Paul Horton: Pros and Cons of In-House Attorneys

Our law firm is often hired by businesses to act as “General Counsel” and about 50% of the time our business clients have in-house lawyers that assist the business during its life-cycle. Defining what an “in-house” attorney does is nearly impossible because almost every such attorney has a unique role specific to that organization and its management team, but the effect of having an in-house lawyer is often the same.

Business lawyers are trained to think about business issues differently than management, owners, accountants and other employees and can therefore be a major asset over time. However, bringing a business attorney into a business to generally help the business grow and prosper is often a big step because there are many pros and cons to having a lawyer around full time. The following is a list of a few such pros and cons to help companies sophisticate themselves about the decision to bring a lawyer onto the payroll:

Pros:

Contracts, legal analysis, negotiations and other tasks generally performed by a law firm can be started (and often finished) in-house for far less money than if the same was outsourced to a law firm that needed to get up to speed on everything.
Day-to-day interactions with a business lawyer can help to identify and expedite strategic change within a business.
Strategic risk can be more easily analyzed by a team that includes a lawyer that is highly sophisticated about the company.
Litigation strategy is easier to implement if it was designed by an in-house lawyer who knows all of the good and bad facts.
In-house business lawyers can bring credibility to a business and open doors that might otherwise be closed.

Cons:

Lawyers are expensive and are often among the highest paid employees at a company.
Lawyers are often very critical, risk-averse people that can slow progress if they act more as a fear monger than a strategic analyst.
Business lawyers’ opinions can sometimes conflict with those of management and cause strain in an organization.
In-house lawyers often know all of the secrets a business has and therefore can cause significant problems when exiting an organization.
In-house attorneys can become complacent in their positions rather than always keeping their legal skills sharp like a private practice attorney. This can cause a company to be blindly exposed to risk for long periods of time.

Generally it is best for a company to never wholly rely on the skills of an in-house lawyer because of the specialized nature of the position. Having the business’ attorney work with outside counsel from time to time can hedge the cons described above to some extent and will often keep the in-house attorney on his or her toes. Additionally, if you feel like your in-house or outside legal counsel is not quite meeting your expectations you should always interview other lawyers and law firms to see if there might be a better fit.

Any attorney in Utah can plainly see that fraud is still just fraud by any other name

Horizon Mortgage & Investment may have seemed like smooth operators, and they probably were for quite some time, having swindled at least $72 million from several hundreds of investors since 1997 in Kaysville, Utah according to Salt Lake Tribune article online. Run by Dee Randall, the “investment company” was recently ruled to be little more than a Ponzi scheme, which makes Randall’s actions fraudulent and illegal, though it doesn’t take an attorney in Utah to see that. Worse still for the investors, Randall filed for bankruptcy in 2010, effectively shortchanging anyone who unwittingly poured money into the scheme get less than 10 cents on the dollar back now.

Investors won’t give up so easily, though, and most have filed a lawsuit with an attorney in Utah “seeking millions in damages.” The suit is pending. But Randall’s scheme was sneaky, even from the beginning, and now, the “U.S. Trustee’s Office has found 20 other companies Randall had been involved with, rental income he had not reported, as well as creditors who were not notified of the bankruptcy filing.”

Serving for a general agent in Utah for Union Central Life Insurance of Cincinnati, Randall “had offices in Sandy, Kaysville, Woods Cross, Fruit Heights, and Logan, where he employed numerous subagents.” The better to trick you with my dear. Pitching life insurance alongside investments, they were already in violation of Utah law according to the lawsuit filed by a forensic accountant who took over Randall’s assets and companies at the request of the court. He found lies and deceit everywhere, but interestingly, there was unexpectedly more.

In his case, Randall didn’t rely totally on lies and secrecy. He actually “disclosed to some investors that he was going to use their money to pay what was due earlier investors,” and “warned that investors shouldn’t put money in they could not afford to lose.” Not only did such disclosures surely make him seem forthcoming and honest, they were what he hoped would pass for getting around securities laws. One attorney in Utah told a victimized couple “that the disclosures made Randall’s operation look like a ‘legal Ponzi scheme,’” according to court records.

But in truth, business lawyer in Utah worth her salt could tell you there is no such thing as a legal Ponzi scheme. “Utah law also says it’s illegal to operate a business in a way that defrauds investors,” so Randall wasn’t skirting any laws by disclosing his methods; he was just setting himself up for failure.

Which, depending on how you look at it, will come down with smashing consequences beginning June 30 of this year in the 3^rd District Court in Salt Lake City. Randall “faces 22 charges of securities fraud and one of engaging in a pattern of unlawful activity.” As those with a flair for the dramatic might say, “the gig is up” for Dee Randall.

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If you are here, you probably have a business law issue you need help with, call Ascent Law for your free consultation (801) 676-5506. We want to help you.