Thursday, September 10, 2009

Pfizer and "Compliance"

So Pfizer, which made a high profile GC hiring just a little over a year ago, has been slapped again for illegal marketing practices, agreeing to a $2.3 billion federal fine. That's brutal enough, but what interests me is one of the non-economic conditions the feds imposed on Pfizer (yes, it was a "corporate integrity agreement", but that's about as much an arm's-length contract as DOJ consent decree is).

Under this agreement, Pfizer's "chief compliance officer" must report to the CEO, not the GC. Now, given Pfizer's record, perhaps that's not such a bad idea; obviously, this is an organization that needs some additional focus on compliance. However, check out this quote from Lewis Morris, chief counsel for the inspector general's office:

"The lawyers tell you whether you can do something, and compliance tells you whether you should. We think upper management should hear both arguments."

Pfizer's issues aside, this is an awfully narrow view of how in-house counsel should behave. Good business counsel should be able to give risk-adjusted advice - that is, both what you can do and whether you should do it.

Tuesday, September 01, 2009

Ebay - Skype - Final Chapter

Almost 4 years ago to the day, I noted that "deal fever" had gripped Ebay and led it into an ill-fated $4.1B acquisition of Skype. 2 years ago, Ebay, took a massive $1.4B writedown on the acquisition, conceding that they had overpaid.

Today, Ebay announced the divestiture of a controlling interest in Skype in a deal that values the company at $2.75B. While the deal not working out is hardly shocking, it is somewhat surprising that Ebay was able to recover as much as it did, selling 65% of Skype for $1.9B in cash (of course, you can be sure that the private equity investors conditioned the deal on a long-term commercial relationship between Skype and Ebay; that deal may well include revenue commitments).

In any event, it's always good to see a little dealmaking discipline - even when it's cleaning up the mess that deal fever can create.