American Bar AssociationForum on the Construction Industry

2012 Fall Meeting

Mark BakerFullbright & Jaworski, LLP

David DelmanHogan Lovells US, LLP

Paul A. BrunoFluor Corporation

Staying The Course In Strong Currents:Saying No To The CEO and The Art &

Ethics Of Advising Strong Corporate Clients

Plenary 1

Moderator: Buckner Hinkle, Jr.Stites & Harbison, PLLC

American Bar AssociationForum on the Construction Industry

2012 Fall Meeting

Mark BakerFullbright & Jaworski, LLP

David DelmanHogan Lovells US, LLP

Paul A. BrunoFluor Corporation

Plenary 1

Moderator: Buckner Hinkle, Jr.Stites & Harbison, PLLC

UP THE LADDER AND OUT THE DOORHow to Say “No” to the CEO

A One-Act, Two Scene Play

A Visit to a Mega Mining Project Goes South

Scene 1

• Commercial, governmental and union bribery

Scene 2

• A troubled project in financial melt-down and no one cares to come to grips with reality

Question presented

What are the obligations of internal and external counsel when confronted with credible evidence of illegal conduct or breach of fiduciary duty under SOX Section 307 and the ABA Model Rules 1.13 and 1.6

Hypothetical 1 – The Pay-Offs

• Bribes paid to private company executives to secure a privately financed project

• Bribes paid to government officials to secure business licenses, building permits, and entry visas for foreign workers

• Bribes paid to union officials to allow foreign workers on the project and to ensure labor peace

Is commercial bribery illegal?• Yes – The Travel Act

Is bribery of foreign government officials illegal?• Of course – FCPA, subject to a “facilitating”

defense

Is bribery of foreign union officials illegal?• Probably – Taft Hartley and the Travel Act

Hypothetical 1 – The Pay-Offs

Hypothetical 2 - Burying the Bad News

• The project is a year late, but the official project schedule shows on time

• Cost increase = $180m, offset by “claims” against the owner

• Liquidated damage exposure $110

• Banking covenants will be breached if claims are not recovered and liquidated damages are paid

• Senior project personnel have over-stated the chances of success on the claim, and under estimated the chances of payment of liquidated damages

The Obligations of Counsel

• SOX 307 – minimum standard of professional conduct

• Lawyers as “gatekeepers” of corporate legality

– Material violations of securities law or breaches of fiduciary duty must be reported “up the ladder”

• ABA model rules of professional conduct

– 1.13 (organization as client)

– 1.6 (confidentiality of information)

Consequences if SOX is followed, consequences if it is not.

• Resist

• Retire

• Resign

• Sued by Shareholders

American Bar AssociationForum on the Construction Industry

2012 Fall Meeting

Break…