A false alarm, a guiding hand and fallout from a very public scandal.
Today, it’s more of a punchline than anything. In 1999, however, the Y2K problem (aka the Millennium Bug) was being taken very seriously by the legal community. Concerns that dates embedded in computer code could wreak widespread havoc unleashed a legal fury. There was legislation (the Year 2000 Readiness and Disclosure Act), Fast Track Procedures from the American Arbitration Association to resolve the anticipated flood of Y2K disputes and a formal SEC pronouncement on corporate disclosures. Here’s what the securities watchdogs had to say in MCC’s March 1999 issue (unfortunately, nobody ever bothered to say, “Never mind”):
“No country, government, business or person is immune from the potential far-reaching effects of Year 2000 problems.”
GE, under the guiding hand of legendary GC Ben Heinemann, was a trailblazer in much of what today goes under the label of legal ops. In August 1999, MCC interviewed P.D. Villarreal, GE’s counsel responsible for litigation management, about the company’s Early Dispute Resolution program. The idea was to wed principles derived from ADR and Six Sigma, GE’s data-driven program to eliminate defects from processes and products. Here’s what Villarreal told MCC:
“Because we were able to statistically verify that a longer ‘cycle time’ led to higher legal costs and that the selection of a more effective resolution method would reduce cycle time,” he said, “we could treat litigation as a kind of ‘defect.’”
The first few years of the new millennium were dominated by fallout from the Enron scandal and bankruptcy, which spawned the 2002 Sarbanes-Oxley Act. MCC ran dozens of articles, interviews and editorials on Enron, SOX, noisy withdrawal, “up-the-ladder” reporting and related topics. MCC’s founder and editor, Al Driver, a former general counsel, cast a harsh light on the “invisible in-house counsel” of Enron now facing the public eye of investigations and litigation.
“It is likely that what will unfold is that the failure of in-house counsel to help their clients avoid disaster was due to the lack of a ‘critical mass’ of corporate counsel with an appropriate reporting relationship to the general counsel,” Al wrote. “It is far less likely that the many companies with outstanding legal departments will find themselves caught up in scandal.”
As the fallout from Enron spread, Al worried that the SEC, pressured to “act tough,” would go too far and “sabotage” in-house efforts to assure SOX compliance by undermining lawyer-client relations. He did not mince words:
“The ‘noisy withdrawal’ requirement will chill the relationship between inside and outside counsel,” he wrote in the March 2003 issue of MCC. “Outside counsel begins to look more like a cop than a lawyer.”
Milestones: 1999–2003
Senate impeachment trial of President Bill Clinton ends in acquittal • Michigan jury finds Dr. Death, Jack Kevorkian, guilty of murder for his lethal injection to a terminally ill man • Columbine High School massacre kills 12 • SpongeBob SquarePants debuts on Nickelodeon • Lance Armstrong wins his first Tour de France • AOL purchases Time Warner for $162 billion • Microsoft ruled to have violated U.S. antitrust laws • Madeleine -Albright holds talks with North Korean dictator Kim Jong II • U.S. Supreme Court ruling ends recount and effectively hands presidency to Texas Governor George W. Bush • 2,977 victims killed in September 11, 2001, attacks • Enron files for Chapter 11 bankruptcy protection • U.S. Department of Homeland Security begins operations • U.S. forces invade Iraq, seize Baghdad and end regime of Saddam Hussein
Published April 2, 2018.
