Keep a Broad Perspective

As the country and the globe struggle to restore stability to the financial sector and businesses contend with the contractions in our economy, primary attention of all will be focused on transactions, financing and restructuring. At the same time, however, neither government nor private interests will forget the belief that the culprits of the economic meltdown were greedy individuals gaming the system. Thus, as you concentrate on protecting and restoring your company and its business, keep your perspective broad enough to consider the exposure to blame that may be developing behind the scenes. 

It may not be necessary to take any action now; but it is prudent to know what can happen. Here are some touchstone questions:

• Is there a policy or practice that you or your company pursued that has been criticized as wrong by internal personnel, federal or state governments, self-regulating entities, or respected commentators?
• Has your company suffered a substantial loss for which it is uncertain of the cause?
• Has there been a substantial loss for which there is internal disagreement about the cause or the responsible personnel?
• If there are such questions, are you confident that a reliable person is responsible for managing the matters?

If any of these questions occur and they are not promptly and carefully addressed, the collateral risk to others can be severe. Nor is that risk merely regulatory, for exposure to private civil liability and criminal sanction is inherent in any such situation.

If you may be expected to respond to such questions – either personally or as a corporate official – there is a range of concerns and tools you should consider. If someone else has that responsibility, you should assure that they are doing it properly and that your individual rights are not being sacrificed. Here are some elemental concerns and tools:

1. If the matter is serious, has the company’s ultimate authority addressed it promptly and given someone full responsibility and authority to investigate and report?
2. Has the company erroneously allowed someone who is under scrutiny to participate in the investigation?
3. Is there need for independent accounting or legal advice?
4. Are involved individuals entitled to indemnification of legal expenses?
5. If causes have been found, have the relevant systems been fixed, and have responsible personnel been disciplined?
6. Do you need the assurance of independent legal counsel?

If you have concerns about these issues, we would be pleased to discuss whether you should take any action now, or plan for action in the future, or feel reasonably comfortable with matters as they stand.