Inhouse, Indict

This story goes into the “Read and Think Carefully While Drafting” file on the corporate attorney’s credenza.

Last week US Attorney Patrick Fitzgerald (yes, the special prosecutor in the Valerie Plame leak case) announced in Chicago an indictment against Siemens Medical Solutions USA Inc. and two employees (including an in-house lawyer) on fraud charges related to the awarding of a $49 million Cook County, Illinois hospital contract. The structure of a Siemens entity is alleged to have been designed to appear as qualifying for minority bidding status.

The in-house lawyer involved is alleged to have drafted documents creating the bidding entity, and was indicted on one count each of wire fraud, mail fraud and making false statements to the FBI.

The Chicago Tribune has more on the story, including a suggestion that these allegations may have come to light by litigation filed by GE Medical Systems, the initial losing bidder on the deal.

The obligatory DOJ press release is out and refers to the Siemens in-house lawyer involved as “formerly” with the company. The indictment is found here.

Of primary interest to any employee swept up in an indictment: will the company provide a defense? No word on that yet in this case. Professor Henning notes that this issue is gaining in importance, mainly due to the government’s expanding policy of leaning on employers to stop payment of the attorney fees of indicted employees. The good professor provides a link to a brief filed in the KPMG tax shelter case that alleges that this policy denies the constitutional rights of individual defendants.

Peter Lattman of WSJ Law Blog was the ace on the case, first spotting this story last week; Professor Ribstein has further thoughts here, with an interesting angle on the potential applicability of Sarbanes-Oxley.

Update (26 Jan 06): Tom Kirkendall extends the analysis here; Francis G.X. Pileggi raises an interesting question about D&O coverage for in-house counsel.

Elsewhere, it’s a tough week for inhouse counsel and “the law.” reports that a former GC of Xpress Pharmacy Direct was indicted on federal charges. The Houston Chronicle has more. The attorney for the indicted GC is apparently one Earl Gray, who has some star power himself.