In-House Counsel's Role In Tailoring Compliance Programs To Their Companies' Needs

Saturday, January 1, 2005 - 01:00

The Editor interviews Charles F. Raeburn, Senior Corporate Counsel, Pfizer Inc., and Jean K. FitzSimon, General Counsel and Principal, Bridge Associates LLC. They will be panelists at the program on Corporate Governance and Compliance Today and Tomorrow: What Corporate Law Departments Need to Know to be held on January 27 in Livingston, New Jersey. Sponsors are the New Jersey Corporate Counsel Association, Sills Cummis Epstein & Gross P.C., Deloitte & Touche LLP, and associate sponsors are PLI-Corpedia, Corporation Service Company (CSC) and Kelly Law Institute. For more information about the program, contact Jennifer Buneta at To read articles about corporate governance in past issues of The Metropolitan Corporate Counsel, visit

Editor: Please tell our readers about your compliance program.


Raeburn: Pfizer's compliance system has evolved over time. As a company operating in a highly regulated industry, with virtually every aspect of our business subject to FDA regulation, there is a huge incentive to having a robust internal compliance system. Our system is outlined in a written "Summary of Pfizer Policies on Business Conduct," which is published on our corporate website, and in a Corporate Compliance page on our internal Legal Division website (accessible by all Pfizer colleagues worldwide). The website has links to the "Summary" and to the Pfizer compliance hotline, compliance education and Pfizer's healthcare law compliance program. This latter program was developed with assistance of outside consultants. The Summary is unique to Pfizer and has evolved over more than 20 years. We do benchmark with other companies in the pharmaceutical and healthcare industries.

FitzSimon: At Bridge Associates, we have an interesting situation. As a crisis management and turnaround consulting firm, our teams work with or serve as senior management of troubled companies primarily to help them improve their financial performance. In their assignments, our consultants have to think not only about the Bridge compliance program, but also that of the troubled company.

When serving as an officer of a company, even on an interim basis, issues under Sarbanes-Oxley arise. For instance, the troubled company may not have an anonymous confidential hotline for whistleblowers or we may be asked to assist in downsizing. Although the lack of a hotline may not affect our team's financial role, it is something that a corporate officer ought to raise to the consciousness of the troubled company's management. And, of course, if we assist in downsizing, we need to be sure whistleblowers are protected.

Editor: What is the role of your in-house lawyers and law firms in the ongoing operation of your legal compliance program?


Raeburn: Pfizer's general counsel is the corporation's chief compliance officer and an assistant general counsel is Deputy Chief Compliance Officer and heads a compliance group of six full-time compliance attorneys, plus support staff. Hotline complaints are received by a third-party service provider in order to preserve complainant anonymity.

FitzSimon: I serve both as general counsel and compliance officer of Bridge, so I need help in covering all the bases. I have a wonderful partnership with the law firms I hire. When I am trying to handle privacy issues subject to the Gramm-Leach-Bliley Act or other specialized concerns, I can stay focused on the company's needs, resources and the way we get things done internally. I rely on outside counsel to review my plan of action and to let me know if I have interpreted the law correctly.

O'Melveney & Myers LLP is one of my favorite firms when it comes to serious corporate investigations. Ira Raphaelson, a senior partner at the firm, is brilliant and practical. He listens to his client's needs and focuses on effective strategies to anticipate and avoid legal problems.

A number of other firms are also great partners. David Axelrod of Vorys, Sater, Seymour and Pease LLP, is a wonderful lawyer. A former federal prosecutor, he is now doing white collar and corporate defense work. He thinks outside the box to help his clients understand the law so that they can figure out where they have to go and how they can get there.

Editor: How are lawyers able to stay in sufficiently close contact with middle management to obtain early warnings of developing compliance problems that might otherwise not be identified and to head them off?


Raeburn: Pfizer constantly publicizes our compliance program and the compliance attorneys travel frequently to keep the profile of the program at a very high level. In the final analysis, however, Pfizer's culture is very focused on compliance with applicable laws, rules and regulations and this is what makes the compliance program so successful. Our worst compliance issue in recent years was inherited when we acquired the Warner-Lambert Company in 2000.


FitzSimon: Companies are in a difficult situation if there is a culture of believing that lawyers are a roadblock rather than a valued part of the team. With the support of senior management, you can turn the attitude around by demonstrating the value of raising issues with the company's counsel or compliance officer before or as soon as they arise. They should also talk with the counsel or compliance officer whenever they are thinking about going into a new or exiting an area of business so that they can identify and address any legal issues. It is essential for counsel to work with management to develop a relationship where the counsel is seen as a partner.

Editor: Has the number or qualifications of the lawyers been affected by their roles in the legal compliance system or employee training program?

Raeburn: Pfizer's compliance group in our Legal Division was formed about 5 years ago and has grown significantly following our acquisitions of Warner-Lambert Company (2000) and Pharmacia Corporation (2003). The compliance group currently consists of seven attorneys headed by the Deputy Corporate

Compliance Officer. Most of the group have a litigation background. Compliance issues arising in IP, environmental, securities, human resources, and other practice areas continue to be handled by the specialized attorneys in those areas, coordinating with the attorneys in the corporate compliance group and, if necessary, in the Pfizer litigation group.

Editor: What is the role of the lawyers with respect to the financial internal control system and Section 404 and other Sarbanes-Oxley certifications?

Raeburn: An attorney in Pfizer's Corporate Governance group (Legal Division) has supported Pfizer's Internal Audit group, who have been principally responsible for section 404 compliance and certifications.

FitzSimon: Lawyers should give legal advice. Does that mean they have nothing to say about internal controls? Of course not, but their advice should be focused on whether the financial controls are sufficient from a legal perspective. They should leave the financial review of the controls to the experts.

Some controls can be very simple. For example, if you want to keep one of your children from breaking into a sibling's piggy bank, you can move the piggy bank to a place where neither child can reach it. Other situations require more complex controls. For example, if a business involves a lot of large cash transactions, complex controls may be required to address money laundering concerns. While, as a lawyer, I am not an expert on knowing what the controls would be, I do know how to help a business team to ensure the proper controls developed by experts are in place.

Some law firms are advising their clients to have everyone from the bottom up certify the financial controls so that the CFO, CEO and others who have to sign off on the financials have a degree of comfort in their accuracy. Such certification, however, is meaningless unless the lowest levels have been trained so that they understand what they are certifying. Otherwise, while their certification may confirm that they are honest, it does not confirm that they know how to categorize a transaction.

Legal counsel may face the same problem that accounting firms have with respect to their potential conflicts of interest. If a law firm or accounting firm advises a company about the design and implementation of financial controls, what happens when a regulator, litigator or someone else raises a question about their adequacy? Most law firms do not see a conflict and continue to advise their clients. Accounting firms have not reached a consensus on whether a separate firm should handle the testing of a company's internal controls for certification purposes.

Editor: What resources do you find helpful in staying current with the legal issues related to your compliance program?


FitzSimon: A variety of professional associations, particularly the American Bar Association, have a wealth of articles and other resource materials. PLI is an example of another organization that helps counsel to stay on the cutting edge of compliance issues.

Laws firms do a nice job of getting to those of us who are general counsel memos on new developments in the law. The biggest problem is that you get a lot of memos. If you establish the right relationship with outside counsel, they tend to keep their eyes open for things that might interest you. They send you articles or drop you notes that help you keep abreast of looming changes. I can then easily identify the right person in the firm to help me understand its impact on my company efficiently and effectively.