GC-Public-Storage-Glick.Pdf

WORLD RECOGNITION of DISTINGUISHED GENERAL COUNSEL

GUEST OF HONOR: Steven M. Glick Senior Vice President, Chief Legal Ofﬁ cer and Corporate Secretary, Public Storage (2010–2015)

THE SPEAKERS

Steven M. Glick Mark Pecheck Senior Vice President, Chief Legal Officer Partner, Gibson Dunn LLP and Corporate Secretary, Public Storage (2010–2015)

Michael Quigley Joshua Zielinski John Marzulli Partner, Kim & Chang (Korea) Partner, McElroy, Deutsch, Partner, Shearman Mulvaney & Carpenter LLP & Sterling LLP (The biographies of the speakers are presented at the end of this transcript. Further information about the Directors Roundtable can be found at our website, www.directorsroundtable.com.)

TO THE READER General Counsel are more important than ever in history. Boards of directors look increasingly to them to enhance financial and business strategy, compliance, and integrity of corporate operations. In recognition of our distinguished Guest of Honor’s personal accomplishments in his career and his leadership in the profession, we are honoring Steven M. Glick, General Counsel of Public Storage during 2010–2015, with the leading global honor for General Counsel.

Public Storage is a real estate investment trust that primarily acquires, develops, owns, and operates self-storage facilities. It is one of the largest real estate companies and landlords in the world. (The national and worldwide operations are described further below.) His address focuses on key issues facing the General Counsel of an international business during the course of his legal career, which includes 16 years of practice in Europe. The panelists’ additional topics include international business and law; mergers and acquisitions; intellectual property; tax strategies; and litigation.

The Directors Roundtable is a civic group which organizes the preeminent worldwide programming for Directors and their advisors including General Counsel.

Jack Friedman Directors Roundtable Chairman & Moderator

Steven M. Glick is believed to be the only and honors he has received is the inaugu- U.S. lawyer to have served as General ral Founders Award of the Association of Counsel of major U.S. (Public Storage) and Media & Entertainment Counsel (“AMEC”), U.K. (Ladbrokes and Graseby) public com- an award which subsequently has also panies, as well as for the Americas for a been bestowed on the head of the Media major French public company (Thomson). & Entertainment Group at Microsoft, the Mr. Glick also has held senior business President of the Motion Picture Association positions in diverse businesses involving of America, and the Founder of JAMS. business development in the U.S., U.K. and Japan, licensing internationally, and Mr. Glick is a graduate with honors of the general management in Asia Pacific and University of Connecticut School of Law, Latin America. His early career (1984–92) where he served as Articles Editor on the was spent in private practice with Shearman Connecticut Law Review, of the London & Sterling, in their New York, London and School of Economics, where he received an Steven M. Glick Paris offices. M.Sc. in Politics (with special reference to Senior Vice President, Chief Legal the Politics and Government of Russia), and Officer and Corporate Secretary, In recognition of his distinguished global legal of Elmira College, where he received a B.S. Public Storage (2010–2015) career and in-house practice, the Directors magna cum laude and was one of the gradu- Roundtable awarded Mr. Glick with its World ating class’ two commencement speakers at General Counsel honor in March 2015. In the college’s Candlelight Ceremony. He was 2008, the International Law Office, in con- born and raised in the Bronx, is married with junction with the Association of Corporate two children, and has lived with his family in Counsel, nominated Mr. Glick as General Santa Monica, California since 2002, follow- Counsel of the Year. Among other awards ing nearly two decades in Europe.

Public Storage Public Storage, a member of the S&P 500 storage facilities located in seven Western and FT Global 500, is a real estate invest- European nations, with approximately ten ment trust that primarily acquires, develops, million net rentable square feet operated owns, and operates self-storage facilities. under the “Shurgard” brand. The Company The Company’s headquarters are located in also owns a 42% common equity interest in Glendale, California. As of December 31, PS Business Parks, Inc. (NYSE:PSB) which 2014, the Company had interests in 2,250 owned and operated approximately 29 mil- self-storage facilities located in 38 states, lion rentable square feet of commercial space with approximately 146 million net rentable — primarily flex, multi-tenant office and square feet in the United States; and 193 industrial space — as of December 31, 2014.

JACK FRIEDMAN: Good morning. I am Jack Friedman, Chairman of the Directors Roundtable. Many of you have been to our programs, but for those who are not familiar, we started our programming in Los Angeles in 1991. Since then we have done 800 events in 14 countries. Our primary goal is to work with Directors and their advisors, who can include General Counsel and other members of the Bar.

Before I turn the program over to the Guest of Honor, I want to thank Deanell Tacha, the Dean at the Pepperdine University School of Law, for coming. She has been a speaker at our programs previously; her last position was as the Chief Justice of the 10th Circuit for the Federal Court of Appeals. It is a great honor for the legal community to have her here. One of our panelists is an alumnus of Pepperdine, Mike Quigley, who JACK FRIEDMAN: I would now like to Then I want to introduce, immediately on you will meet later. introduce Amy Forbes. my right, Mark Pecheck, who is a partner at Gibson Dunn, here in Los Angeles. I Now I would like to give a brief background AMY FORBES: Good morning. I’m Amy first met Mark about ten years ago while on Steve Glick, who is retiring from his Forbes, the Co-Partner-in-Charge of the Los I was at Thomson/Technicolor. Mark is a current position after 30 years of service in Angeles office, and I wanted to welcome very highly accomplished and well-regarded the legal community. He most recently has you all here. Enjoy the view and enjoy the real estate lawyer. He’s been with Gibson been the Chief Legal Officer and Senior morning. We are very pleased to have this for over 30 years, so he, too, is a member of Vice President of Public Storage, as well as program here. Thanks very much. the 30-year+ club. its Corporate Secretary. Earlier positions included General Counsel of the Americas JACK FRIEDMAN: And now our Guest Then, to my far left, as you all now know, for Thomson (Technicolor), Executive of Honor. is a graduate of Pepperdine Law School, Vice President at Paramount Pictures, and Mike Quigley. Until the end of last year, General Counsel at Ladbrokes, a FTSE-100 STEVEN M. GLICK: Thank you, Jack, Mike was the head of the Tax Controversy U.K. public company. It is a distinguished for those kind words. Let me also thank the and Tax Litigation practice at White & Case career, from which he will draw some Directors Roundtable for honoring me and in Washington, D.C. He is now based out of useful comments about being in private organizing what I am sure will be, for all of Seoul, Korea with Kim & Chang. I worked practice and in-house, both in the United us, an enjoyable and informative event today. closely with Mike for several years on an States and overseas. Steve attended Elmira important transfer pricing matter, and in that College, the London School of Economics, I wanted to first thank and introduce the time, I came to respect his work immensely. and the University of Connecticut’s School panelists individually, as Jack mentioned. Mike, I am glad that the event today gave you of Law. I could spend the whole morning To my immediate left is John Marzulli, a chance, since you were raised in California, on just his accomplishments. who is a partner at Shearman & Sterling to come back to visit. Thank you. in New York. He has been a partner for Instead, we will start with a welcome from over 30 years. John and I worked together Our final panelist, to my far right, is Amy Forbes, Co-Partner-in-Charge of Gibson at Shearman’s in both New York and in Josh Zielinski, who is a partner in the Dunn in Los Angeles. Then our distinguished London in the early part of our careers, and Commercial Litigation group at McElroy, Guest of Honor, Steve Glick, will make his we even played on the Shearman’s basket- Deutsch in Newark, New Jersey. Josh is opening remarks. He will be followed by our ball team together! John is a fine lawyer; a top-flight litigator whom I and my com- Panelists, who we will bring into the discus- he’s a friend; and he was a much better bas- pany have worked with on a large number sion as the morning goes along. ketball player than I was, as well! of matters.

General Counsel of Ladbrokes, a FTSE 100 Luck has definitely played a part in whatever company. While I was there, they owned success I’ve achieved over the course of my and operated the Hilton Hotels outside the legal career. Including the fact that when U.S. It was a very interesting business with I joined Public Storage in early 2010, the both hotels and betting and gaming. stock was $80 a share, and when I left last week, a little over five years later, the stock Following that position, I went to work was close to $200 a share. for Paramount Pictures in both London and Hollywood, and then for Thomson/ As one city analyst said a few years ago — Technicolor, which provided a broad range and it’s still true today — looking at PS’s of products and services to the entertain- stock chart, it’s a Superman-like ascent. It’s ment industry. Then I made the move to been true for me for at least the last five Public Storage. To go from Paramount and years and it’s largely been true for the last 43 Technicolor to Public Storage, is about as years. Luck and timing both really do matter. dramatic a change in client as an in-house lawyer can experience. I would like to go on with the show now, so to speak. For the next 15 minutes or so, Let me just say a few words about Public I’m going to share with the audience — as a Storage. First, there is no business that I tribute to my favorite and soon-to-be-retiring On behalf of everyone here, I would like have been associated with that has a better late night host — my Top Ten list of lessons to thank all the panelists, once again, for business model than Public Storage. That is I’ve learned in unusual circumstances and coming. I would also like to add my thanks a model that its fine and experienced man- unusual settings over the course of my career. to Gibson Dunn. I really do appreciate — as agement team, and Board, really know how Although I have a Top Ten list, there’s only does the Roundtable — their making their to support and exploit. At Public Storage, time for two today, so we’ll focus on two. facilities available and hosting the event one of the things you often hear, in describ- today. Finally, I wanted to thank the friends ing the business, is that “we just rent garage The first lesson is, “Don’t let a bomb get and former colleagues and others whom I space” and “boring is good.” Public Storage in your way: success and failure in the U.S. see here today. I know everyone’s time is has grown to be a $35 billion equity capi- IPO markets.” It was 1992, and I was a valuable, and I am truly grateful for your talization, with over 150 million square feet senior associate at Shearman & Sterling in interest and your support. of space rented to 1.2 million customers in London. It was Friday night, April 10th, the U.S. and Europe and 5,000 employees, and I was working with and leading a team My presentation today will be different than with endless opportunity to continue to of five lawyers and assistants on the final the usual Roundtable presentation by an grow and expand in the U.S. and overseas. stages of a U.S. public offering, for a com- honoree, as the Roundtable is really hon- This just doesn’t happen by being “bor- pany called Orthofix. Their product was an oring my recent and past roles as General ing” and “simple.” There’s a lot of work external fixation device used to help in frac- Counsel for both U.S. and U.K. public that goes into it. The legal team at Public ture treatment. Orthofix was headquartered companies. Having just retired from Public Storage has — over the course of its 40-plus- in the Netherlands. It had a factory in Italy; Storage, shortly after celebrating my thirtieth year history — done a great job in protecting its management was in the U.K.; and its year of law practice, I wanted to talk about and helping grow the brand. main market was in the United States. something that was more personal and a bit more anecdotal. In my relatively short time at Public Storage, At 21:20 — 9:20 p.m. — that evening, an I saw some of the company’s seasoned, excel- IRA bomb consisting of 100 lbs. of Semtex In one’s career, as in one’s personal life, lent in-house lawyers bring their talents to wrapped in a ton of fertilizer exploded in a everyone needs some luck. I have certainly bear. Lawyers like Tim Scott, who is here van parked outside the office building I was had my fair share of it, from landing a job with us today, who is a real estate tax expert, working in, the Commercial Union build- straight out of law school with Shearman and David Goldberg, their former General ing. At the time, four of the five members & Sterling in New York, to moving from Counsel, who’s “been there and done that.” of the team were having dinner — Chinese there to their London and Paris offices — They are great lawyers and good people. That food — and on a conference call with our which in the 1980s, were quite small, with really helped me along the way, both at Public client in the one conference room on the few opportunities for Americans to get Storage and in the other positions I’ve had only side of the building that did not get posted over there. From there, I became the the privilege to work in over the last 30 years. the windows blown out in the bomb.

Tragically, when that bomb went off, three At Public Storage, one of the things you often hear, in people that were‌ in the building died, including a taxi driver who was waiting out in his describing the business, is that ‘we just rent garage space’ car at the base of our building, and we think and ‘boring is good.’ Public Storage has grown to be a he was waiting for someone in our office. The bomb ripped through the Baltic Exchange $35 billion equity capitalization, with over 150 million and the Commercial Union building, which is pictured here — where Shearman’s office square feet of space rented to 1.2 million customers in was — and the buildings were rendered unoc- the U.S. and Europe and 5,000 employees, with endless cupiable for at least three years. opportunity to continue to grow and expand in the U.S. Luckily, four of the five of us were in the con- and overseas. This just doesn’t happen by being ference room, and we were okay. After we picked ourselves up off the floor — and we ‘boring’ and ‘simple.’ — Steven M. Glick were pretty confused — I led the team down prior evening. The woman returned just in and really proud of getting that deal done. the staircase and helped our one injured col- time, before I really lost my patience, and Not only because we didn’t let the bomb league. She had been hit in the head with a she handed me first-class tickets. British disrupt us, but I had also helped persuade lot of glass and there was blood all over her Airways had upgraded us due to the bomb. the company to go public at $12 a share, head and body. It looked much worse than it We thanked her and we went on our way to which was way below their initial offer- was — but we escorted her down the stairs, out New York. We went straight from landing ing price range. I had good reason to feel of the building, around some fires, and then — this may sound familiar to people who’ve strongly about that. Then, as it turned out, into the safety, finally, of the streets of London practiced for 30 years — to the printer on the price didn’t really hit $12 again for sev- and the awaiting emergency medical services. Saturday; we didn’t see our hotel room until eral years, and the window for these types of We handed our colleague off to an ambulance Monday, until after we had filed with the medical IPOs, shut down that year. We did operator, and the remaining four of us just SEC. Then later that day, I got a phone call well to go when we did. As Warren Buffett kept walking. We walked about a mile and to see the senior partner at Shearman’s. I would have said, in an approving manner, then we realized, “What are we doing? We was an eighth-year associate, but I had never I was being fearful at that time while others should just go home!” And so we went home. really talked to the senior partner, although around me were being greedy. Partly as a we had met and exchanged greetings. He result, the chairman and the CEO of the Before I did, I found a phone booth — wanted to see me in his office. I went to company became friends of mine, and they sounds very quaint now — and called the see him that Monday afternoon, and he appreciated that I helped push them across senior partner-in-charge of the London thanked me for the leadership that I had the finish line with the SEC. I actually got office to explain what had just happened: a demonstrated during the bomb evacuation, the SEC working over a weekend and giving bomb went off! From the tone of his voice and he told me to take some time off — comments, and looking at our comments and the tenor of the conversation, I could after the Orthofix deal closed! I underscore for the staff responses, before we even filed tell he thought I was raving mad and had “after” only to emphasize, really, the degree an amendment, which was unusual. exaggerated the extent of the destruction. of client service that was expected from, and He soon found out for himself. generally delivered by, lawyers at Shearman On that transaction, I managed to do what’s & Sterling. important for all lawyers to do, which is to In any event, the next day — which was a build personal relationships with my team, Saturday — a junior colleague and I went to We went back to London, closed the deal on with the underwriters, with the underwrit- Heathrow to catch a flight to New York, to May 1st, and that was that. Then I got a $500 ers’ counsel, with the SEC staff and, most the printer — I realize that dates me a bit — bomb bonus from Shearman & Sterling! importantly, with my client. in advance of that Monday’s planned SEC Okay? But I only got the bomb bonus after I filing. Unfortunately, our British Airways agreed to sign a release! [Laughter] After that, Orthofix actually offered me a business tickets were sitting on the window position as their first General Counsel, ledge in my office, and were blown up by The whole experience is very memorable. I which I reluctantly turned down. Ten years the bomb. We had no tickets. I explained look around and I think Gibson Dunn, Kim later, in early 2000, the stock traded at $48 this to the airline rep, and she asked me to & Chang and McElroy would have made a share, which was a four-bagger, and today wait. The wait just seemed endless. Also, I me sign a release, too — not just Shearman the company has a market capitalization of think we were still edgy from the bomb the & Sterling! I was an eighth-year associate about $500 million. It’s actually the smallest

company that I ever took public. It really particular that I thought illustrated, at least was the most memorable and enjoyable on a small business scale, the “impossible one, given the challenges and the results. is nothing” theme of Ali’s remarks and, perhaps more famously, of the Adidas campaign. Before Orthofix, I was also involved in taking some of Europe’s largest companies public in The most recent transaction was in 2005, the United States as part of the French and when the French company, Thomson, British privatization movement in the 1980s where I was General Counsel for North and early 1990s. Such companies as British America, signed an agreement to acquire

Gas, BP, Société Générale, were all clients 33 ¹/3 percent interest of the issued and that my firm and I represented in successful outstanding shares of Canopus Co., U.S. IPOs. As we all know, not all IPOs enjoy Ltd., which is a Japanese-based leader in success. A few years later, in 1995, as head of high-definition-disc desktop video soft- Business Development and General Counsel ware editing equipment. The shares were at a small British public company called acquired through a private transaction with Graseby — which was FTSE-listed, based in Canopus’ chairman and CEO, Hiroshi London — we tried to take our environmental Yamada, and members of his immediate business, Graseby Andersen, public in the family. That’s the deal getting signed up. U.S. We failed for a variety of reasons. Some of the reasons were performance-related; the At the same time we acquired that 33 ¹/3 company’s internal growth rate was really ane- percent from the chairman and founder, In 1994, a decade before that Canopus mic, and its potential to grow by acquisition Thomson also announced it would launch transaction, I completed a transaction in was quite limited. We also had some regula- a public tender offer for the remaining which Graseby licensed certain high-speed tory issues that hit us — some expected EPA Canopus shares. The value of this sort of x-ray detection technology to Anritsu in changes, which would have forced people to combined transaction, the two steps, was a Japan. Anritsu was looking for a solution to purchase the type of particulate monitoring little over €90 million. detect glass and other foreign body contam- products that we manufactured, were never inants in glass bottles. Graseby’s technology passed, and the prospects actually worsened What made the transaction notable was at that time was believed to be the only one during the leadup to the IPO. that it was believed to be the first time that of its kind in the world that could do that. there was a tender offer for a Japanese com- Notwithstanding that, there still were a lot At the end of the day, IPOs — at least in pany by a non-Japanese company that was of people, a lot of naysayers, saying that a cautious markets — need a good story, and successfully completed. That was done with Japanese company would never license tech- the Graseby Andersen one, alas, wasn’t me and the legal team at Thomson, and nology from a western company. This was good enough. Perhaps that’s something that others, and with the outside support of in the ’90s, and you have to remember, I or our bankers, and the company, should Morrison Foerster — despite, again, many back at that time, you know, Japan was busy have understood earlier than we did. people saying that that sort of transaction licensing its technology to the United States could not be done. and Western Europe, and it was really one- Lesson number two — the final lesson which way traffic. But our Board at Graseby, and I will share with you today! “Impossible is Japanese investment in the U.S., at that time, particularly our CEO, were not among nothing — even in Japan.” So Muhammad had been extremely profitable. But U.S. the naysayers. They were convinced, and Ali said — and I don’t know if you can all investment in Japan was seen — and prob- my CEO, particularly, was convinced that read this; I’ll just read the first sentence or ably still is seen — as not really viable, for Japanese companies would be prepared so — “Impossible is just a big word thrown economic reasons or legal reasons or other to take a license, and in the end, he was around by small men who find it easier to reasons. In fact, one commentator had earlier right — they were — and they were actually live in the world they’ve been given than to stated that an acquisition of a Japanese com- prepared, in this case, to largely pay for it explore the power they have to change it.” pany was undoubtedly the most difficult form upfront. The head of this product line and You can read on with the quote. of entry into the Japanese market. Another I, after a lot of groundwork, went to Tokyo commentator observed that acquisitions and twice in December of that year, and we got While I’ve been involved in several trans takeovers are simply not an effective device the deal done. So, “impossible” is nothing. actions in Japan over the decades of my for Americans to enter the Japanese market. legal practice, there are three transactions in Again, “impossible” is nothing. That’s a picture of the equipment at the time.

Finally — I don’t know if some of you noticed ...I managed to do what’s important for all lawyers to do, the Hollywood sign in the distance behind us, and I think that maybe one or two of you which is to build personal relationships with my team, are waiting for some tale from my Hollywood with the underwriters, with the underwriters’ counsel, with days, so here it is! the SEC staff and, most importantly, with my client. Jackass: The Movie, you may remember, was a 2002 American reality comedy film, with — Steven M. Glick the tag line, “Do not attempt this at home.” as a battery charger, can get things going; sure many of us would think it’s a glamor- It was a continuation of the stunts and how positive, team-oriented, and solu- ous profession — I think it’s maybe slightly pranks by the characters on the MTV show tion-oriented results by engaged lawyers less attractive now because of the cost, the of the same name that had aired the prior with management support and board sup- competition, and the difficulty of obtaining year. The film was released by Paramount port can be achieved; and how this can a job. But, over the years, it’s become less Pictures, and was really a surprise hit glob- yield results that are really unprecedented. glamorous as an in-house lawyer, because ally, both in the U.S. and overseas. Anyone you’re dealing much more — and the here see it? Or are you afraid to acknowl- Thank you, everyone, for the honor today. accountants are, as well — with pervasive edge you’ve seen it? [Laughter] Thank you, Jack. I’ve reminisced long regulation that really wears you down over enough, and I’ll hand it back over to you. time. There is a lot of form checking; there’s Okay — we have three people who said Thank you. [Applause] a lot of auditing going on; and the overall they’ve seen it; I think there’s a few more regulatory and litigation environment are in the room! It wasn’t released in Japan at JACK FRIEDMAN: Thanks, Steve. Next, far worse in the U.S. now than it seems the time of its international distribution, the Distinguished Panelists will each intro- to have been when I started practicing. But because it was feared that some of the scenes duce their topics. We have a series of very there are also, of course, exciting, thrilling, in the film were either obscene or there were interesting ones today, and then I’ll have challenging, and memorable moments, faces of Japanese citizens being shown with- some questions. interesting people, and front-page business out having consented to be involved in the transactions. movie. Overall, it was felt that the film may But first, I wanted to ask a question, and not have been in compliance with local law, have Steve comment on it briefly. One of JACK FRIEDMAN: Although we’ll get and it was never released in Japan. the things that’s often said about young more from each of the panelists later, I people who go into law is that they do it wanted to invite them to make comments At that time, I was the head of Business for justice; and they like the glamor and the on this. I remember the good old days, in Affairs for Paramount’s International Home idea that law offers an incredibly interesting the ’90s, when I could call up a rainmaker Entertainment business. I wanted to get that and stimulating profession and a variety of partner, and tell him or her about a pro- film released in Japan, because I thought it opportunities. On the other hand, you talk gram which the firm would be interested would be successful. I spent some time lob- to lawyers 20 or 30 years later, and they in — and he would say, “Sounds good; bying within both Paramount and MTV to are sometimes demoralized by the billable we’ll do it.” get the film cut and released in Japan, and hours system and the paperwork. Your eventually prevailed. We had a small theatric presentation highlights the fact that all Now, inevitably, the conversation goes like release there, where we edited out some bits, these things you were doing were done in this, “I like the idea, and I’ll take it to the and then we had a DVD release which was a cultural context. Could you give us your committee.” What’s this all about? How has very successful and well-received. Even subse- perspective on the trend and how it’s devel- the practice of law changed with more cor- quently, there was a DVD release with some oped? Particularly, tell us about the glamor porate committees, lateral hires, and people of the footage that we had taken out put back and interest of it versus the nitty-gritty of changing law firms throughout their career? in. In the end, we released more of the film having to earn a living as a lawyer. than we had initially expected. That was an JOSHUA ZIELINSKI: I just have a quick illustration of “impossible” is nothing. STEVEN M. GLICK: I was just chat- comment on the idea that the legal profes- ting before the program with the Dean of sion is not glamorous. Being a lawyer is a These are just small-scale illustrations of Pepperdine, and she reminded me that lot of hard work, but it is also a privilege. transactions that supported that theme. applications are dramatically down for the The job is very exciting. You’re never han- At the same time, they are really good law school again this year. If you thought the dling the same problem, even if you are demonstrations of how an in-house lawyer, profession was ever glamorous, and I’m not practicing in a specialized field of law.

JACK FRIEDMAN: Lawyers have a these three transactions, perhaps, illustrate chance, quite often with law firms now, to some of the characteristics or qualities that do pro bono work. lawyers should be thinking about.

JOSHUA ZIELINSKI: Absolutely. Case Study #2: The financing of an apartment portfolio. To set the stage, this MICHAEL QUIGLEY: I don’t think transaction occurred in 2007. I think most there’s ever been a better time to be a lawyer people here have some vague and unpleasant than today. I think the opportunities are lim- memories of 2007 and 2008. Cracks in the itless, for reasons that each of the panelists subprime mortgage market began to show will speak to, and I, myself, will speak to. in 2007. In the fall of 2007, the economic The increasing regulation; the complexity of storm clouds began to gather; they were doing business cross-border; the fact that the very obvious, culminating in March of 2008 world is flat — as Tom Friedman has taught with the failure of Bear Stearns, and then in us — and getting flatter, makes for very, very September of 2008, with the collapse and interesting times. Wise counsel, learned men bankruptcy of Lehman Brothers. and women who can be coaches and guides and bodyguards to the C-suite occupants Meanwhile, back in 2007, there was a bor- who are running the major corporations of rower that was seeking to finance a large America and the world — for them business estate are location, location, and location. apartment portfolio. This borrower had has never been better. The only thing I wish But two-thirds of the land was located in a been turned down by its go-to bank, for is that on my 30-year mark practicing law, if 50-year flood plain, which made the land — three reasons: Number one, the bank had I could do anything, I’d be a third-year law at least for the time being — undevelopable. lent it several hundred million dollars, and student in Dean Tacha’s law school or one of However, the Army Corps of Engineers had was concerned about its credit. Number the other fine law schools around town, and plans, eventually, to install infrastructure that two, the apartments that were being pur- start it all over again. I’m highly optimistic. would divert the floodwater and make the chased were valued at a 3% cap rate; in But then again, I’m Irish! land completely developable. other words, the apartments were being valued at about 33 times the net annual JACK FRIEDMAN: Thank you very The land was sold in 1995 for $900,000, income from the properties, which is an much! I’d like to have our next speaker which is about 45 cents per square foot. The come up. Mark Pecheck of Gibson Dunn extraordinary ‌valuation. And number three, developer promptly took the 13 or 14 acres there were reputational issues with this bor- will introduce his topic. that was immediately developable, built two rower. The borrower was a defendant in buildings, recovered 100% of its invested numerous lawsuits, class action lawsuits MARK PECHECK: Thank you, Jack. I’m capital, and made a nice profit. Over time, with tenants; there were credible allegations going to talk for a few minutes about three the Army Corps of Engineers did what it of sleazy business practices. So the bank case studies of transactions that I have been was supposed to do — eventually built the turned them down. involved with over my career — some large, flood control channel — and, in 2012, the some small. I will, with one exception, keep developer sold that land for almost $20 mil- the names out of the discussion. lion. That’s a nice profit. They went to another financial institution, which said, “Sure — we’ll lend you the The first case study involves 50 acres of When you consider the carrying costs for money,” and made the loan in September of surplus land in the Inland Empire — that’s that land during those intervening years 2007. Sixteen months later, that same finan- western San Bernardino and Riverside were just a few thousand dollars a year; it cial institution sold that $165 million loan Counties, here in the L.A. Basin. In that was nothing to hold onto it. You didn’t to another buyer for $80 million — in other transaction, we had a large Fortune 500 com- have to maintain it; you had to bring out a words, more than a 50% loss in 16 months. pany that had 50 acres of land and it didn’t crew to cut down the weeds once a year and know what to do with it. They didn’t want remove the trash, but that was it. By the way, in spite of what it may sound it; didn’t need it; and decided to get rid of it. like, I’m not passing judgment on any deci- It was in an A+ location — for those of you When we finish these three case studies, sions that were made at the time — hindsight who have some experience in real estate, you we’re going to consider what qualities a is always 20/20 — but I think these trans know that the three important points of real lawyer should bring to the table, and how actions do illustrate some points.

The third transaction — and this time, I We also need creativity. The only point I’m can’t be anonymous about it and, in fact, going to make on creativity — again, every- no discussion of real estate would be com- body talks about wanting to be creative; I plete without mentioning Donald Trump’s would simply say — and I’m seeing more of name: Ocean Trails Golf Course in Palos this — that if we take the Inland Empire land Verdes. Somebody in this room has prob- transaction, it would have been very easy to ably played golf down there. Weeks before structure a joint venture arrangement where the golf course was supposed to open in the Fortune 500 company that didn’t need June of 1999, there was a landslide and or want that land any more could have effec- the 18th hole fell into the ocean. You really tively contributed to a joint venture, gotten don’t have a golf course without 18 holes. it off his books but retained an interest in The developer filed for bankruptcy; the the land and been able to participate in the project failed; and there was about three upside. This wouldn’t have fallen outside and a half years of litigation between the of their corporate customs, the way they do lender, the insurer, and the borrower. business; and it would have allowed them to retain a piece of the action. Ultimately, at the end of that process, the the transaction; we’ve got year-end quotas to lender wrestled control of the asset and got make”; somebody needed to step back and Finally, just to state the obvious, know ready to sell it. The lender at that time had ask the questions. when to hold them and know when to fold spent — from its loan proceeds and the them. Something may be a really good idea, cost of trying to get the golf course ready The next quality that I think is critical is but if it’s not the right time, then the right for reopening — about $150 million. The patience. Let’s take the Inland Empire land idea is really not the right idea. finish line was in view; they had done all transaction. Yes, we had a Fortune 500 of the work; they had rehabilitated the company with 50 acres of land that wasn’t I’m just going to mention that interest 18th hole. Institutionally, the lender said, critical to their business; they didn’t need it; rates have been low for so long that I think “We want to get rid of this; we are so sick they didn’t want it. But the fact is, there was we’ve gotten used to this idea that interest of this asset that we want to get rid of it.” no real effort involved in holding onto that rates will always be low. If you look at that So they sold it to Donald Trump for $35 land. It didn’t require management; it didn’t chart, in 1981, the primary was at 21.5%. million. There were 90 residential lots that require tenants; they could have simply sat You see how quickly it rose to that level. It’s conservatively were valued, at the time, at on it. They chose not to. Again, it wasn’t been down at 3.25% for five years; it’s not approximately $1 million apiece. It’s hard part of their core business — I’m not sec- going to stay there forever, but there are a to understand what motivated that decision, ond-guessing the transaction, but for a lot lot of companies, businesses, and real estate other than somebody said, “We are so sick of investors, patience is what really pays off. investors, that currently have the mindset of this litigation, the bankruptcy court — we that interest rates are not going to change, want out.” I would also say that unfortunately, in our in spite of all the evidence to the contrary. corporate culture — and this is something the With those three brief thumbnail case stud- other panelists may want to comment on at The same thing if you look at the one- ies, what qualities should real estate lawyers some point — there is so much emphasis on month LIBOR chart, you’ll see that it’s bring to the table? Number one, obviously, the short-term. Whether it is three years or down at about 0.15% right now; it’s been is foresight. Let’s take the apartment exam- more — five years is considered a very long there for a long time. But look at not that ple. Somebody really ought to have been time horizon. But if you take the long view long ago, it was hovering at 5%, and I sub- asking not just what seems to be happen- in real estate, you’re going to do very well. mit to you that if LIBOR rates went up even ing, but what was really happening in this 100 basis points — 1% — it would wreak case; what might ‌happen in the future; what A real estate lawyer needs discipline. havoc in a lot of markets. might we need to do. Again, it’s obvious Discipline is about not chasing the cat. Not and it’s easier said than done, but some- doing the impulsive thing; not following the In the handouts, there are a list of some body should have stepped back with all of crowd. I’ll let everyone make his or her own issues that I think are going to be coming up the problems that were facing this borrower, determination regarding how discipline did in the near term, including: efforts to change and instead of thinking, “Well, let’s just go play a role — or perhaps should have played Proposition 13; dealing with the California ahead and make the loan; we’re going to a role — in each of the transactions, but it’s drought; figuring out how to address and get loan fees; we’re going to be able to book something that lawyers should be thinking pay for infrastructure improvements; direct about when they’re advising their clients.

democracy as a solution; and the inability to While these statistics show that there is amend CEQA (California Environmental a lot of nitty-gritty litigation and potential Quality Act). exposure, these statistics also show that there are a lot of smaller cases that need Thank you very much for your attention. to be handled quickly and efficiently. How do companies develop a policy for resolv- JACK FRIEDMAN: Mark is not only a ing nitty-gritty litigation? In my experience, fine attorney, but he has the wisdom it takes the policy is set by the company’s General to make a profit and not a loss in real estate. Counsel, the CEO and Board of Directors. The policy is then communicated to the JOSHUA ZIELINSKI: Thank you, Jack, in-house legal department, who will then for putting this program together, and communicate the policy to people like me thank you, Gibson Dunn, for hosting us — outside counsel — to carry out the policy. in this spectacular setting. I’m going to speak this morning about litigation facing In my experience, American companies like companies. I’m not going to speak about to use what I’ll call the “tough but fair” pol- “bet the company” litigation. Instead, I’m icy. Companies want to have the reputation, going to speak about unglamorous litiga- in the legal and business community, that tion, what I’ll call nitty-gritty litigation. they are tough on claims and will not pay meritless claims. At the same time, compa- Before I begin, I would like to congratulate in the United States was 1.66% of GDP. To nies also want the reputation that they are Steve Glick. I’ve had the pleasure of work- give you an idea of the magnitude of that good public servants and will fairly treat ing with Steve during the past five years. value, the United States’ GDP in 2011 was someone if a mistake has been made. I can’t think of a General Counsel in the $15.5 trillion. Tort liability, and nitty-gritty United States more deserving of the honor litigation in the aggregate are significant and The “tough but fair” policy, however, has that Steve is receiving today. Steve, congrat- companies need to have policies for resolv- some risks. If you’re dealing with large vol- ulations! [Applause] ing the cases they encounter on a daily umes of litigation, statistically speaking, you basis. Nitty-gritty litigation is not going away are not going to be right 100% of the time. We all know about the sexy litigation that anytime soon. companies face; it’s in The American Lawyer The danger is that if you are tough on the every month. You can read about the lat- wrong case, and lose, you may viewed as To develop a policy for resolving these taking money from widows and orphans. est trial in the New York Times, the L.A. cases, it is helpful to look at how nitty-gritty No one wants to be viewed as taking money Times, or Bloomberg. Those cases involve cases are decided. We’ve all heard that sta- from widows and orphans. shareholder disputes, class actions, and tistically, most cases don’t go to trial. A government investigations. What you don’t 2005 study of state court systems confirms There are several strategies that a company hear about is day-to-day, nitty-gritty litiga- this assumption. According to the study, can use to avoid the perception of taking tion that companies in the United States approximately 3% of cases go to trial. The money from widows and orphans. First, face. You don’t hear about premises liabil- statistics become more interesting when you ity cases, the slip-and-falls that occur every drill down on the 3%. Particularly, what discovery in most jurisdictions is liberal month, the more routine breach-of-contract types of cases are going to trial and how are and parties to a lawsuit will receive docu- cases or local administrative proceedings. In they being resolved — jury or bench trials. ments and information regarding liability, and of themselves, none of these cases are What the statistics show is that most of the defenses and damages early in a case. Once particularly important or unique. However, cases going to trial are tort cases and 90% that information is received, it can be used when you view these cases on an aggregate of tort cases going to trial are being resolved to determine whether a case should be level, particularly tort litigation, nitty-gritty by a jury. In contrast, only 36% of the con- litigated through trial or settled. Once dis- litigation becomes very important. tract cases that go to trial are resolved by covery is completed and developed, you can a jury. If you’re a company operating in review jury verdicts and determine, “Is this This slide shows the estimated cost of tort the United States facing tort liability, more a case we want to fight? Or is this a case we liability as a percentage of GDP in the likely than not, you’re going to face a jury at want to settle because there is a risk that United States. This slide shows that in least once a year, maybe twice a year, maybe if we lose, we could be perceived as taking 2011, the estimated total cost of tort liability multiple times a year. money from widows and orphans?”

Further, the discovery disputes and motion board meeting, where the director asked practice will be just as complicated in arbi- the board, “If I pay for him, can I have tration, but much more costly to resolve my personal attorney come to every board at $3,000 an hour. Finally, your appellate meeting? Not just the meeting for critical rights can be limited in private arbitration. issues, but every meeting. As a lawyer outside the company, how do you get a team of A creative way to use arbitration is to use the people working together, when in the back court system to conduct discovery and narrow of their minds, they are worried about their the issues to be resolved at trial. Then, when personal liability? you’re ready for trial, the parties can agree to arbitration and the rules for the arbitra- JOSHUA ZIELINSKI: First, you have tion: how witnesses will be examined (direct to be upfront and direct. Individuals will examination on paper and cross-examination often ask questions like, “Am I personally conducted live), and what form the ruling will liable here? Are you representing me?” You take (one line order or reasoned decision). On have to clarify that you are representing the the other hand, trials are long and expensive company and cannot give personal advice. — particularly jury trials. It can take a day or You may then direct the individual to two to pick a jury and you are not going to be speak with their personal lawyer or to seek examining witnesses eight hours a day. I see a lawyer to advise them. You try to be as that my time is close to running out, so thank delicate as possible, while recognizing your you Jack, and thank you for the time. professional responsibilities. If there is a risk of an adverse outcome, what can you do? If the case cannot be set- JACK FRIEDMAN: I have a question on As far as making people comfortable, it tled, you really only have one option: fight. working with the business side. How do you, helps to go through what is going to hap- However, is there an intelligent way to fight as litigation counsel, deal with the under- pen. You can do a rehearsal as many times consistent with the “tough but fair policy”? standing, or lack of understanding, that as needed so that when you get to court, the ADR [alternative dispute resolution] can be business people have regarding litigation? examination is easy because they’ve been very valuable in maintaining a “tough but through the process with you. fair” reputation, while also limiting the pub- JOSHUA ZIELINSKI: You have to make licity of a bad outcome. Mediation is being them feel comfortable and simplify the issues, JACK FRIEDMAN: Regarding litigation, used by more and more court systems in the if possible. Going to court is a stressful, scary how do juries typically view big companies United States. A majority of court systems experience. Nobody wants to be there, and versus the little person? have mandatory mediation/ADR programs. the business people sure don’t want to be Mediation, however, only works with two there. Also, no one wants to read a law JOSHUA ZIELINSKI: There’s a com- parties willing to negotiate a resolution. review article for the answer to a question mon perception in the United States that or feel like they are sitting through a lecture. juries hate companies. That is probably a Another form of ADR that can be helpful You must recognize that each person’s time is good starting baseline rule. America loves is arbitration. One of the primary benefits valuable and that your job is to make the lit- an underdog. Ultimately, what I’ve found of arbitration is that it is private. The wit- igation process simple and understandable, is that jury trials are about white hats and ness testimony, evidence and outcome are while also providing comfort that your advice black hats. If you know you have the black not open to the public. If you have some and analysis can be trusted. hat going into the courtroom, you’ve got to nasty facts, harmful exhibits or a bad ruling, tailor your case, your witnesses, and your tes- you should be able to keep that informa- JACK FRIEDMAN: A current issue in timony to get that black hat off, or at least tion from the public. Arbitration, however, litigation is that it used to be “we” — mean- make it grey so that you are not the big, bad has recently been criticized because it is no ing the company, everybody at the company company, and maybe the case isn’t as cut and longer quicker or less expensive than tradi- — versus people outside the company. And dry as the opposing counsel claims it is. tional litigation. Judges, for lack of a better later it became “we” meaning the outside word, are free — they are paid for by tax- directors, separate from the corporation. JACK FRIEDMAN: Thank you. payers. Arbitration is expensive. A panel of Now “we” has become “I,” which is every three distinguished retired judges as arbitra- director worrying, “Should I have a law- JOSHUA ZIELINSKI: You’re welcome. tors may cost more than $3,000 an hour. yer?” This actually happened in a corporate Thank you. [Applause]

JACK FRIEDMAN: Our first two Panelists Paris or New York); are you going to trust focused on litigation and real estate. We the court system of some other jurisdiction? have two more speakers whose specialties These are all things that you wrestle with will include international elements, which every time you sit down at that very early Steve so eloquently discussed earlier. Also, stage of planning a transaction. we mention that three of the four panelists have flown thousands of miles to be here Dealing with foreign counsel is always a including Joshua from New Jersey who just wonderful challenge. As a New Yorker, we spoke, Mike Quigley from Korea, and John tend to be a little high-speed, a little excit- Marzulli who flew in from New York. able, a little impatient; and sometimes the hardest thing in the world is to deal with JOHN MARZULLI: Thanks very much, your local counsel in — pick a jurisdiction Jack. Steve, congratulations, again. I’m — and discover that it’s going to take him actually delighted that you asked me to par- or her five days to do something that you ticipate in this. As Jack mentioned earlier, would probably expect to get done in a Steve and I go way, way back, and I don’t couple of hours. Expectation management want you to think that the reason why I was looks at a problem and says, “How do I solve becomes awfully important. not in the office in Shearman & Sterling this?”, then you’re the right person to be a on that Friday night was because I was a practicing lawyer, whether it’s litigation, cor- One of my favorite transactions was when I partner and partners didn’t work late on porate, tax, etc. because that’s what we spend was representing a Swedish pharmaceutical Friday nights. My wife was in labor with all of our time doing. If it’s not a problem company buying a business from an Italian our third child, so I had something else to that’s difficult to solve, you don’t really need pharmaceutical company. I was based in do that weekend. [Laughter] us and you go someplace else. London, the Italian pharmaceutical company also had a U.S. law firm — with a In any event, Jack has asked me to talk What do we do in a corporate M&A trans- partner based in Paris taking the lead, about cross-border M&A issues that we action? Well, we design and execute on and the business being sold was entirely face on a regular basis. Steve and I must transactions. We try as an important part in Europe. The business was entirely in have the same taste in late-night talk shows, of that to identify and allocate risk. Cross- Europe. The parties opted to have the lan- because I obviously have a “top ten” list as border — the first thing that comes to mind, guage of the contract be English, because well. The difference is, whereas Steve cut obviously, is that there are cultural differ- that was the common second language of off numbers three through ten, I am actu- ences. One piece of advice I always have for both. But culturally, if the Swedes returned ally going to touch on all of them. But I’m our young lawyers when they first start prac- a phone call within an hour of it having going to do it at a really high level, and then ticing overseas is, you can’t succeed and be been placed, they thought they were being if anybody is interested, when we get to the an American cultural imperialist. We have polite. If the Italians returned a phone call roundtable discussion, we can actually talk a way of doing things; everybody else has — well, the third phone call — within a week about them specifically, if you want. a way of doing things. Ours isn’t necessar- or two, they thought they were being polite. ily right; theirs isn’t necessarily wrong. The Now, I can say that, because I’m of Italian- All of these issues are in the context of key is to sit down and develop a common American heritage. But the expectations of the cross-border arena; obviously, these are understanding of all systems and plan a way the two sides were fundamentally different issues that are faced in any M&A transac- forward. We walk into conference rooms; as to how people were going to behave tion, even entirely domestic ones; they just we meet people; we have assumptions on during the course of the transaction. have a funny twist to them. the way foreign laws work, and they have assumptions about the way our laws work. Issue two is securities law compliance. In responding a little bit to one of Jack’s ear- I think you all know the expression about If you’re dealing with a public company, lier questions about who should go to law never assume … your assumptions are always and publicly traded securities, trying to school, what’s in it for them, and things like wrong to a large extent; there’s an education stitch together the competing and some- that, from my perspective, passion about jus- process. Boilerplate things that we deal with times extraordinarily different methods of tice is an interesting thing, but the people on a day-to-day basis whenever we’re dealing regulating securities across jurisdictions who make really, really good lawyers are the with any contract — choice of law, choice of is, perhaps, one of the more technically creative puzzle solvers. You had “creativity” venue, choice of language, dispute resolu- difficult things that we do. This is a multi- up on your slides. If you’re somebody who tion, litigation or arbitration (ICC or AAA, stage problem, because you talk about rules

regulating tender offers, if you’re going to ...an in‑house lawyer, as a battery charger, can get things do a bid for cash; and rules regulating the offer and sale of securities, for those of you going; ... positive, team-oriented and solution-oriented who were involved in the capital markets results by engaged lawyers with management support and and the public securities markets. Back in the days when Steve was doing cash IPOs, board support can be achieved; and ... this can yield results if he decided, “The French offering rules are too difficult, let’s not sell our securities that are really unprecedented. — Steven M. Glick in France,” you could just eliminate it. But, if I’m doing an M&A transaction, my target shareholders are wherever they are. If have significant stockholders in the United we’re a public company; we’re not permitted they are French shareholders, I have to deal States, you’re going to get stuck dealing with to.” You say, “We’ll just sign a confidentiality with them, and I may not have the luxury of the U.S. securities laws, notwithstanding agreement.” “That’s not good enough. We being able to design around their existence. the fact that if the reverse were true, the can’t show it to you.” Again, this is part Issue French wouldn’t really bother you. #1 — the cultural issue, part the legal issue, The other thing worth mentioning — again, and then it all folds into how it deals with since we’re all here to honor Steve — is Issue three, again, in the public company the practical impact of doing diligence. that Steve set the world record, I think, in arena, we’re not going to spend a lot of getting an S4 from initial pen to paper to pages here, but if you do a public deal in Now, over and above the traditional business effectiveness; when we did one in London, the United States, these are all standard diligence issues, obviously, compliance has you did it in 12 days. Now, this was a sit- things that you see, you read about in the been mentioned before as maybe being one uation where the target company that we newspapers — how do we try and lock up of the things that makes the practice of law were buying made the mistake of calling the deal; what do we do to protect ourselves. less fun than it used to be. It certainly has the SEC and describing the nature of the Needless to say, in some jurisdictions, these significantly altered the nature of diligence transaction, where we were not going to reg- things just don’t fly at all; in some jurisdic- in cross-border transactions. The need to ister and we were going to deal with the tions, they fly a little bit; and in some, you do compliance-related diligence for FCPA, U.S. shareholders in a very creative way. can get reasonably close. But again, the task OFAC, sanctions, anti-money laundering, The SEC called back and said, “We don’t is to design and execute a transaction. What Sarbanes-Oxley, etc.; if you’re in the finan- like that solution, and we would like you to you need to do is figure out where you are, cial services industry, Volcker Rule, cyber register.” But at that point, we had already what the jurisdiction is, consult with your security, privacy legislation — all of these announced the transaction, and under local counsel to the extent you don’t really things are significant gotchas. They may not U.K. rules, we had to launch within 21 know it all already, and then move on from be significant issues in a non-U.S. jurisdic- days in those days. We had a regulatory gun there. One thing that both Steve and I both tion, but once you’re owned by a U.S. parent to our head as to when we had to get the suffered from: we get to London and all of company, then all of a sudden, it becomes a registration statement effective so we could a sudden all of our colleagues in New York significant issue. We all deal with the Wall launch. We luckily had a very cooperative start calling us because we must know some- Street Journal test: how is this going to look SEC. Nevertheless, it’s a good example of thing about English law, solely by virtue of when the headline in the paper says, “Major what you’re driven to do sometimes on the the fact that we’ve been transported here! U.S. company is charged with [something]”? securities law compliance side. [Laughter] But, in fact, you’re no smarter Even though it happened not on your watch, than the day you left the United States! but before you bought the company, you nev- A lot of this is driven by the fact that — ertheless get tagged with it. and you can view this on the tax side, too The next issue is diligence. In any trans — the U.S. has a somewhat unique way of action, diligence is extraordinarily important. Accounting matters are obviously critical. If addressing securities laws. For most coun- On the cross-border side, it gets to be not you’re acquiring a company which doesn’t tries, they’re going to apply their securities less important, nor more important, but use U.S. GAAP, it probably uses IAS. There laws to their domestic companies, and perhaps more difficult. The preliminary are significant differences between the two, companies listed on their domestic securi- issue is always, “Is diligence permitted at all?” and reconciliations may be required. Your ties exchanges. The United States, on the You can go into some jurisdictions, and sit CFO may find it difficult to provide the cer- other hand, focuses on “where’s the share- down with the target company and you say, tifications he or she is required to give — all holder located?” You’re a French company “These are the things I’d like to see,” and of these things are extraordinarily difficult and you’re listed on the Paris Bourse; if you they say, “We can’t show you those things; in the cross-border arena.

The next topic is competition and antitrust. JACK FRIEDMAN: You wanted an We all know that the competition rules easy job. are out there. In keeping with the opening comments, the identification and allocation JOHN MARZULLI: Yes, I wanted an easy of risk is a large part of what we do. The job! [Laughter] study of the relevant markets to identify antitrust risks and the contract negotiation There are obviously multiple types of litiga- to allocate who bears the risk — when do I tion to deal with. In my world, shareholder get to walk away from the deal because the litigation is endemic, and the latest statis- regulators are demanding too much; when tics are that in 95% or 96% of all cases am I forced to close, even though it means you get sued. Jack asked the question of I have to eat a lot of pain as a result of com- what do directors do about litigation. From plying with some remedy that’s required by my perspective, the most pernicious effect the antitrust regulators, is a crucial part of of shareholder litigation is the impact it’s any significant cross-border transaction. had on directors’ behavior. I might say this more bluntly if I were off the record, but If my antitrust partners would identify one of the bottom line is: directors, in theory, are the ways in which the world has changed over Then there are foreign investment con- protected; they’re protected if they exercise the years, it’s going to be the extent to which trols. Obviously, CFIUS [Committee on good business judgment. Because they regulators around the globe coordinate with Foreign Investment in the United States] know they’re going to get sued; they know each other. Once upon a time, they would is here in the U.S., and when we’re rep- somebody’s going to spend time on the say, “This is the story we’re going to tell in resenting non-U.S. companies coming witness stand, having depositions — even the United States. And this is the story we’re into the United States, especially if it’s a if they’re indemnified, there’s a risk that going to tell the EU, and this is the story state-owned company, then the CFIUS’s somebody pulls a conflict of interest out of we’re going to tell someplace else.” Nobody concerns get to be extraordinarily difficult. the hat that they hadn’t realized was there. gets away with that any more. They all coor- Corresponding to that, many other juris- Therefore, their protection from monetary dinate; they all communicate. If you’re not dictions have similar statutes, and a lot of liability, if you’re a Delaware company, selling a consistent theme across the regula- them have much broader statutes about lim- may be lost. You can’t blame them for the tory environment, you’re going to get sunk. iting foreign investment within their home change in behavior, but there’s no question countries, but a lot of times, those foreign that over the 20 years that I’ve spent in and The next general topic is other regulatory ownership limitations are really designed out of boardrooms — because I didn’t go to regimes. This one we can do quickly, again, to protect business within the jurisdiction. boardrooms when I was a young associate because it’s not all that significantly different You may have seen, for example, a num- — directors’ behavior has changed. than on a U.S. domestic deal. Financial ser- ber of acquisitions in Canada, where the vices, airlines, gaming, insurance — these are Canadian government and the provincial Litigation, class actions, discovery — these are things which are heavily regulated as an indus- governments will negotiate agreements with things which non-U.S. companies making try, per se. On a cross-border basis, a lot of the acquirer to maintain certain levels of acquisitions into the United States typically those same industries are similarly regulated employment and staffing and investment fear almost more than anything else. Steve’s in their home countries, but sometimes there and things like that, in order to avoid the work of taking non-U.S. companies and are different industries that get regulated more situation where the foreign company comes bringing them into the United States was heavily than you might expect. Again, a little in and buys up everything that’s valuable big business for U.S. law firms in the ’80s bit of this is the flashback to Issue #1 on the and basically takes the business outside of and ’90s, but with changes in the regulatory cultural side — let’s make sure we understand the country. environment and changes in the litigation what it is we’re buying, what it is we’re selling, environment, more recently, it’s been com- where they do business, what is the regulatory Number seven is litigation. You’ve learned panies going the other way. They’ve dropped overlap of what we’re doing? a lot more about litigation already. What I their listings in the United States in order to can tell you about litigation is that I did a try to avoid some of that exposure. Exchange controls have largely gone away as an federal district court clerkship, and it con- issue across the world, but they do rear their vinced me that I was not competent to be a Concepts of attorney-client privilege are fas- head every once in a while, especially when litigator when I grew up, so I went into the cinating, to try and figure out whose rules you’re working in the less-developed world. corporate side, instead. about privilege govern. Is there a privilege

in Slovakia, or isn’t there a privilege? These of value in that trapped cash. Typically, if available to management teams scattered are very important things to us, because you talk about Basic-101 Capital Markets/ around the globe. As we’ve mentioned we’re always in a courtroom; we’re always Investment Banking for Lawyers, when you before on the securities law compliance, having what we’re going to do be the sub- figure out the enterprise value of a company, every jurisdiction has its own rules about ject of litigation. In an environment where it is plus cash; but the bottom line is that offering securities, including offering secu- there’s much less litigation, there’s less sen- some cash is not as valuable as other cash. rities to employees. To try to come up with sitivity to it, but that doesn’t make it any less Because if it’s offshore and you are going the equivalent of a cross-border option plan important of an issue. to pay 35% to bring it back to the United can be extraordinarily complicated. States and use it for something, then you Number eight is tax planning. I’m not going don’t really want to pay one cent on the Number ten — and this is why this is actually to cover it thoroughly; but if you were to say cent for something like that. 10.1 and 10.2 — financing is always, from a to somebody, “What was the number one business perspective, a perennial issue in issue on hit parade on cross-border M&A Employee matters are extraordinarily signif- any transaction. Like, “Can I afford to pay in the last 12 months, it would be inversion icant in the sense that employees tend to for this?” Assuming I’m not using stock — transactions. In this process, you take a U.S. have more protection outside of the United but the ability to do something as simple as company and merge it with a non-U.S. com- States. U.S. companies frequently — less so having a financing condition is not neces- pany, and then use the transaction as a way now than in the past — move into a non- sarily simple. In the U.K., if a bank assists of redomiciling the new parent company in U.S. market without realizing how limited a company in making a bid, the bank is a low-tax jurisdiction where instead of pay- their freedom of action is, in terms of pro- on the hook for the money. If the client ing the statutory 35% here, you pay, say, tecting local workers. You may not be able company actually shows up at the closing 8% in Ireland. Obviously, it has been the to realize the synergies that you want in a and says, “I don’t really have the money,” subject of much political controversy in the transaction by letting people go. the bank, in theory, has to pay. Again, there United States. Nothing’s actually happened are a lot of differences around the world in Congress; there are regulations that It is also common throughout Europe now about whether you can have a condition on are designed to force people to pull back. to have what’s called the “works council” financing, or what kind of financing you People have pulled back, but the bottom — you frequently have to go to the works have to have in place. Obviously, foreign line is it’s a symptom of a bigger problem. council and appeal to them. You solicit currency risk is an important part of any Until our corporate tax regime is fixed, peo- their views, see whether or not they have transaction. For those of you who work in ple are going to continue to try and figure objections to a transaction which you can the private equity-type world, where you’re out how to save more money for their share- then reflect in the way the transaction is frequently doing financing based upon the holders, like becoming a REIT, for example. designed and structured. assets, there are a lot of jurisdictions where I mentioned this to Steve, I’m working on there are financial assistance rules that basi- a transaction now involving one non-U.S. The French one is more militant than most. cally preclude or limit that. REIT trying to merge with another non- Number one, it’s a criminal statute, so if you U.S. REIT. They have significant assets in don’t play by the rules, one of your local Lastly, because we’re lawyers, remedies. the United States, and the entire thing is managers can go to jail. Number two, you You could put this back in the boilerplate driven by tax planning. How do you do the can’t actually — the French lawyers will advise position, but we all sign contracts, and per- transaction efficiently; how do you structure you — sign a deal and then go consult with haps the most difficult conversation you’ll it so the dividend flows are tax efficient them; by then, it’s too late. You basically give ever have with a client is, “But they signed after the fact? Managers and advisors the French company the option to accept the contract! The contract’s clear — they all want to generate the highest after-tax your offer to buy them, and they then go have to do this! Why don’t they do it?” returns for shareholders. to the employee works council, and it’s an The answer is, “Because they don’t!” You extraordinarily uncomfortable position for don’t necessarily know why, and the client Obviously, trapped cash is a significant traditional U.S. companies to be in. is extraordinarily frustrated because you just issue in the United States these days. A told them it’s going to take three years of number of companies have billions of dol- On the other end of the spectrum is man- litigation to get them to do what they’re sup- lars outside the United States that they can’t agement retention — you want to get a deal, posed to do or otherwise pay you damages. bring back without paying significant tax and you want to keep management, so you Nevertheless, breach of contract is always penalties. In the M&A environment, it’s a might want to incentivize management. Our an interesting thing. Nobody goes to jail, wonderful thing for a non-U.S. company to Paris office is very active these days help- necessarily, for breaching a contract. There buy a U.S. company, because there’s a lot ing clients make stock-based compensation is an efficient breach theory; I can decide to

breach, and pay you damages, because that of the presentation. For now, I’m going to costs me less money than performing on talk with you about just two things in the the contract. few minutes that I have with you.

We spend a lot of time figuring out what rem- The first is my perception of the markedly edies work in the cross-border environment. changed role of the General Counsel — or, if I may use the modern term for this post, One of the more interesting things that’s the Chief Legal Officer — in today’s corpo- going on these days is this last one — and rations. Second, I will illustrate the changed this is largely a trend that’s coming out of and evolving role of the CLO by using some Europe, and it’s trying to move into the of the most crucial international tax ques- United States — which is: you go out and tions and issues that reach the C-Suite today. buy an insurance policy against breaches of rep and warranty. I won’t say that it’s com- I have practiced law for more than thirty mon, but it’s of increasing commonality years; mostly from Washington, D.C. and, — again, typically in Europe — the insur- more recently, from Seoul. My first job was ance companies have largely identified it as as a trial attorney at the U.S. Department of a new business line that they’re really trying Justice, Tax Division and, thereafter and for to grow, so they’re heavily marketing it in many years, as an associate and a partner in the United States. That being said, the pre- some of the finest law firms in the world: miums are not insignificant, and because about four hours and I’m badly jetlagged. Cadwalader, Wickersham & Taft; Akin it’s a relatively new product, we really don’t So I’m honored, I’m humbled, and I’m Gump; White & Case; and now Kim & know what their claims experience is going hobbled! [Laughter] Chang. From these points of view and over to look like over the years. They started thirty years, I have witnessed a tectonic shift doing environmental insurance, and they’ve I have 32 slides in the deck that each of in the role of the trusted advisor. In my slowly been broadening it out. you have before you. I will abide by the view, this vital role has largely moved from seven minutes Jack has allowed us, and I’ve the senior partner in major law firms to the That’s my top ten list, and I’ll be happy to used nearly one minute for introductory Chief Legal Officer within corporations. talk about any of it later on! [Applause] remarks. That leaves me about eleven sec- onds a slide. So I’m going to skip the slides Let me say a word about the concept of a JACK FRIEDMAN: Our next speaker is entirely. Nonetheless, I commend them to trusted advisor. What CEOs and other chief Michael Quigley from Kim & Chang in Korea. you. It is a wonderful slide presentation. I officers of corporations — the occupants wrote about 10% of it. [Laughter] Ninety of the corporate C-Suite — need most is MICHAEL QUIGLEY: I’m deeply hon- percent of it was written by my brilliant tax wise, prudent, smart, and informed advice. ored to appear before this august body this partners and colleagues at Kim & Chang All corporations operating in the global morning. I’m humbled to be on a panel in Seoul, Korea. We are the largest law firm marketplace confront labyrinthine rules and with Jack, Mark, Josh, John, and our hon- in Korea, with over 1,000 professionals all regulations on tax, competition and anti- oree, Steve Glick. John taught me many in Seoul. My tax colleagues did a truly fine trust, intellectual property, cyber-security, things in his fine and just concluded pre- job of setting out in the slide deck an intel- FCPA and anti-bribery, labor and human sentation; prime among them is the folly ligible and easily understood articulation of resources, health care, ERISA, litigation, of trying to get through ten meaty slides the U.S. transfer pricing rules and how they and myriad other areas. Law firms and other in the seven minutes Jack has allotted us. apply to cross-border transactions. I used external advisors provide superb technical [Laughter] I think he taught us much, but this deck when I served as an instructor experts in all of these areas. But no CEO has he failed to watch the clock. Indeed, I saw for an eight-hour seminar last month before the time or the fortitude to evaluate which Judge Tacha hit the red light! [Laughter] Korea’s National Tax Service — the Korean among these many issues present serious IRS — about international tax rules. Please risks to the corporation’s well-being. Thus, I am hobbled this morning and ask for take time to page through it, and should and for many years, CEOs and others in your forgiveness. I live and work in Seoul, you have any questions, please feel free to senior management sought out trusted advi- Korea, and I arrived here about 5:00 p.m. ask me after the panel concludes today or, if sors — wise counselors — to bring clarity and yesterday to join these gentlemen for a there is not enough time, then call or email wisdom to the opaque maze with which the sumptuous dinner last night. I slept for me. I will be happy to elaborate on any part occupants of the C-Suites must wrestle.

It takes great skill, intelligence, experi- $630,000. A quick look at the SEC 10-K fil- ence and training to be a trusted advisor. ings or American Lawyer salary surveys reveal Professionals with such qualities are in that Fortune 500 companies and many other high-demand and are mobile. Thus, to international corporations pay their Chief a high degree, these individuals will be Legal Officers very well by comparison. offered and will find many opportunities for lucrative employment. Money is important but, beyond compensation, the professional quality of life for the Major law firms of today are increasingly in-house lawyer and the major law firm part- becoming unattractive places to work; par- ner are very different and the trend favors ticularly for senior partners. There are many the in-house lawyer. Let me just mention one reasons for this and a full exploration of the point. Major law firm senior partners are topic is beyond the few minutes we have often called upon to specialize in narrow areas together, but let me identify just one crucial of the law of keen and acute interest to key cli- factor making this so. Law firms remain ents. Such specialization lends some support addicted to the antiquated billable-hour model to the relentless pressure on law firm partners and many employ basic — even primitive — to increase their hourly rates. By contrast, the financial management tools to measure the in-house lawyer is called upon to have diver- productivity of their lawyers. So, let us sup- sified knowledge and expertise. A micro-focus The importance of the trusted advisor has pose a hypothetical and hard-working senior on a narrow technical area of the law would been known for decades and has been partner in a major law firm. They might work be anathema to a senior partner with the written about. Years ago, David Maister’s 50 weeks per year and produce 40 hours per skills and talents to become a trusted advisor. popular book described in helpful and smart week of client billable time at $1,000/hour. ways the characteristics of a trusted advisor. This would yield $2 million in gross billable I have not fully developed my first point but The point I wish to focus upon is that the time. The law firm’s billing department and my time is running short and I must now C-Suite now looks internally within the cor- accounting staff managers would easily and turn to my second point. Indeed, our hon- poration for the trusted advisor rather than typically determine a client realization rate (the oree, Steve Glick, specifically asked me to address international tax issues in the con- externally to senior partners in major law amount of cash paid by the client after dis- counts and write-offs). Let’s suppose a 95% text of the CLOs duties. firms. So, I will, as others have done, label realization rate. Our hypothetical senior part- this trend as the rise of the role of the corner is hard-working (40 hours a week for 50 As Steve mentioned in his remarks, we porate General Counsel and the elevation of weeks year), at a handsome and top-of-market worked together to advise Public Storage on that role to that of the Chief Legal Officer; hourly rate ($1,000) with a very respectable a significant tax dispute with the IRS in a an occupant of the C-Suite. Put bluntly, I see realization rate (95%) and this Herculean highly complex area of the tax law known the CEOs of America’s — and, indeed, the effort produces $1.9 million in revenue. as transfer pricing. I will speak more about world’s — finest companies turning to their that general topic in a moment, but let me CLOs as their trusted advisor. No longer — Of course, the partner may also be recognized underscore one point now. Twenty years or at least not as much — do they turn, in the for “origination credit.” That is to say, our ago, in any case of similar magnitude and first instance, to senior partners in major law hard-working partner may be paid, through importance, I would have reported directly firms — such as John, Mark, Josh and myself a formula, some percentage of revenue attrib- to the CEO and the CFO. To be sure, the — as the trusted advisor. utable to the efforts of other lawyers in the client’s tax director and in-house or General firm on work that the partner brought to the Counsel would be vital and important team Like all bold and sweeping announcements, firm or manages. members. But I would have, as outside mine is subject to exceptions and objections counsel, been leading the dialogue with the and qualifications. The trend is not uni- Major law firms often and typically spend C-Suite over the crucial strategic judgments form. But, I respectfully maintain that it is one-third or so of their gross revenue on oper- and risk assessments of how to protect the a gathering trend and it is highly likely to ating expenses (e.g., rent, IT, staff payroll) and company’s reputation and earnings from continue. Let me briefly offer a few reasons one-third or so of their gross revenue on asso- adverse impact. In the tax case with Public why I believe this to be so and then I will ciate and non-partner professional salaries. Storage, Steve Glick was most ably in the turn to my second point about the inter For our hard-working senior partner, these lead every step of the way. So, my thresh- national tax law. assumptions would leave a “profit” of about old point is that the role of the corporate

General Counsel has changed; the route by There is a lot of form checking; there’s a lot of auditing which senior management obtains advice from “trusted advisors” has changed and, going on; and the overall regulatory environment and indeed, the landscape on which the prac- litigation environment are far worse in the U.S. now than tice of law is conducted has changed. That’s probably a good thing. it seems to have been when I started practicing. But there

My co-panelists gave a superb catalog of are also, of course, exciting, thrilling, challenging, and the labyrinth of regulatory requirements memorable moments, interesting people and front-page and burdens — FCPA and anti-bribery acts, corporate governance, HR issues, litigation business transactions. — Steven M. Glick — that plague CEOs and impede them from Let me illustrate with an easy case. A com- Some countries entirely exempt corporations driving shareholder value. pany like Samsung may manufacture its from tax. So our tax rates for corporations mobile phones in China, develop and are quite high, compared to our trading part- I will now turn to the second point and use design its phones in Korea, and sell and ners. The key point here is that corporations my world — the international tax world — as market them in the United States. How must compete in a global market and com- a lens to illuminate the role of the General much profit should Samsung properly petitors can and do arrange their operations Counsel or CLO about which I have already report in Korea, how much in China, to take best advantage of the fact of high-tax spoken. I will do so with three concepts that and how much in the United States? The and low-tax jurisdictions. are articulated in that fine and encyclopedic answer is determined by the arm’s-length PowerPoint deck that you have before you. standard. It’s a simple rule to articulate but Tax lawyers and tax enforcement agencies it is immensely complicated to apply. The are adept at identifying the source country The first is the arm’s-length standard as that applicable regulations in the United States, and the residence country of profits, income, term is used in the context of “transfer pric- under Section 482 of the Internal Revenue and gains. Almost every taxpayer, whether ing.” I know that some of my friends from Code, are themselves more than 100 pages an individual or a corporation, has a tax PricewaterhouseCoopers are here, and they — just the regulations. And they are surely a residence in some jurisdiction. To be sure, are superb experts in this field. I, myself, model of clarity. [Laughter] determining the residence jurisdiction may know a bit about it. In a brief capsule it be difficult in some cases but most taxpayers means that, for tax purposes, all intercom- The second international tax concept I wish are seen to reside in one jurisdiction for tax pany transactions must be on the same or to raise is the significance of the presence of purposes. Also, all income has a source. So, similar terms as would have been the case high-tax and low-tax jurisdictions worldwide if stock is sold on the NYSE, the source of if the parties to the transaction were unre- and how this fact is connected to two tax the gain on the sale is the United States. If lated and acting at arm’s length. So, for a concepts known as “source” and residence.” Apple sells a cell phone in China, then the global firm with cross-border transactions Why do I raise that with you? Well, John source of the income on that sale is China. in multiple jurisdictions — e.g., a firm that alluded to the difficulty and burden of operat- manufactures in one jurisdiction; conducts ing businesses in the United States because it I share these concepts with you to demon- R&D in another jurisdiction; and sells and is a high-tax jurisdiction with double-taxation strate how quickly they can become an markets the product in a third jurisdiction of corporate earnings. First, our tax rates are important issue for discussion in the C-Suite. — the income, expense and profits must be higher than many other countries. Beyond We think of Apple, founded by the great apportioned on an arm’s length basis. It’s a this, the United States imposes two levels tech visionary, Steve Jobs, as being a U.S. challenging riddle for all multinationals. of taxes on corporate earnings: a corporate company from Silicon Valley. But is that the income tax at the corporation level and then whole picture? It has been widely discussed The answer to the riddle is found in the a shareholder level tax on dividends paid in the press and before U.S. Congressional U.S. tax law, in the law of every OECD and on gains realized upon the sale of appre- and U.K parliamentary hearings that much country, and in bilateral tax treaties world- ciated stock in the corporation. If you’re a of Apple’s global profits are reported in wide. The arm’s-length standard and the shareholder in a corporation and you receive Ireland. So one may ask (and many gov- power of tax authorities to reapportion a dividend, that dividend has already been ernment officials do) why, when Apple (a income, deductions, credits, and allowances burdened by taxation when the corporation U.S. resident company) sells its phones in if a company fails to abide by the arm’s earned it. Not all countries impose two levels Australia or China or other foreign countries length standard is a powerful and vexing of tax on corporate earnings. Many exempt (with those sales sourced in each of those tax enforcement weapon. dividends and capital gains from taxation. countries), does most of the profit end up in

Ireland? Part of the answer is found in com- of these tax authorities, the rallying cry is the The Internal Revenue Service doesn’t like plicated tax structures with amusing names elimination of “stateless income” that is free that and so they have challenged Amazon’s like “a double Irish with a Dutch sandwich.” from tax in any jurisdiction. In other words, cost-sharing arrangement. income and profit that does not reside and But much more basically, it is because is not sourced in any country but in some Amazon maintains that it sold its IP to its Apple chose to locate much of its intellec- netherworld or limbo. Luxembourg affiliate on arm’s length terms tual property and market risk in Ireland. and for fair market value. That price was In so doing, Apple — and many other Let me conclude with one illustration, from about $200 million. IRS disagrees; they companies — lower their effective tax rates, pages 30 and 31 of the PowerPoint, to bring argue that the IP was worth $3.2 billion. improve earnings, and become more com- our conversation full circle and back home to petitive and attractive in the equity markets. the point I made about the role of the Chief The significance of this valuation and The large impact that these tax concepts Legal Officer in the C-suite. The essence of transfer pricing dispute is that Amazon have on corporate earnings and competi- my point is that the CLO has assumed the Luxembourg must pay Amazon, in the tiveness make them a C-Suite issue. mantle of the trusted advisor to the CEO United States, the proper arm’s length price and is part of senior management. To fulfill to “buy” the technology. The IRS argues The third concept I wish to raise with you, this vital duty, the most able CLOs must pos- that the transaction price was $3 billion as we reach the end of our seven minutes sess a command of a diverse range of areas in short. If they are correct, that’s additional together — is BEPS. Tax lawyers, myself the law — my colleagues spoke of real estate, taxable income in the United States. The included, love acronyms. What is BEPS? M&A and litigation. Even international tax United States Tax Court has the case and It stands for “Base Erosion and Profit falls under the purview of the Chief Legal it is before U.S. Tax Court Judge Lauber. Shifting.” Why is it germane to my mes- Officer because all of these areas present The case has been argued and will likely be sage? All of the major tax authorities of the clear and present legal and compliance risks decided later this year. It is a signature case. OECD are now working diligently in that to the vitality and well-being of global compa- beautiful city of Paris on what is known nies. I’ll bring it full-circle with an example I raise the Amazon case with you to illustrate as the “BEPS initiative.” What brought from the public reports of the battle Amazon that international tax issues, like the other them together is their collective concern now faces with the IRS. areas my co-panelists addressed, present that multinational corporations worldwide C-suite issues. Smart — albeit complex — tax are avoiding fair and reasonable taxation Amazon is one of the many great companies strategies and tax planning are required for by use of clever transfer pricing, placing founded and established in the United States companies to be competitive, to produce highly valuable technology and intellectual as part of the high technology and e-com- attractive returns for shareholders and to property in low-tax jurisdictions, availing merce economy. Millions of people and be compliant with the law. Yet, the C-Suite themselves of favorable treaties with low- businesses worldwide benefit every day from doesn’t need a 30-page PowerPoint pre- tax jurisdictions and causing income to be its amazing and efficient marketplace. There sentation on the fine points of arcane and reported and taxed (or not taxed) in other can be little doubt that Amazon’s intellec- obscure international tax rules to chart the than the true source or residence country. tual property is crucial to the success of its best course. They need wise and prudent Internet-enabled e-commerce marketplace. judgment grounded in experience, knowl- Many tax authorities worldwide, and notably edge, and training. These tax questions — as those of the United States, the U.K., and Amazon’s intellectual property, like that of Amazon’s case shows — frequently go to the Australia, accuse multinationals of improp- many high tech and IP driven companies, core bottom line of company profits and erly shifting profits to low-tax jurisdictions, does not reside in the United States. Its IP shareholder value. Is that a C-Suite issue? such as Ireland, Bermuda, and Singapore, is owned and resides in Luxembourg. It is You bet. by use of evasive or tax-avoidance techniques. probably not a country that you would imme- They don’t like it, and through the BEPS ini- diately or directly connect with Amazon, And that is what brings us here today. We tiative, they are publically and methodically even if, like me, you are of Irish descent and celebrate and honor a great and distin- studying the issue, devising enforcement a huge fan of Amazon. However, using a guished General Counsel — a true trusted tools to remedy the perceived problem, and well-accepted and completely lawful interna- advisor — and a man who has our deep establishing standards by which true evasion tional tax technique known as a cost-sharing admiration. I am very honored to be here or abuses can be differentiated from proper agreement, Amazon caused its Luxembourg with you, Steve, and with all of you. Thank and appropriate tax planning. The OECD is affiliate to purchase the IP developed by you for your patience and attention. It’s coming up with a playbook, if you will, for Amazon U.S. The profit that attaches to been a great pleasure to be with you. Thank tax authorities around the world. In the view Amazon’s Luxembourg based IP is huge. you. [Applause]

JACK FRIEDMAN: I have a question for public companies to now, and American CFO or the HR Department, but reports to Steve, and everybody can join in. Could approaches have recently been adopted by the chief executive. It’s different, for many you comment about the difference between public companies overseas. reasons, historical and cultural. domestic and international aspects of being a General Counsel? JACK FRIEDMAN: Why is the number STEVEN M. GLICK: GE really developed of in-house counsel about one-tenth in the the U.S. model decades ago, and others STEVEN M. GLICK: I was General U.K. compared to the United States? have followed suit. I can remember — I don’t Counsel of two U.K. public companies believe John was involved — doing a deal for in the ’90s, and most recently have been STEVEN M. GLICK: And Japan is GE in London in the late 1980s in connec- General Counsel of Public Storage. My one-fifth of the U.K. I’m not sure I really tion with their acquisition of Tungstrum, a European or U.K. experience is a little dated know the answer to that question, but I prominent Hungarian light bulb company. now, but back then, I was one of only two do think the litigation and regulatory envi- We felt, as outside lawyers, that we were Americans that were General Counsels at ronment that exists, and has always existed pure executioners — that we didn’t have a U.K. companies; the other was the General in the U.S., is a big part of the difference seat at the table, because GE came to us Counsel of Cadbury Schweppes. in the number of lawyers that are needed with everything fully baked, and it was really by a public company. Beyond purely the just looking for us, as outside lawyers, as an JACK FRIEDMAN: Is it a requirement size of the U.S. population, I think it’s additional resource to execute, but not for that a company can only be listed on the directly related to the complex legal envi- input on strategy or the development of the stock exchange if you, Steve, have been their ronment that companies have to operate in, overall deal structure/terms. General Counsel? in the U.S. JACK FRIEDMAN: Does anyone in the STEVEN M. GLICK: [Laughter] Yes! MICHAEL QUIGLEY: I have two reac- audience have a question? With these two — it was 20 years ago, or tions to that question. One is, the U.K. and more — the situation was very different. One [AUDIENCE MEMBER:] I have a ques- Japanese companies are obviously badly of them, Ladbrokes, the second one I was tion for Steve. I’m curious as to what you under-lawyered, and they need to lawyer up! at, was one of the largest companies in the look for as a General Counsel in hiring out- [Laughter] U.K. at the time, and as I mentioned, it had side counsel. Has that evolved at all over the a very large betting business and owned and last five, ten years? But apart from that, I think that the operated all the Hiltons outside the U.S. In evolution of the General Counsel’s office, that position, I reported to the CFO. STEVEN M. GLICK: What’s really or the chief legal officer’s role in a company evolved over the last five or ten years is the isn’t the same in every country. It’s the most I think that is a reflection of the role fee arrangements. [Laughter] Which Frank that lawyers played at that time, generally, sophisticated, I would say, in the United is very familiar with having worked for us! in the U.K., and more particularly with States, and some of our EU trading partners. But I think that’s been the real area of Ladbrokes. It was one of the things I didn’t change. What General Counsels look for, like, because it was much harder with that I think Asia has lagged tremendously generally speaking, probably hasn’t changed reporting structure, and the way the law- behind in terms of the role of the in-house very much. We look for someone with the yers were used at Ladbrokes, to really find lawyer or the General Counsel, compared subject matter expertise and experience, a meaningful way to have value at the board to the United States — but it’s rapidly catch- and who is responsive, and as John and level and at a strategic level. That just wasn’t ing up. In 1992, when I first visited Korea others have mentioned, is creative and a expected at that time of in-house lawyers. — now the country I live in — Samsung problem solver. It’s really subject matter That was a long time ago, and the model, as Electronics, a client then and now, did not expertise, hard-working, responsive, solving it generally exists today in the U.S., is also have an in-house legal department. They your problems. increasingly the model throughout Europe, had licensing lawyers in-house, but they did where a lawyer does have a seat at the table, not have an office of General Counsel or JACK FRIEDMAN: Have your firms ever so to speak, in most large public compa- an in-house law department. After about had creative fee arrangements? nies. If there is an executive committee, the ten years, they developed an in-house law lawyer sits on it; the most senior lawyer department, and then fairly recently, devel- [AUDIENCE MEMBER:] We are attends board meetings. It has moved on oped a true chief legal officer that has a seat asked all the time to come up with other a lot from when I was a GC of those U.K. in the C-suite and doesn’t report to the arrangements.

JACK FRIEDMAN: Would you take a thing that a chief legal officer looks for percentage? when they’re looking for a trusted advisor. It gets to the core of this labyrinth of regula- [AUDIENCE MEMBER:] It is usually a tions. It’s a complex world in which we live, flat fee arrangement. that Josh and the other panelists so expertly described. I would summarize it this way: A JACK FRIEDMAN: They like the flat fee. talented lawyer will hit the target that other That’s like government contracting. lawyers cannot hit. But that’s not good enough, because the innovative lawyer, the [AUDIENCE MEMBER:] There are exceptional lawyer, the Steve Glick, will hit really several ways to do it. But what people the target that the CEO can’t see. Not just found is, as much as people hate the billable the other targets; not just the targets that hour, it’s predictable, and you know what to other people can’t reach — to see around expect. If you try these alternative arrange- the corner. Also, I think that’s what Steve ments based on percentages, somebody can did in his years at Public Storage. I know get burned badly, and that will, at the end of — by reputation, even though we have not the day, hinder the relationship between the worked together — that’s what John does, outside counsel and the in-house counsel. and the other panelists. It’s seeing that dan- STEVEN M. GLICK: It’s routine. ger that the CEO or the company does not JACK FRIEDMAN: Do the clients come in see. If you do that it won’t be a big issue. JACK FRIEDMAN: People don’t worry and say, “Would you take it on contingency?” that there is a conflict of interest? STEVEN M. GLICK: Let me tell one [AUDIENCE MEMBER:] Yes, we’ll con- story, if I could, about lawyers sometimes JOHN MARZULLI: Conflicts are endemic sider that. The overwhelming majority of not really seeing things. When I was at and I don’t mean that in a negative way; I just our work continues to be on a billable hour Shearman & Sterling, on the offering of mean that it is the real world. Maybe use the arrangement, but we’re constantly looking Racal Telecom in Europe and the United example earlier about the CEO negotiating at, and we occasionally do come up with States — Racal Telecom was owned by Racal his or her own employment arrangement. It alternative arrangements, particularly for Electronics, but was its cellular phone arm, is a clear conflict and I think the key — and established clients looking at large matters. and it subsequently was renamed, and the this is presumably what we’re doing all the operating group was called Vodafone, which time, is to make sure they are identified and JACK FRIEDMAN: In Silicon Valley, there is now a $400 billion cellular phone com- appreciated by the people who are otherwise are some law firms that will take a piece of pany. When we worked on the first public involved in making the decisions involving a deal, like an IPO deal. They’ll do the legal offering of the cell phone company in the the conflict. This truly disables it and con- work, but they want a certain percentage of late 1980s, in the prospectus, we included a flicts are relatively few. the stock as part of their compensation. Isn’t statement that said, “Cell phone use is, and that a conflict of interest for the attorney, is expected to continue to be, primarily for JACK FRIEDMAN: Disclosure is the key who’s supposed to be totally objective? business users.” [Laughter] to controlling it?

MARK PECHECK: I don’t think alterna- We had Goldman Sachs, and we had JOHN MARZULLI: It’s a combination of tive fee arrangements, where the lawyer takes Rothschild, and we had Davis Polk things. It’s disclosure and making an analy- a contingent fee are either unusual or uneth- representing the underwriters, and we sis as to whether or not the conflict is really ical. Of course, a lawyer has professional were representing the issuer; we had all the benign and what kind of impact the conflict responsibilities, duties and obligations not experts in the world in the room; and no one is going to have on behavior. You see a lot to be in business with his client, and there foresaw the development of the cell phone of press, and it’s all about investment banks are significant and appropriate constraints industry the way it has actually developed. and their success fees. They make nothing if on that. But beyond fee arrangements — the deal doesn’t close, and if the deal closes, alternative or the billable hour — are under JACK FRIEDMAN: Should part of then they make $25 million. Plaintiffs have increasing pressure. The essence of your the compensation package of a General been saying for years that that’s a conflict. superb question — at least my response to Counsel be in equity, whether it is options Of course they’re going to give the fairness it — is a CEO, in hiring a General Counsel or some other form? How often is that done opinion if they’re going to get $25 million. or a chief legal officer, looks for the same these days? But the bottom line is there isn’t a CFO

or a CEO that wants to pay the bank if own initiatives, distributed throughout the STEVEN M. GLICK: A big nap! nothing happens. The real world prevents company; so it may not be something that’s [Laughter] you from being as pristine as you might organized centrally, imposed on a large orga- think is appropriate. It’s a conflict. Every nization, but left — with some restrictions I think the one thing I did mostly in the board knows it’s out there. The board says, and controls — up to local management last few years — and a lot of people in this “We’re going to hire Bank X and we know in various countries to decide what char- room may have done it as well, at different they have a success fee, but we know they’re itable enterprises or efforts they want to levels — is both my sons played soccer, so not going to give us a fairness opinion on a get involved with. It is prevailing that most I got very involved in my free time in sup- bad deal, just to make this happen.” Boards companies are doing something. porting their soccer club and high school make that decision all the time. soccer activities. I was the manager of the JACK FRIEDMAN: In preparing for club team, and helped to raise money so JACK FRIEDMAN: Let me change the the event, I was told by someone who’s that they could have scholarship players, subject. Steve, what are some of the pro bono, nationally involved with the self-storage etc. In fact, my youngest son is planning to charitable corporate things that companies industry, that it’s a very natural thing, in play soccer in college at Colgate University. you have worked with have been involved the self-storage industry, to provide help for with, either before or with Public Storage? the homeless. They may have food drives or JACK FRIEDMAN: The next Pelé! different‌ pro bono programs for people who STEVEN M. GLICK: It varies greatly may not have a home. I want to thank our Guest of Honor for from company to company, and not all sharing his wisdom and his time. I want to companies share the same role that others STEVEN M. GLICK: Within the Self thank all of our Distinguished Panelists for may have, in terms of their involvement in Storage Association, which is the trade asso- joining us for this program. the community and giving back. For tax ciation for the self-storage industry, they do reasons, it’s really not particularly effective have some programs of this type. I also want to thank the audience, because for REITs to make charitable donations. the purpose of the Roundtable is to be of There are other reasons they might want JACK FRIEDMAN: Finally, in the five use to the community and to the audience. to do it. But some of the companies I’ve minutes a month that you had free for your- Thank you for coming. worked for have supported doing pro bono self when you were General Counsel, what work, so that can be a component of it. A did you enjoy, other than maybe taking a lot of the companies, themselves, have their little nap?

Mark S. Pecheck is a partner in Gibson, institutions, pension plans, high net worth Dunn & Crutcher’s Los Angeles office. He individuals and families, and European, joined the Firm in 1984 immediately after Asian and Middle Eastern investors. graduating from the University of California, Berkeley, School of Law (Boalt Hall). Mr. Over the years, Mr. Pecheck has been involved Pecheck received his undergraduate educa- in a number of high-profile projects, including: tion at UCLA, earning a Bachelor of Arts degree in economics cum laude in 1979. • Representation of a major financial institution in a deed-in-lieu transaction involving $500 million in mortgage Mr. Pecheck is a member of the State Bar of indebtedness secured by 51 multi-family California and the Los Angeles County Bar Mark Pecheck apartment properties. Partner, Gibson Dunn LLP Association and is a member of the firm’s Real Estate Department. He is an accom- • Representation of Dillon Read Capital plished real estate finance lawyer, having Management in $133 million senior and structured, negotiated, and documented mezzanine financing secured by port- (on behalf of both lenders and borrowers) folio of 15 apartment buildings in San Francisco, California. hundreds of complex transactions involving senior loans, mezzanine financing, CMBS • Representation of UBS in bridge loan loans, construction loans, participations made in connection with the recapitaliza- GIBSON DUNN and syndicated loans, and large multi-state tion of a major landowner in Napa and and multi-property portfolio transactions. Lake Counties, California. He also has significant experience and • Representation of CSFB in $165 million expertise in the area of mortgage loan senior and mezzanine financing secured remedies, including foreclosures and receiv- by portfolio of 24 apartment buildings in erships. Recently, Mr. Pecheck has been San Francisco, California. deeply involved in several of the residential • Representation of a Riverside County mortgage servicer reviews undertaken pur- landowner in the long-term ground lease suant to consent decrees mandated by the of a 35-acre site to an energy company Office of the Comptroller of the Currency for the construction of an 500 megawatt and the Federal Reserve Board. combined cycle power plant. • Mr. Pecheck is involved in a number of In addition to his real estate finance exper- community organizations, and recently tise, Mr. Pecheck has broad experience in real completed service as Chairman of the property acquisitions and dispositions, joint Board of Trustees of Berkeley Hall School ventures, development projects and com- in Los Angeles. He is a native of Los mercial leasing. He has represented a wide Angeles and resides with his family in range of clients, including major financial Sherman Oaks.

Gibson, Dunn & legal service, and our lawyers routinely repre- We focus on client service: Gibson Dunn Crutcher LLP sent clients in some of the most complex and is one of the top firms in the BTI Client high-profile transactions in the world. We Service 2015 Survey, which named seven Gibson, Dunn & Crutcher LLP is a consistently rank among the top law firms in Gibson Dunn partners to its 2015 BTI full-service global law firm, with over 1,200 the world in published league tables. Client Service All-Stars list, featuring “those lawyers in 18 offices worldwide, including rare, exceptional attorneys standing out nine offices in major cities throughout the We will work tirelessly on the matters you above all others serving the most influential United States and over 100 lawyers in our have entrusted to us. We believe in devel- legal decision makers.” London, Paris, Munich, Brussels, Dubai, oping strong, long-term client relationships Beijing, Hong Kong, Singapore and São and are well positioned to provide you with Paulo offices. We are recognized for excellent superior service throughout the world.

Michael Quigley is a foreign attorney at affecting multinational corporations. He Kim & Chang. He specializes in represent- has negotiated advance pricing agreements ing clients in tax controversy and litigation with the IRS and the tax authorities of many matters. For more than 25 years, he has foreign jurisdictions, including obtaining concentrated on the resolution of tax dis- some of the very first APAs between the putes by negotiation and, when necessary, United States and Korea. litigation before the courts. Mr. Quigley has extensive experience with To achieve negotiated settlements with the the operations and practices of the global IRS and foreign tax authorities, he works operations of multinational firms and, par- with examining agents and assessing officers ticularly, their interaction with the U.S. and Michael Quigley to resolve disputes at the earliest possible foreign governments. He has represented Partner, Kim & Chang (Korea) stage. When this is unavailing, he appears clients in many business sectors and indus- before the IRS Office of Appeals or parallel tries, including energy, pharmaceutical, organizations within foreign tax authorities, aviation, broadcasting, vehicle manufactur- and has successfully represented clients in a ing, consumer electronics, semiconductors, multitude of appeals settlements, fast-track home appliances, defense, insurance, invest- mediations, and post-appeals mediations. ment banking and private equity.

Mr. Quigley has tried more than 50 civil tax For many years he has studied the economic, Kim & Chang cases before the U.S. Tax Court, the U.S. business and political affairs of the Republic Court of Federal Claims and many U.S. of Korea and the Korean Peninsula, with a federal district courts. His tax litigation experi- particular emphasis on U.S.-Korea relations. ence is extensive and his advocacy skills before He has a developed interest in Japan and the courts have been recognized by his peers. its relations with both the United States and Korea and U.S.-India relations and the He is a leading authority on intercompany political and economic affairs of India. More transfer pricing, tax treaties, permanent broadly, Mr. Quigley is keenly focused on establishment issues and other tax matters U.S. relations with Asia.

Kim & Chang Kim & Chang’s success is founded on our The dedication to our clients is reflected commitment to meeting the needs of clients, in Kim & Chang’s unique team-oriented no matter how small the issue, while uphold- approach and “one-stop” legal services. ing the highest standards of professionalism The firm leverages its multifaceted expertise and integrity. Our valued clients are start-ups, and broad experience pooling together a small businesses to international conglomer- team with the right mix of professionals for ates. We customize our legal advice, paying each client need. Drawing upon our strong close attention to client details such as busi- practice areas across the board, legal special- Kim & Chang is Korea’s largest and most ness size, business model, industry and ization of our professionals with deep market specialized law firm with a premier global market. Kim & Chang regularly solves the knowledge and forward industry insight practice. Since the firm was founded in 1973, most complex and challenging legal issues is invaluable to our clients in successfully it continues to advise the world’s leading for the world’s largest multinational corpora- navigating today’s economic challenges. At companies and financial institutions. Based tions and international financial institutions Kim & Chang, we have the legal expertise, in Seoul, Kim & Chang is a full-service law on cross-border transactions and in doing resources and team structure flexibility to firm, with over 1,000 dedicated profession- business in Korea. Our professionals at provide a fully integrated one-stop legal ser- als including Korean, U.S. and European Kim & Chang see the world from the view- vice for our clients. licensed lawyers, tax lawyers and accoun- point of our clients, big or small, building tants, patent and trademark attorneys. lasting relationships.

Joshua A. Zielinski is a partner in McElroy’s He received a B.A. in Political Science, with commercial litigation group in the Newark, honors from Alfred University in1996 and New Jersey office. Mr. Zielinski advises a a J.D., cum laude, from the Law School at broad range of public companies, closely Syracuse University in 1999. held businesses, individuals and municipal entities in complex civil litigation in state He is admitted to practice in New Jersey and federal courts. and New York and was a Law Clerk to Honorable Ronald B. Graves, Justice of the Mr. Zielinski has successfully represented Superior Court. clients before state and federal trial and appellate courts in matters involving Mr. Zielinski is a member of the New Jersey Joshua Zielinski antitrust, commercial mortgage backed secu- State, New York State and American Bar Partner, McElroy, Deutsch, rities, commercial foreclosures, civil RICO, Associations. Mulvaney & Carpenter LLP breach of contract, ERISA, and partnership and limited liability company disputes.

MDM& C

McElroy, Deutsch, Mulvaney Placing the Client First complex contract, counsel on a tax or regula- Why do clients turn to MDM&C? What tory matter, or provide private client services. & Carpenter LLP is it about our Firm that has enabled it to Whatever the legal or business situation, our sustain continued growth in a time of eco- lawyers understand that clients trust and nomic uncertainty? What is it about our appreciate lawyers who genuinely care about Firm that generates such client loyalty that their problems and provide them with effec- over eighty percent of our annual business tive and innovative results. A Diverse Practice comes from former or current clients and McElroy, Deutsch, Mulvaney & Carpenter, client recommendations? We respond to our clients’ needs promptly LLP (“MDM&C”) is a diverse practice with and serve their interests efficiently. Effective lawyers who place the client first. MDM&C The answer is that MDM&C has a tra- communication with our clients marks the has approximately 300 lawyers in twelve dition of providing exemplary service to way we operate at MDM&C. We are deter- offices in seven states, and offers a full clients, of placing the client first. In the mined to create successful and long-lasting range of legal services, including municipal practice of law, what does “placing the relationships with the people and the busi- and local government, litigation, labor and client first” really mean? It means a com- ness institutions we represent. The bottom employment, healthcare, bankruptcy/restruc- mitment to excellence. It means dedicated line in our relationship with clients is, of turing, real estate, insurance, environmental, professionals who care about providing the course, “results” — the ultimate measure of the fidelity and surety, construction, corporate best possible service to clients. It means a effectiveness of any law firm. Our lawyers at transactions, white collar crime and corpo- commitment to providing superior, timely, MDM&C are committed to overcoming dif- rate compliance. MDM&C’s philosophy and effective assistance. It means lawyers ficult situations in achieving our clients’ goals provides clients with the critical edge they who are “hands-on” practitioners involved — and to doing it time after time. need to achieve their legal and business full-time in providing solutions to client objectives. Clients who seek the assistance problems. It means having a shared vision The attorneys in our Firm have been recog- of MDM&C will discover lawyers dedicated and a shared purpose with clients and a nized for their integrity and dedication to to providing superior service and personal dedication to achieving their goals. the highest level of professionalism. While attention to clients’ needs. The Firm has we are proud of their personal achieve- developed a national reputation and regional Those are some of the attributes that have ments and professional contributions, our expertise without abandoning the focus on brought us the satisfaction and the loyalty of collective focus is always on providing legal efficiency and client satisfaction that is often- our clients, year after year. Our attorneys may services of superior quality and exceptional times the hallmark of the best small firms. engage in courtroom litigation, negotiate a value in a manner that places the client first.

John Marzulli, a member of Shearman & on Mergers, Acquisitions and Contests for Sterling’s Mergers & Acquisitions Group Corporate Control. In 2009 Mr. Marzulli in New York, focuses his practice on inter- was named by The Lawyer as one of 25 national corporate fi nance with an emphasis “Transatlantic Elite.” He has ranked for New on cross-border mergers and acquisitions, York: Corporate M&A by Chambers USA defensive assignments, privately negotiated 2011–2013, Chambers Global 2012-2013, acquisitions and divestitures of stock and IFLR1000 2011–2012, Legal 500 and Who’s assets, joint ventures and on related corpo- Who Legal (Mergers & Acquisitions and rate governance matters. His clients include Corporate Governance). Mr. Marzulli joined fi nancial institutions, strategic/corporates, the fi rm in 1980 following a federal district private equity sponsors and their fi nan- court clerkship and became a partner in 1988. John Marzulli cial advisors. He is a past Chairman of the From 1990 to 1996, he was based in London Partner, Shearman & Sterling LLP New York City Bar Association’s Committee as head of the fi rm’s U.K. M&A practice.

Shearman & Sterling LLP Europe: We participated in the fi rst U.S. list- in its $5.7 billion canal refi nancing plan; ing of a German company — Daimler Benz IntercontinentalExchange in its acquisition AG — on the New York Stock Exchange of The Clearing Corporation and forma- Shearman & Sterling has been advising and remain front and center in transaction of a credit default swap clearinghouse; many of the world’s leading corporations tions involving automobile manufacturers in The Dow Chemical Company in its acquisi- and fi nancial institutions, governments and Germany and with a broad range of compa- tion of Rohm & Haas and sale of Morton governmental organizations for more than nies across the continent. International and its calcium chloride and 140 years. We are committed to providing Styron businesses; Suncor Energy in its legal advice that is insightful and valuable Latin America: We represented the fi rst $15.8 billion merger with Petro-Canada; to our clients. This has resulted in ground- Brazilian company to register an IPO with the Brazilian conglomerate JBS in its acquisi- breaking transactions in all major regions of U.S. Securities and Exchange Commission tion of U.S. poultry company Pilgrim’s Pride the world, including: and, today, have played a lead role in many through a bankruptcy proceeding; Société of the country’s most signifi cant IPOs to Générale in combination of its asset man- Asia: In Beijing, we advised on the fi rst suc- date, including Santander and VisaNet. agement operations with Crédit Agricole’s; cessful transaction done under new Chinese and Sterlite in its $500 Million Convertible M&A rules and, more recently, played a North America: We advised on the creation Bond Offering in India. key role in the US$ 2.4 billion initial pub- of the dual class stock when Ford Motor lic offering of Metallurgical Corporation of Company went public more than 50 years Together, our lawyers work across practices China Ltd, one of Hong Kong’s largest IPOs ago and today remain the company’s under- and jurisdictions to provide the highest qual- of 2009, and in Shiseido’s acquisition of writers’ counsel, advising on Ford’s debt and ity legal services, bringing their collective U.S. cosmetics company Bare Escentuals. equity offerings and restructuring during experience to bear on the issues that clients Ford’s continued turnaround. face. For example, underpinning the quality The Middle East: We participated in the of our work fi rmwide are our shared values. fi rst power project in the Middle East that We have also advised on some of the world’s included fi nancing from Islamic banks most notable transactions and matters, rep- We take pride in the successes of our clients and, also, in the largest oil and gas Islamic resenting: the Yukos shareholders in their and in our contributions to them. fi nancing and, most recently, represented the $100 billion compensation claim against project sponsor and project company of a Russia; Cadbury in its $19.4 billion acqui- major refi nery just outside of Cairo, Egypt. sition by Kraft; Panama Canal Authority