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Investigations Call for Legal Aid |
An area where CIOs cross paths with lawyers is during an internal investigation -- an uncommon albeit a serious one. If an employee is suspected of stealing secrets or insider trading, his manager may ask the CIO to turn over the employee's emails and other electronic records.
Most CIOs would probably comply, especially if their companies have policies that say they have the right to review an employee's electronic communications at any time. But in these cases, Rob Baxter, vice president and CIO at Shamrock Foods Co., recommends proceeding hand in hand with a lawyer.
And he should know.
In September 2002, Baxter joined Phoenix-based manufacturing company EaglePicher Holdings Inc. for a six-week interim assignment as CIO. "Within eight days, things started to smell very fishy," he says. To wit, he discovered fraudulent bills for IT goods and services that the company had never received. One suspicious contract was from a one-man shop posing as a large company; it ran for five years with no possibility of cancellation. "Having run a $600-million service company, I had never even seen a contract like that," Baxter says.
Although the prospect of digging out more evidence on his own was alluring, Baxter knew better than to proceed solo. He didn't want to be accused of "going and reading everyone's email" or snooping through databases "because I thought it would be neat to find out how much the other guy was getting paid."
So he alerted his chief executive and told him that he needed another C-level approval before he would dig further. He wanted something in writing. He got it and then collaborated with the chief counsel and director of security on how to proceed. After a lengthy investigation by almost a dozen different law enforcement agencies, EaglePicher's former manager of information technology, John Franklin Brock, pled guilty to billing the company's pension plan for more than $400,000 worth of goods and services that really went to an aviation company that Brock owned.
CIOs should never access employee email or other data without a lawyer even if the company has a policy saying they can, says Kennedy, the lawyer. "This is one where you want to go to the corporate counsel and say, 'This one is in your domain. I'll wait until you tell me what to do.'"
Even if a company has a policy that gives it the right to spy, there are plenty of gray areas, Kennedy points out. "Does that mean that I can turn the data over to law enforcement? What if the story gets out in the public? What if I'm on the front page of the newspaper because we're revealing information about our employees?" he says.
If a CIO ends up on the witness stand, he does not want to be stammering, "I thought I understood what the law was," says Kennedy. Instead, he should be able to say, "On the advice of a lawyer, here's what I did."
--J.I.R.
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A Collision Over Contracts
When it comes to vendor contracts, CIOs often make two key mistakes that irk their lawyers. First, they wait until the vendor sends over their first version of the contract. That means the CIO's lawyer is stuck working from a draft that favors the other side. Second, the CIO often throws the contract at the lawyer without reading it and sometimes without even knowing what he wants from the proposed deal. Then the lawyer, who might be neck-deep in an acquisition or a sexual harassment suit, might put it on the back burner, unaware of the importance of the hardware or software. Tensions boil over.
Rob Baxter, now vice president and CIO at Shamrock Foods Co., a food wholesaler based in Phoenix, learned a lot about contract negotiation when he ran a $600-million business for Honeywell Inc. in the late 1990s. His advice: It's helpful to work with your legal department ahead of time to develop templates for various types of contracts. That way, when a deal is in the offing, you can get your contract out first. "The first one to the chair gets to sit down. The other one has to negotiate," Baxter says.
Payne is also a big fan of templates. When it's time to start negotiating a contract, he can suggest to his lawyers, "I'm going to use template number six." If they agree, he ships the contract off and the negotiations go from there.
If the contract is too complex for a template, Kennedy suggests that a CIO invite the vendor to get together to write a letter that outlines the terms of the contract. Then say, "I'll volunteer my lawyer to draft that. That will save you a little money on legal fees," Kennedy says. "That way, you get control of the draft." (But make sure it's not too one-sided. That could breed distrust or even kill the deal, Kennedy notes.)
If the CIO is working from the vendor's contract, he should know it well enough to be able to say to the lawyer, "Here are all of the points I agree with," says Shamrock's Baxter.
CIOs should also be prepared to outline the business terms in a contract. For instance, they shouldn't expect their lawyer to figure out issues like how much uptime is required, what triggers will terminate a contract or what happens if the vendor can't deliver. Instead, they should look to counsel for help on legal issues, like which state's laws should govern the agreement and how to resolve disputes, Kennedy says.
The more involved the CIO is, the better the contract negotiation will go, Baxter says. "The CIO's job is to engage the lawyer to get help, not to give the contract to the lawyers and say, 'Can we sign this?'"
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