Sarbanes-Oxley Act has corporate counsels working harder than before

If corporate counsels ever had life easier than their law firm brethren, they certainly don't in the wake of the Sarbanes Oxley Act of 2002.

Under the sweeping federal legislation aimed at curtailing corporate scandals such as Enron and WorldCom, in-house legal counsel have had to overhaul

The notion that in-house counsel enjoy laid-back nine-to-five workdays is one of the greatest myths known to man, said Steven Woghin, senior vice president and general counsel at Computer Associates International Inc.

On a recent drive home, Woghin, who supervises a 40-person legal staff, calculated that he'd just worked a 94-hour week. There's no way I could have done that working nine-to-five, he noted.

The new law and increasingly common investor lawsuits have corporate counsels working harder than ever these days.

There's a lot more ground for them to cover, Victor Futter, special professor of law at Hofstra University School of Law said of Sarbanes-Oxley.

For example, the in-house counsel is responsible for making sure members of the board of directors have the necessary information to fulfill their obligations to the company and its investors, said Fred Krebs, president of the American Corporate Counsel Association. It's a substantial responsibility and it's all brand new, Krebs said.

While that can be a daunting challenge, Jason Barnett, executive vice president and general counsel at Reckson Associates, said it's one that can be met.

I wouldn't say things have been revolutionized, but they have changed for attorneys working in-house, Barnett said.

There is a new focus on maintaining a record - lots of meetings, minutes and checklists, Barnett said of the work his five-attorney staff now faces. It's about gathering enough diligence and knowing your company from the inside out, he added.

The Sarbanes-Oxley Act was adopted last summer after financial schemes shattered a number of corporate giants and wiped out billions of dollars in investor share value. The sweeping new rules apply mainly to corporate officers, accountants and corporate counsels.

In January, the SEC adopted final rules for reports and filings by public companies, which in-house counsels oversee. In addition to complying with stringent filing requirements, corporate counsels must also report evidence of securities law violations or breaches of fiduciary duties up the corporate ladder and, if necessary, to the board of directors. Ultimately, if no action is taken, the attorney must go to the SEC.

Critics have argued that the fraud reporting rules could undermine trust and communication between executives and their attorneys.

But Ed Slezak, vice president corporate counsel at Glen Cove- based Acclaim Entertainment, said the new rules haven't taken him out of the inner circle of senior executive deliberations.

It's not as if you're running to the SEC at the first sign of trouble, said Slezak. If you find fraud, you first go to the management at the company. If you don't get satisfaction from them, only then would you go outside the company.

The bigger risk for a company would be if he were to remain silent and not give internal guidance on dicey dealings, he said.

Jerry Gallagher, general counsel, senior vice president at Westbury-based 1-800-Flowers, said the new rules have actually helped his relationship with senior executives. We are all on the same page and are focused on running our business, he said.

John Bishar, senior vice president and general counsel at KeySpan Corp., said it would be clear to him even without the new law that his client is the corporation, not an individual or group of executives in charge at the moment.

Barnett, of Reckson, added that, If you have a healthy relationship with your advisors and you raise a red flag on an issue, it shouldn't be a problem.

Krebs of the ACCA said shareholder lawsuits and increased regulatory and law enforcement probes of their companies are turning out to be much bigger problems.

In-house counsels at the companies interviewed declined to discuss any pending litigation, including Computer Associates, which recently announced plans to pay $144 million to settle dozens of suits alleging accounting misdeeds.

Krebs said these types of issues, along with new federal regulations, have been all-consuming and have increased the time demands of in-house attorneys.

Bishar, of KeySpan, said the corporate governance matters have piled on work for his 47 staff attorneys. He said they often work 12- hour days.

According to ACCA, most Fortune 1000 companies have an in-house counsel who is part of the company's senior management team.

Corporate counsels tend to work more as administrators than practicing attorneys. While much of a company's transactional work may be handled in-house, litigation is usually farmed out to contract firms familiar with the local legal establishment where a lawsuit was filed and cases are heard.

The biggest difference, Woghin of Computer Associates said, is not the workload, but the relationship he has with his client. My client is with me all day long, whether or not I want them there. And the expectation is that you're available all the time.

Bishar added that the in-house counsel has a more singular purpose and is able to develop a very deep understanding of the corporate client. Over time that results in a better understanding of your client's needs, he said.

Asked whether the company's bottom line was of constant concern, Bishar said it was no different then the concern of a senior partner in a private law firm.

Woghin said financial concerns come with the territory, If you work for a company, everyone is sensitive to the bottom line, including the legal staff.

Slezak said the poor economy has further highlighted bottom line concerns at Acclaim, as it has at many other companies.

In spite the laser-like focus on their work, most in-house counsels believe the new governance rules make sense. It's absolutely a good idea. Putting more responsibility on the management of public companies is a wonderful thing, Slezak said.

Barnett said there are a lot of hoops to go through, but once you're through them you realize that a lot of them have value.

Futter of Hofstra said anything that emphasizes lawyers' ethical duties is a good thing for the company and the investor.