Editor: Mr. Roberts, would you tell our readers something about your background and professional experience?
Roberts: I started my practice in 1971 as a traditional labor lawyer. I worked initially with the National Labor Relations Board and went on to join Morgan Lewis & Bockius when the firm opened a New York office.
Editor: How did you come to Epstein Becker?
Roberts: For twenty years I had my own boutique law firm that specialized exclusively in labor and employment law. As a consequence, I came to know, and develop considerable respect for, EBG as both a competitor and as a firm with a great deal of talent in this area of the law.
Editor: Would you describe your employment and labor law practice? How has it evolved over the course of your career?
Roberts: As traditional labor law gave way to Title VII and other employment discrimination litigation opportunities for counsel, I tended to move with the prevailing trends. Over time, my practice has expanded to cover a variety of employment issues and claims, some with a statutory basis and some without. At the same time, the clients have become more global in their interests, and that has meant that things like mergers and acquisitions and cross-border considerations have became a more active part of the practice. Since 2002 I have been increasingly involved in counseling clients for Sarbanes-Oxley employment compliance, in addition to representing clients in Sarbanes-Oxley litigation.
Editor: In recent years you have lectured and written extensively on Sarbanes-Oxley compliance and related governance and whistleblower issues. For starters, would you tell us how Sarbanes - or is it the corporate scandals that prompted the enactment of Sarbanes - has impacted your practice?
Roberts: My starting point is that no organization is immune from the impact of Sarbanes-Oxley. That is, I think everyone understands the technical side of the statute and the rules it imposes. It is the implicationsof Sarbanes that concern people now, the investor factor and the conclusions investors draw from a perceived Sarbanes lapse. Just about any corporate decision is going to have to consider the whistleblower issues, for example, and the impact a whistleblower might have on the corporation's reputation. As a result of Sarbanes, the corporation really is visible to a far greater extent than it ever was in the past, and that is as true of private companies and non-profit organizations as it is of publicly-traded enterprises. To the extent that we talk about best practices having been established as the acceptable standard, everyone - whether formally subject to Sarbanes-Oxley or not - must be in compliance.For that reason, expectations of Sarbanes-Oxley scrutiny and best practices are factored into any advice I give.
Editor: As a result of Sarbanes, and the plethora of rules, regulations and emerging case law that derive from it, compliance requirements have increased dramatically. How has this impacted your firm's relations with its clients?
Roberts: This represents an opportunity to counsel collaboratively.In our case, and as a consequence of having been engaged with the issues from the very beginning of this legislative initiative, we have been able to work with our clients' corporate counsel to integrate, on a step-by-step basis, a whole series of employment law considerations into their Sarbanes-Oxley compliance.If one looks at any of the Sarbanes-Oxley hallmarks - controls, transparency, oversight, governance - each somehow implicates employee considerations.Information originates with employees, and many will be high placed and "insiders."What we have to work on with clients and their outside counsel is the distinction between a well-intentioned employee raising a legitimate issue and an employee with a separate agenda who wants a cloak of statutory protection.
We counsel, also, that clients cannot receive or manage whistleblower claims in quite the same way as other employment claims. Because of the underlying corporate issues raised, there is a different immediacy and urgency.There are ramifications of attention from investors, the financial press and sometimes the general media, and a good defense may be secondary to other considerations.
Editor: Are you engaged in audits of your clients' legal compliance systems?
Roberts: Yes. We work with in-house counsel and with outside regulatory counsel because we believe that the employment issues that companies face cannot be divorced from the other compliance issues that Sarbanes has brought to a head.The challenge to corporations is to obtain information from employees at all levels without provoking an unintended and undesirable reaction from the reporting employee.
Editor:Are you called in to handle issues that, in the past, might have remained with the client's legal department?
Roberts: EBG brings to the table an experience that no single company is going to have with respect to whistleblower and Sarbanes-Oxley claims. So, yes, we are engaged in matters that might have remained with the client's corporate counsel in an earlier day. The combination of our expertise and in-house counsel's knowledge of the organization leads to the best results for the client, and this is particularly true where the law as applied lacks reliable definition.There are few reported administrative cases, and fewer court precedents.That is compounded by little in the way of regulatory agency experience with the securities nuances of Sarbanes-Oxley.
Editor: Under §307 of Sarbanes outside counsel is required to report material violations of the securities laws and violations of fiduciary duty to the chief legal officer or the CEO and then, in the absence of an appropriate response, to the governing board. Is this something that might erode the trust that has almost always existed between outside counsel and the general counsel and legal departments of its corporate clients?
Roberts: I do not think that §307 serves to erode trust so much as underscore the need for working together. Section 307, together with the SEC rules interpreting that provision, makes clear that it is the company that is the client. The individual executives with whom we interact are not technically the client, and they are now well aware of that fact. I think we will begin to see engagement letters which highlight the law firm's understanding that they and the general counsel represent the company.
Editor: Please share your experiences in establishing and managing hotline and whistleblower systems.
Roberts: There are two components to that undertaking. One is to determine what the system ought to do, and the other is to determine how it should function. The latter is something that tends to be handled by others. With respect to what is meant to be accomplished, however, we can play an important role. I believe there is a significant failing in Sarbanes in that it does not direct the employee who could be a whistleblower to go the company first .These provisions allow the would-be whistleblower to report within the company, to Congress or some committee of Congress or to a regulatory agency, but there is no guiding set of incentives or disincentives to report first to the company.We know that neither Congress nor a regulatory agency is going to be able to fix a corporate problem directly. The only way the problem is going to be addressed is for the company to learn about it, acknowledge it and then fix it. Sarbanes does not reward the company for doing so, however. I think it is simply good sense for the company to encourage employee use of an established hotline, as well as other means of reporting, and to promote a culture of receptivity to such reporting. Otherwise, the employees may resort to other reporting mechanisms, to the company's detriment. One of our main objectives as counselors is to ensure that the company is supportive of the system established to deal with these reports, in addition to the reports themselves. We also work to ensure that the company is supportive of the reports it receives through the certifications and sub-certifications under §§302 and 404. We try to assure clients that the sub-certifications provide meaningful information in two respects: that things are in order, as they should be, and that controls are working.
The certifications and sub-certifications, if not framed properly, could spawn an entire new class of whistleblowers. Someone who receives a sub-certification and objects to signing it is potentially a whistleblower. I think that it is important that the sub-certifications proceed through a series of acknowledgements by the individuals charged with responsibility for specified areas. Properly managed, this process can avoid the situation where someone will not sign a certification, but refuses to give a reason.
Editor: What about responding to auditor's questions during the audit review process?
Roberts: From time to time there are questions about whether an employment issue is subject to reporting. We are seeing some early administrative decisions that might suggest that whistleblowing under Sarbanes-Oxley reaches beyond the crimes, frauds and swindles that are expressly stated to be within its reach. To the extent that there is a major employment law issue that is not disclosed - something that would be of significance to the company's shareholders - the auditors are bound to be interested. And we have a role in attempting to analyze the situation and the applicability of Sarbanes to it.
Editor: And the role of outside counsel in helping to establish and monitor standards of director independence?
Roberts: The independence of the board is going to be bolstered by the board's access to an independent, outside counsel. I hasten to add, Sarbanes-Oxley, in insisting upon the primacy of inside counsel's loyalty to the corporation, has accorded a degree of independence to general counsel and the members of the corporate legal department that may not have existed in the past. Access to independent counsel serves to evidence the distance that should exist between the board - and the audit committee, the compensation committee and the other instrumentalities of the board - and the senior executives and other corporate insiders. That is where things are trending today.
Editor: Would you share with us your thoughts about how to deal with the situation where general counsel believes that he or she cannot properly discharge their compliance responsibilities - perhaps there are too few lawyers or they report to someone other than general counsel - but to raise the issue with the CEO or the board might jeopardize general counsel's job. What kind of support can outside counsel provide in these circumstances?
Roberts: Because we have a common client, in-house counsel and outside counsel have a common cause in this situation. The real question is how to put together a team that best serves the client's interests. Sarbanes-Oxley has put a spotlight on this question, but in fact it is not a new one. This is a difficult area in which to operate, and there is no single response that is going to work in every instance. The best approach, however, is one that draws upon the experience and talents of both in-house counsel and outside counsel.