law is favorable to policyholders with regard to coverage for civil penalties, punitive damages and restitution.

II. Claims Involving the Purchase of Securities Private company D&O policies may contain securities exclusions relating to the sale of securities or stock in the company. The exclusion can wreak havoc if not narrowly worded and limited to the sale of public securities. In Colorado Boxed Beef Co. v. Evanston Ins. Co. (2019), the Eleventh Circuit addressed the application of a securities

B. Alleged Fraudulent Acts Government investigations often involve allegations of fraud and may result in fines and penalties against the company or the directors and officers. While D&O policies may contain exclusions for fraudulent acts, many such exclusions are conditioned upon the establishment of fraudulent conduct by a final, non-appealable adjudication, so the insurance company is required to advance defense costs even where fraud is alleged. In J.P. Morgan Sec. Inc. v. Vigilant Ins. Co. (2015), a New York appellate court found that even a consent order did not trigger this exclusion, because the company and its directors and officers “reserved the right to profess [their] innocence in related proceedings.” Despite the final adjudication requirement in fraudulent acts exclusions, insurance companies may argue that there is no coverage for alleged fraud because such coverage is

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Carrie Maylor DiCanio is a member of Anderson Kill’s insurance recovery group and founding shareholder of Anderson Kill’s Denver, Colorado office. Her practice concentrates on D&O and representations and warranties insurance and claims involving complex financial matters. Reach her at cdicanio@andersonkill.com.

Robert M. Horkovich is managing partner of Anderson Kill and co-chair of the firm’s insurance recovery group. He is a trial lawyer who has obtained more than $5 billion in settlements and judgments for policyholders from insurance companies. Reach him at rhorkovich@andersonkill.com.

exclusion under Florida law. The company and its officers and directors were sued by stock purchasers for allegedly making misrepresentations in connection with a private sale of the stock. Plaintiffs alleged fraud in the inducement, negligent misrepresentation, breach of fiduciary duty, unjust enrichment and rescission. The insurance company denied coverage based on the securities exclusion. The Court found that the exclusion barred coverage for all of the claims against the company because each claim essentially sought the rescission of the stock purchase agreement and every alleged act involved misrepresentations in connection with the sale of the stock. This case is a cautionary tale to policyholders to ensure that a securities exclusion be narrowly written and apply only to public offerings of securities.

III. Claims for Breach of Contract Policy provisions purporting to limit coverage for claims for breach of contract can limit coverage severely for claims against private companies if they are not narrowly worded. Russell v. Liberty Ins. Underwriters, Inc. (8th Cir. 2020), decided under Kansas law, involved a very broad breach of contract exclusion. Russell involved a company that was

held by three shareholders. They reached an agreement whereby the company would purchase life insurance on each shareholder. If one of the shareholders died, the company would use the proceeds to buy the deceased shareholders’ stock from his personal representative. The plan was memorialized in a Stock Agreement. When one of the shareholders died, the company received the life insurance proceeds but never paid the shareholder’s widow for the stock. The widow sued the other shareholders for conversion and breach of fiduciary duty, but not breach of contract. The shareholders sought coverage under their D&O policy, which contained an exclusion for claims “based upon, arising out of or attributable to any actual or alleged liability under or breach of any contract or agreement.” The insurance company denied coverage, arguing that the breach of contract exclusion applied because the widow’s lawsuit alleged that the shareholders promised her but never delivered the deceased shareholder’s life insurance proceeds. The court agreed, holding that coverage should not turn on what legal theory plaintiffs chose to use in the underlying litigation. Policyholders should be aware that there are ways to mitigate the impact of this exclusion. The exclusion should apply to claims against the company only and not individual directors and officers. There should be an exception for liability that the company would have in the absence of contract. The exclusion should also state that it does not apply to defense costs. Private companies need D&O insurance as do other organizations that are susceptible to corporate liability. Corporate policyholders and their directors and officers need to scrutinize policy language that pertains to their most salient risks and be prepared to fight for coverage if their insurance companies invoke overly broad interpretations of exclusions to improperly deny coverage. 

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The Legal Spend Guessing Game NATHAN CEMENSKA WOLTERS KLUWER'S ELM SOLUTIONS

The corporate law department budgeting process can be a guessing game—here’s how you can use that to your advantage. A recent Wolters Kluwer poll showed only 10 percent of corporate law departments (CLDs) feel that they have a “high degree of control” over hitting their annual departmental budget. Just over 40 percent believed they had “some influence,” but it was mostly up to forces beyond their control. The rest fell somewhere in between. These numbers go against the reigning legal ops narrative, which lacks nuance and says that legal ops can control outside counsel spend. Recent research from Wolters Kluwer ELM Solutions LegalVIEW® Data Warehouse – the largest body of legal performance data in the world – indicates that narrative is probably untrue. Despite the advent of legal ops, annual outside counsel spend remains highly volatile, with 29 percent of CLDs experiencing a 90 percent swing up or down over any given 5-year period and 9 percent experiencing an even larger swing of 200 percent or more (see chart 1 on page 33). Many will find these results unsurprising. After all, everybody knows the amount and type of legal services needed 12 months from now are hard to predict. On any given day a huge, unexpected investigation, transaction or litigation could emerge and cost tens of millions annually until concluded. If you dwell too long on these realities, it starts to look like CLDs are in the unenviable situation of having lots of

Don’t predict next year’s spend; advocate for the resources you want. Every year, law departments go through a departmental budgeting process in which they try to predict next year’s spend and get that approved by the CFO. They look at what they spent in the last couple of years, their anticipated matter mix, and other evidence and try to come up with a number. However, the volatility discussed above suggests there are going to be a lot of “unknown unknowns,” and these make reliance on a single number highly risky. Instead, produce various scenarios: Examine the data and say to the CFO, look, if you give us $X, then our modeling suggests a 60 percent chance of going over budget. But if you give us $Y, then the risk is only 20 percent. You might secure more cushion this way and, even if you don’t, you documented the risk of going over and can bring it up in next year when you’ll ask for more money again (always ask for more money— everybody else is!). Ask other departments to pay for unreasonable and unanticipated costs. Some CLDs pay all the outside legal costs, while others have a

accountability, but little control.

lot of that come out of

But that story, too, is oversimplified. It is true that

generated the legal work.

demand for legal services is the primary driver for cost and that it is generally difficult to control. However, there is a lot that CLDs can do to influence the budgeting process and make it work better for them. Here are some:

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the department that When a business unit you serve creates a costly, unanticipated legal need, ask them to pay for it.

Nathan Cemenska is the director of Legal Operations and Industry Insights at Wolters Kluwer's ELM Solutions. He previously worked in management consultancy helping GCs improve law department performance and has prior experience as a legal operations business analyst. Reach him at nathan.cemenska@wolterskluwer. com.

Otherwise, you may go over budget, no matter how

they would get to keep a percentage of any savings,

good your legal ops. Having the expense hit another

which would be earmarked for legal ops consulting and

department also makes them—rather than you-- feel the

legal technology. The entire department became more

pain if they use outside counsel in a wasteful manner.

cost-conscious and eventually ended up with a couple

Harvest downswings. The volatility in legal spend means costs can spike, but also means they can plummet. When that big case ends sooner than you thought, you’ve got millions lying on the table. Have a plan ready for that. For instance, you can move some of next year’s legal work into this year, putting yourself ahead on January 1. I even consulted for a CLD that negotiated a deal with the CFO where

hundred thousand dollars they ultimately used to upgrade their organization. Admitting you aren’t totally in control can feel like defeat, but it actually brings you closer to victory. Legal ops still has plenty of influence and can save 10, 20 or even 30 percent in outside counsel costs. That still doesn’t guarantee staying under budget, but it is a significant amount of money, and you would have gone over even worse without all that hard work. 

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Flipping the Script on Litigation BENJAMIN RUBINSTEIN, MAXWELL HERMAN AND CHRIS EMCH HERBERT SMITH FREEHILLS

Litigation is often viewed through an avoid-atall-costs lens. Yet, there are a number of reasons to embrace it. There are overlooked benefits of litigation for dispute resolution that should be considered. Corporations involved in commercial disputes often view litigation as an undesirable last resort. To read the prevailing commentary, one can hardly blame them. Online articles abound recycling the same, generic reasons why companies should avoid a lawsuit: it’s time consuming, it’s public, it’s ineffective, and it’s too expensive. At many companies, “litigation avoidance” is treated as an end in itself, and in-house counsel often are charged in the first instance with meeting that end. The “avoid-litigation-at-all-costs” mentality misses the mark. While the above concerns are legitimate, what companies with this mentality overlook is that in certain contexts an unwillingness to litigate leaves value on the table. Litigation should not be viewed as the end result of a failed negotiation – indeed, the vast majority of lawsuits end in a negotiated settlement – but as a tool that frequently can help achieve a superior resolution to a commercial dispute. Like any tool, litigation can be exceptionally effective when deployed in the right context and manner. It’s time to flip the script on how corporations view litigation of commercial disputes, and that can start with inhouse counsel ensuring that key decision-makers take into account the often overlooked benefits of litigation as a tool for dispute resolution. Here are a few: Litigation can improve the dynamics of a negotiation Litigation can accelerate the resolution of a dispute. In the

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absence of a credible threat of litigation, a counterparty may view negotiation as a test of endurance, wasting endless hours of senior executives’ time going through the motions of negotiation while making no real progress toward a resolution. Filing a complaint signals that a company is committed to its position and should be taken seriously, and oftentimes forces a once-inflexible counterparty to make a move toward compromise. Litigation also can reverse a company’s bargaining position. If, for example, a market leader is strong-arming a smaller company over resolution of a dispute, the smaller company can file a complaint that portrays it as David facing Goliath; this converts the market leader’s dominance from a strength to a weakness and puts the smaller company in a position sympathetic with the court and jury. Large companies know these dynamics well and may be more willing to negotiate fairly after being sued. Similarly, a company set back on its heels by the threat of litigation from a counterparty can regain its leverage by filing its own preemptive lawsuit, such as an action for declaratory judgment. Litigation can establish favorable precedent and discourage future conflicts A company can gain long-term commercial advantages by litigating disputes and establishing favorable precedent, even if the disputes could have been resolved outside of court. For example, if a company has a recurring issue with the same entity (e.g., with respect to intellectual property), a favorable judgment may be issue-preclusive and prevent future disputes between the parties. Alternatively, if a company has recurring disputes with different parties over the same issue (e.g., with respect to a key term in a form contract), a favorable judgment or contract construction may provide a ready basis to resolve future disputes. Having a reputation for going to court can have a prophylactic

effect as well, dissuading counterparties from engaging

its opponent is willing to take the dispute to court. On the

in conduct that could give rise to a lawsuit. An investment

other hand, a company that has been unfairly criticized

in litigating a dispute today can save significant time and

in the public sphere can set the record straight and repair

money tomorrow.

reputational damage by way of litigation.

Public litigation can be a benefit

Where public litigation is not advantageous (and might, for example, reveal commercially sensitive information

Key decision-makers may resist litigation because “all press

or damage corporate reputation), companies can

about litigation is bad press.” Although this may be true for

shield documents from public disclosure by executing

some disputes, in others, the public nature of litigation can

confidentiality agreements. Confidentiality agreements

provide a distinct advantage to a litigant. For example, if the

have become ubiquitous in commercial litigation and

facts or equities fall in a company’s favor, a counterparty

courts expect, and may even demand, that the parties

that suddenly finds its unsavory conduct under the

agree to reasonable restrictions on public disclosure of

public microscope may feel pressure to amicably – and

sensitive documents. Thus, a company can still avail itself

quickly – resolve the matter. That same counterparty also

of the other benefits of litigation while mitigating the risk

is more likely to negotiate fairly pre-litigation if it knows

of disclosure of sensitive information.

CORPORATE COUNSEL BUSINESS JOURNAL

Litigation isn’t always expensive, and its costs are not

A company can reduce its expenses further by taking

always unpredictable

advantage of the rapidly growing litigation funding industry. Third-party lenders may be willing to shoulder

The “boogeyman” of litigation is its perceived high cost,

some or all of a commercial plaintiff’s legal fees in exchange

particularly in the United States where expansive discovery

for a share of the settlement or judgment proceeds. In

burdens and the absence of fee-shifting provisions create

the event the company would not be entitled to a money

an impression of unjustifiable expense. In reality, litigation

judgment (for example, because it plans to file a preemptive

often is far less expensive than the value assigned to

lawsuit for declaratory judgment to reverse its bargaining

litigation avoidance during commercial negotiations.

position), it may still be able to use litigation funding to

Alternative fee arrangements, litigation funding, and the

reduce its risk. Some litigation funders will cover the cost of

use of aggressive trial strategies can all reduce a company’s

a company’s legal defense in exchange for a portion of the

legal expenses and provide greater predictability of cost.

savings realized in a settlement or judgment as compared to

When a company is developing an offer or counteroffer and

the company’s total, pre-assessed liability. If the company

putting a price tag on litigation avoidance, taking these

loses outright, the funder still pays the legal fees, and the

options into account may allow it to take a more aggressive

company owes nothing to the funder.

stance at the negotiating table. Smart trial strategies can also lower the cost of litigation Outside counsel increasingly are willing to agree

without compromising the company’s chance of success.

to alternative fee arrangements. Flat fees, fee caps, fixed fees, risk collars, phased work, success fees, and subscriptions are all used by innovative law firms to make fees more predictable and improve client value. A growing number of firms also will represent clients on a contingency basis or via the use of holdbacks (a form of contingency fee), which shift some of the risk of success to outside counsel.

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Benjamin Rubinstein is a partner with Herbert Smith Freehils. He is a commercial litigator in the New York Office and has particular expertise defending product liability lawsuits, including class actions and claims brought by governments, both in the United States and internationally. Reach him at Benjamin.Rubinstein@hsf.com.

Maxwell Herman is a senior associate with Herbert Smith Freehills. He focuses on product liability, climate change and class action litigation. He represents domestic and international companies in disputes in U.S. courts and advises companies in disputes in Canada and South America. Reach him at maxwell.herman@hsf.com.

Time to judgment is the single biggest contributor to high

A lawsuit will not always improve a company’s negotiating

litigation costs. A company frequently can reduce its legal

position, and there are legitimate downsides to litigation, but

expenses by setting clear expectations with outside counsel

it is only after balancing the pros and cons of litigation on a

of an aggressive pacing of the litigation. Some firms may not

case-by-case basis that a company can determine, in a more

be equipped to meet the goal of speed, or can only deliver

strategic and empirical way, whether it wants litigation (or

speed at the expense of putting more attorneys on the case.

the credible threat of litigation) to be a part of its negotiation

But oftentimes, in-house counsel and outside counsel can

toolkit. In some cases, the answer may be no, such as when

work together to expedite a case by scheduling procedural

there is a relatively low amount in controversy, the company’s

milestones as early as possible, avoiding extensions,

position on the law or facts is particularly weak, the dispute

seeking early discovery, producing discovery timely, and

involves technical questions that would be difficult for a lay

not hesitating to engage in motion practice when the other

judge or jury to understand, litigation could damage ongoing

party drags its feet. Experienced in-house and outside

commercial relationships, or the negotiation is near resolution.

counsel will be sensitive to the interplay between these

However, a company that fully appreciates the benefits of

strategies and the nature of the case – for example, by

litigation will best be able to assess the pros and cons and,

avoiding lengthy discovery battles at the expense of speedy

where appropriate, deploy litigation to its greatest effect. The

resolution when the amount of controversy is low or the

risks of litigation are evident, but a well-reasoned choice to

matter is not particularly complex.

litigate in spite of those risks can reap major rewards. 

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NextGen Financial Services Report CORPORATE COUNSEL BUSINESS JOURNAL

Ops Meeting Client Expectations in a Changing World KEN CRUTCHFIELD WOLTERS KLUWER LEGAL & REGULATORY U.S. Ken Crutchfield, vice president and general manager of Wolters Kluwer Legal & Regulatory U.S., discusses the results of the organization’s 2021 Future Ready Lawyer survey, including how new technology and processes are moving the legal field forward. CCBJ: There has been so much talk in recent years about changes to legal departments, most of it having to do with technology and process. Why do you think those expected changes gained so much momentum from 2020 to 2021? Ken Crutchfield: The pandemic was the trigger that caused organizations to really rethink things. There was a real need for action, and increased pressure to change to ensure continuity of business operations and competitiveness. Everyone needed to make sacrifices and take action. We’ve certainly seen the pace of change

accelerate in our daily lives. We’re still not going out to restaurants or shops as much as we used to, and we’re still buying more things online. Those sorts of ongoing trends in our personal lives have definitely played out in the business world too. Due to the uncertainty of the pandemic, there was tremendous pressure being driven by the potential that something catastrophic might happen that would have further impacts on business. Organizations have been accelerating the pace of change and acting on things with greater urgency than ever before. What barriers do you expect as far as implementing any of these changes? The first step, especially with technology, is accepting the need for change. You have to adjust the tools, you have to adjust the processes, and people need to be trained and accept the changes that are being pushed

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through. This was pretty self-evident when offices shut down. Everyone affected had to adapt to work remotely and understood why. Other changes can be a bit more nuanced. Skill sets need to be adjusted in order for these changes to be successfully implemented and staff need to understand “why”. That’s key. You need buy-in from your people, as well as buy-in from organization leaders. You also need to make sure you’re solving the right problem in the first place and focusing on real business results, as opposed to implementing artificial intelligence (AI) just for the sake of implementing AI, for example. In the case of an AI project, AI should be applied to a specific problem, such as identifying deadlines in contracts that need compliance, so that you can take action. Regarding client-firm relationships, in Wolters Kluwer’s Future Ready Lawyer survey it was noted that law firms fell short in terms of certain client expectations about their capabilities and services. Please expand on this. Why was this the case, and is this likely to continue? The 2021 Wolters Kluwer Future Ready Lawyer survey identified and mapped out certain existing gaps, but it didn’t go into as much detail about the root causes, aside from the fact that we know clients want their law firms to know more about them. The gaps the survey pointed to suggest that maybe firms don’t know their clients as well as they should. Maybe they don’t know the industry as well as they should. Maybe they need more tools or expertise to be able to do that. As an example, an M&A attorney may want to have a better pulse on what investment bankers are advising similar clients. If the finance world thinks the market for “SPACs” is drying up, it would be good to know that when advising a client on a SPAC related issue. But I will also say there are explicit items in the survey, such as greater scrutiny from clients about how

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technology is being applied to delivery legal services from law firms. In short, clients want confidence about how services are delivered in addition to results. There’s also an expectation that a firm’s policies and practices reflect the client’s business from the standpoint of diversity, supply chain policy, data breaches, things like that. A firm is a trusted advisor, but firms must also increasingly conform to vendor requirements and client policies. That means conforming to areas like hiring practices, data security, and even things that may seem totally unrelated to a law firm, but that are important to the client. And with new disclosures required by publicly traded corporations from an environmental, social and governance (ESG) perspective, there will likely be even more focus on aligning with client policies. Those are some areas where the survey indicated there are gaps and how I interpret some of the data. Clients need firms to understand more nuances about their business and industry to effectively advise them, and they need firms to conform more with their goals, values, and policies.

Clients want their law firms to understand more about their business, so they are able to more effectively advise them. Let’s talk about technology investment. The survey reported that 63 percent of law firms and 57 percent of legal departments intend to increase their technology investment. Are you inclined to believe that this growth will occur? What will it mean for firms and departments if growth in this area does occur? Yes, I am inclined to believe this growth is going to occur. I will say it’s likely to happen, if for no other reason than because there’s a talent shortage. If you have a certain amount of work to get done, that workload continues to increase, and you can’t throw more people at it, you have to use tools to enable productivity among the people you do have – and I think that’s key. I would argue that technology has to be part of the relief valve for the pressure that is on corporate legal departments today. So what will it mean for law firms and legal departments if this growth does occur? I think it means greater productivity, being able to do more with less, and hopefully getting better results for the business and better outcomes for corporate legal clients when a law firm is serving them. If increasing the importance of legal tech and coping with the increased amount of information are top legal trends, why is it that only one-third of lawyers are actually prepared to meet those demands? That’s a good question. Sometimes it could be as simple as adding a legal ops professional to an organization, whether it’s a law firm or a corporate legal department,

to make suggestions and help guide the decision-making – someone who can bring a bit of business rigor to the legal department or to the firm itself. That’s probably one of the most basic things. Lawyers don’t have to be experts in everything, just as an accountant doesn’t have to be an expert in knowing how software is designed. A lawyer doesn’t necessarily need to understand that either, but they do need to know how to rely on people who can help manage these trends and help them prioritize and apply the right technologies to the right problems. That’s really the core of this – if lawyers are willing to think about how to leverage business people, whether it’s product managers, project managers, or people who can write a good business case to justify a good technology investment, that can help get them over the hump. Realistically, as we look forward, you are going to have more people on legal teams who have strengths in business or technology. If you start to strip away that prerequisite of having a JD, when you’re looking for project management or coding or whatever, it’s just going to open up that talent pool. Maybe there are some things you don’t need Ken Crutchfield is the president to have done by an and general manager of Wolters attorney, but you do Kluwer Legal & Regulatory U.S. He leads the Legal Markets group need support staff that and is responsible for setting the can help guide you vision and strategic approach with and help you be more a focus on developing leading digital products. His group aims to effective with various provide legal professionals across a tools for deploying wide range of markets with expert better processes – and content and analysis and leading workflow solutions. Reach him at that’s what you get Ken.Crutchfield@wolterskluwer.com. with legal ops. 

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Why In-House Legal’s Digital Transformation Starts with Your Contracts RICK RALSTON CONTRACT LOGIX

Rick Ralston, CEO of Contract Logix, observes the digital transformation that companies have been experiencing, as well as how the lack of support from in-house legal departments on these digital transformation strategies is affecting CLOs and GCs. There’s no question that the need for digital transformation accelerated greatly during the COVD-19 pandemic, and there are no signs of slowing as we begin to get back to normal. That said, many in-house legal departments have lagged in supporting their company’s digital transformation strategies. While chief legal officers (CLOs), general counsel (GCs) and their in-house legal teams want to serve their clients in the most strategic and effective manner possible, too much of their valuable time is spent chasing down routine requests across various departments and managing multiple workflows involving numerous stakeholders, introducing complexity into any kind of transformation. All of this takes CLOs and GCs away from the critical task of mitigating risk and ensuring compliance. According to a Deloitte survey, more than half of CLOs said that recurring tasks and data management constraints interfered with their ability to create value. Functional silos can be disruptive and the way workflows are structured often makes key performance indicators (KPIs) difficult to track and evaluate. That said, digital transformation is imperative and firms that embraced technology during the pandemic outpaced the competition. Research confirmed that leading organizations see digital transformation and technology as a key driver of improved performance, efficiency and productivity, and that increased use of and investment in it will continue. Legal and Legal Ops teams are no exception and can take on a leadership role in their organization’s broader digital transformation strategies. But where to begin? With so many legaltech solutions available to help increase productivity and efficiency, it’s easy to get overwhelmed 50

SEPTEMBER • OCTOBER 2021

or invest in technology for technology’s sake. A more prudent and proven approach would be to start with the often overlooked backbone of every modern organization: contracts. Why? Because contracts define and are foundational to your business relationships. The fact is, however, that many teams still embrace a traditional and manual approach to managing legal agreements. Often, this involves hard-to-maintain spreadsheets to track dates and other important information, unsecure and hard to search shared drives for document storage, and email for managing reviews and approvals, making version control an absolute nightmare. If contracts hold the key to in-house legal’s digital transformation, then the way you manage contracts must also be digitally transformed. Enter Digital Contract Transformation Digital contract transformation or DCX is all about the digitization of contracts and contract lifecycle management (CLM) processes. It gives legal departments the ability to modernize, streamline and automate their contracting efforts as well as harness the wealth of data available in contracts to deliver actionable insights. After all, digital transformation is all about data and using it to evolve your business. The end result of DCX for GCs and CLOs is far less risk, greater compliance, and the ability to finalize business faster. Let's look at the four main ways this can be made possible using legaltech such as contract management software. 1) CLM Process Automation: Manual processes are a huge time suck for GCs and their teams. They are also very error prone given the high degree of human touch required, resulting in unnecessary risk. Using contract management software to automate the CLM process from the moment a contract is requested through the creation, negotiation, approval, execution and ongoing management of it is key to mitigating risk and increasing compliance. With automated workflows, business rules are always followed with efficiency and speed. Automating alerts, tasks, and other notifications

associated with contracts helps eliminate missed obligations, dates, milestones and other critical items. 2) Better Collaboration: Every corporate lawyer knows that negotiating even the easiest contract involves multiple stakeholders and multiple reviews. The World Commerce and Contracting group estimates that the average cost of processing and reviewing a negotiated contract continues to rise and can range from $6,900 for a simple contract to more than $49,000 for complex agreements. These costs introduce risk and delays, and it’s not uncommon for slow negotiations to kill a deal. A frictionless collaboration environment using modern collaboration tools helps finalize business faster. Lawyers can easily and quickly negotiate contracts internally and with third parties using concurrent editing, automatic and accurate version tracking, real-time messaging and e-signatures – without ever having to leave the contract management software. 3) Actionable Business Intelligence: Harnessing the data in legal agreements gives GCs and their staff the ability to benchmark and track KPIs that can be used to optimize the performance of contracts and contract management processes. For example, an organization can benchmark the current average total number of days in a contract lifecycle and identify opportunities to improve it. Another example of a KPI focused on the pre-award phase of a contract is understanding the average time to reach and execute each contract milestone like requesting an agreement, drafting it or negotiating it. By benchmarking and tracking KPIs based on data made available through digital transformation, GCs can provide the business with strategic intelligence not previously available to them. 4) Greater Security: It’s not a surprise that contracts contain some of the most sensitive and confidential information about businesses, customers, partners, employees and vendors. However, most legal agreements are freely accessible and shareable due to the nature of being stored in shared drives. In many cases, they can even be inadvertently deleted or misplaced. This is increasingly problematic and exposes the business to

major risk with severe consequences as the number of data breaches and cyber-attacks continues to skyrocket around the blog. 85 percent of data breaches last year involved a human element, but by digitizing contracts and processes and centralizing that data in a secure contract management repository, GCs can now confidently regulate access to that information. Capabilities like role-based and feature-based permissions ensure the appropriate people and groups have access to the right information. Other security features and certifications like SOC 2 Type II, HIPAA and FISMA will keep the IT department happy and contract data safe. Key Takeaway The role that automation, centralized management, real-time analytics, collaboration and improved security plays in CLM can help any in-house legal team streamline the routine onerous tasks CLOs said were holding them back, while reducing risk and satisfying compliance requirements. A modern contract management system that facilitates DCX gives legal departments the data they need to support and lead digital transformation strategies with additional visibility into all contracts and contract data. With this transformative Rick Ralston serves as the CEO approach, departments of Contract Logix. Rick has over can extract value from the 35 years’ experience in various information within their engineering, operations, and contracts, optimize those leadership roles including as the COO of iProspect, president & legal agreements, and CEO of KeyCentrix, and managing then provide a tangible director of IT Operations at Koch ROI to the business. Less Industries. Rick has founded, risk, greater compliance cofounded, or held senior positions in over a dozen successful and an ability to get entrepreneurial ventures. business done faster is a win for all parties!  CORPORATE COUNSEL BUSINESS JOURNAL

ILTACON Tackles Changing Legal Service Delivery Models BRAD BLICKSTEIN BLICKSTEIN GROUP New Service Models

Brad Blickstein, founder of Blickstein Group reflects on ILTACON 2021, and its gradual shift of focus over the past few years. I was one of the lucky ones who was able to attend ILTACON 2021 in Las Vegas in late August. While the conference itself was, as expected, more sparsely attended than in years past, there was still a lot of value present. Many of the key players were there; meetings were held, business was conducted, and parties were attended. Still, the footprint was much smaller, and while still valuable (some might even argue more valuable), the event felt different. In addition to the smaller attendance and higher percentage of senior people, I also felt a significant shift in the content. In years past, ILTACON has felt very…techy. Most sessions covered technology—tools, platforms, and features. In more recent years, there have been more discussions about adoption and value proposition. This year, however, there was a noticeable shift towards a discussion of business models throughout the legal industry. I counted at least six sessions on this topic: Redefining Delivery of Legal Services; The Changing Nature of Legal Procurement: “NewLaw and Aggregators of Legal Products and Services; Legal Business Design Challenge; Ewww, David! Change Management and User Group Lessons Learned from The Roses; The Future of Legal Services Pricing; and The Legal Engineer Consultant. There were probably more. For the first time, ILTA talked less about how to make legal work more efficient, law firms more profitable and lawyers more satisfied and instead and more about the potentially seismic changes afoot throughout the legal industry.

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During Monday’s Changing Nature of Legal Procurement session, Jae Um, founder and executive director of Six Parsecs, took a shot a defining “NewLaw.” She says, “NewLaw is about one thing, and one thing only. It’s about building scale in legal business and legal services.” By “scale,” she means the ability to flex up capacity while keeping cost flat. She references Jason Barnwell, general manager for digital transformation of corporate, external, and legal affairs at Microsoft, who says that he expects the company’s legal capacity to have to increase tenfold over the next few years, but the option to increase headcount at the same rate is not on the table. At ILTACONs in the past, we might have discussed scalability, but only in terms of technology. And while tech is at the forefront, it is not the only building block for these new models. People, process, and data are equally important. During the panel I moderated, Redefining Delivery of Legal Services, Meredith Williams-Range, chief knowledge and client value officer at Shearman & Sterling, Kimball Dean Parker, CEO of SixFifty at Wilson Sonsini, and I discussed the new approach that clients are taking to legal services. In the past, clients had two options: they could do the work in-house, or they could ship it to a law firm. That is no longer true today. Both options still exist, but others do, too. The client can engage an alternative legal service provider to do the work domestically or overseas. It can build or buy technology to allow the work to be completed more efficiently inside the legal department. It could deploy technology to allow the business units a “self-service” option. It can study data to determine if the work needs to be done at all.

On top of all that, if they are so inclined, any of those options can be delivered to the client by their favorite law firm. According to a 2020 report from Baretz+Brunelle, at least 35 Am Law 100 law firms have their own captive ALSP. Many law firms are deploying technology designed to increase efficiency. As I learned from Kimball Parker during our session, SixFifty is doing an amazing job of automating Wilson Sonsini’s legal expertise to allow clients to use their computers to write legal documents like a lawyer. And as Peter Lee, CEO of Simmons Wavelength, said during Thursday’s The Legal Engineer Consultant panel, “I think data is the juice that drives a lot of this stuff.” Making matters even more complicated, although ultimately to the client’s advantage, is the fact that more than one option can be applied to any problem. Many law firms partner with independent ALSPs. Some ALSPs help clients choose the right technology for their own use. Many contract management processes leverage automation, then escalate difficult issues to ALSPs, law firms or in-house counsel. Or all three.

New Business Models One thing that lawyers and legal technologists (including ILTA’s planning committee) are starting to understand is that clients and counsel alike are interested in developing new legal service delivery models. And for them to work, we need new business models as well. If I were to take this opportunity to complain about the hourly bill, it wouldn’t be the first time. I’ve spent decades speaking and writing about how hourly billing rewards inefficiency and creates a misalignment between client and counsel. And while I believe that to be true, I no longer believe those to be the biggest issues. The biggest issue is that, when legal services are technology-enabled, process-driven and flexibly staffed, the law firms can’t make as much as they deserve in fees. Consider a tool that takes a draft of a document that would otherwise take an associate a few hours and delivers a first pass in five minutes. Under an hourly billing model, the firm could bill for five minutes time.

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But few clients would deny that the work product is worth many times that. Which brings us back to Jae Um’s definition of NewLaw: legal services at scale. Scale should be good for everyone: the overworked client looking to reduce costs; the law firm looking for more profitability; lawyers looking to practice at the top of their licenses; ALSPs who already have a head start at delivering; business units that want work done faster. The key will be finding not only delivery models that work at scale but business models as well. Let’s take a deeper look at how some of the sessions at ILTACON covered new service delivery models as they are impacted not only by technology but by people, process and data. Critical New Roles One of the more interesting sessions at ILTACON was The Legal Engineer Consultant. At some firms, the role of legal engineer is new. At others, the function has been

around a while but with titles like “system integrator.” Regardless, the role is becoming more critical as, more and more frequently, legal engineers are now interfacing with clients. The function sits between the lawyers and the technologists. As Rebecca Holderedge, innovation leader at Husch Blackwell, describes it, “[The] legal engineer…understands how the lawyers work, but they also understand the technology and the process and are able to relay that more effectively.” What skills does a good legal engineer have? Simmons Wavelength employs about 30 legal engineers. Peter Lee is CEO of Simmons Wavelength, which describes itself as “the regulated firm of legal engineers.” As Lee describes it, “It's a combination of different skills sitting at this nexus between different departments and different skillsets within the profession. And a lot of it is about translation and understanding problems and coming up with creative solutions, using the tools at their disposal.” Lawyers solve legal problems and are famously (though sometimes unfairly) known to be tech-averse. Technologists solve technology problems, and few went to law school. “There are enormous inefficiencies in the practice,” said Lee. “And some of those are inefficiencies that take highly compensated professionals away from doing the thing that actually does earn money.” The trick is applying technology to solve legal problems. And that’s where the legal engineer comes in. Rob Saccone is one of the true pioneers in applying technology (and process) to solving legal problems. He is a Lean Six Sigma Black Belt and was the CEO of SeyfarthLean Consulting. A panelist on The Legal Engineer Consultant, Saccone described the issue as follows: “I would say that it's more of an operations problem than a technology problem. And that requires the ability to engineer a better process…to re-engineer with scale and speed.”

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Change Management Is Key It’s clear that law firms are looking past technology for new ways to deliver legal services. They are starting to consider that new business models are required and are even building new roles to help. This will all matter little, however, if the partners in law firms are unwilling to change. During the NewLaw session, Joe Borstein, co-founder and CEO of LexFusion, said that “Law firms are the only ones in the U.S. market who are allowed to profit from the provision of legal advice. As long as that’s true I think they’ll do fantastically well. And if that changes, they’ll also be the first to adapt.” Borstein may be right that law firms will adapt well if and when alternative business structures come to the U.S. In the meantime, however, a change management strategy is critical. This topic was discussed creatively on the Tuesday panel, Ewww, David! Change Management and User Group Lessons Learned from The Roses, where the panelists used the characters from the television sitcom Schitt’s Creek to get their message across. The panel discussed why it is difficult for people to switch their behavior, describing the following as common scenarios: • People do not think things need to change • There is little to no motivation to change • “We’ve never done it this way here” • There is agreement but no forward movement Ultimately the panel suggested an approach designed around providing crystal clear direction; engaging emotion; and creating conditions that enable both the leaders and followers to excel. The Change Management panel quoted MIT’s Peter Senge in saying, “People don’t resist change. They resist

being changed.” We have made some progress over the last few years. More and more legal professionals value the kind of incremental efficiency gains incumbent in new technology, and some are even starting to understand that legal technology is more than just tech. But what’s at stake here? What’s the value of figuring out how to drive all this change? During Redefining Delivery of Legal Services, we talked about the three different levels of legal services. At the top of our imaginary triangle, there’s the highly strategic and specialized work that will likely always stay with big law firms. And at the bottom there’s the highly commoditized work: ALSPs and other technology-driven solutions are already winning much of that. It’s the work in the middle of the triangle—the everyday legal work—that is in play, and many experts feel that represents about 60 percent of it. We have entered an era when legal service delivery models are being redefined and transformed. The winners will figure out how to effectively deploy technology, along with people, process, data and new business models. The losers will not. How that “everyday” legal work gets done is the biggest question we’ll be answering over the next decade. All that’s at stake is 60 percent of the world’s legal market. 

CORPORATE COUNSEL BUSINESS JOURNAL

LEGAL TECH STARTUP SPOTLIGHT Spotlight on: Brightflag HQ: Dublin, Ireland # of Employees: 90 Growth Rate: 0.04% Institutional Investors: One Peak Partners Frontline Ventures Sands Capital Ventures Twitter: @BrightflagHQ URL: brightflag.com/ As developer of an AI-based enterprise legal management system, Brightflag uses powerful language analysis technologies to examine and analyze legal invoices, providing visibility into legal spending and uncovering opportunities for alternatives to the billable hour. Reflecting its performance and potential, Brightflag most recently received € 23.2 million in development capital from a number of companies and organizations.

PERCENTILE

Weekly Growth PitchBook Analysts laud Brightflag for "streamlining and prioritizing product development and reducing administrative bottlenecks." As a result, Brightflag has emerged as an AI-powered partner for legal ops excellence -- a fast-growing player with breakthrough technology and a team of experts that will take your corporate law department exactly where it needs to go. To learn more about Brightflag and to book a demo, go to https://brightflag.com/. Source: Pitchbook (As of Dec. 2020)

To nominate a startup to be featured, email kcalve@ccbjournal.com 56

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BUSINESS, LAW & LEADERSHIP CCBJ Perspectives Podcast, hosted by editor & publisher Kristin Calve, provides access to leaders and influencers within the ever-evolving ecosystem of lawyers and legal professionals.

PLEASE VISIT

ccbjournal.com/podcast

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NOVEMBER 15-16, 2021 The Tarrytown House Estates | Tarrytown, NY RESIGTER TODAY AT bit.ly/2YMIhVe Speakers featured from: -NBC Universal Telemundo Enterprises -The New York Times Company -U.S. VETS - National Office -Reynolds American, Inc. -Nomura Securities -Terex Corporation -Boardwise Inc. -ING Americas -Cummins Inc. -Aptar Group -Scoular Co -WWE

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CCBJ September - October 2021

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