One Perfect Day
The legal department at TennAg Chemical Company was small. Two lawyers, a paralegal and a secretary. Nevertheless, they provided internal legal support to a specialty chemical company with plants in three Southern states. Jack Schmidt, as General Counsel, led the legal team. Although still a youthful 40, he had previous legal experience at a Fortune 500 company, and was well regarded within the industry. His younger colleague, Bruce Lawton, had a private practice background.
The professional environment was informal, depending less on formal meeting schedules than simple 'drop-by - what do you think' conferences. Accordingly, it was not extraordinary when Bruce dropped in to Jack's office to discuss a new topic. "I have something interesting that has landed on my desk."
"What's up?"
"I am not sure yet. An anonymous whistle-blower says that our subsidiary in Texas is using a phony freight forwarder for exports to Mexico."
"That's interesting. Any substantive details?"
"Not yet."
"I think you need to dig in. Find out from accounting who is getting checks. Follow the money."
"That's what I thought, too. I will let you know what I find out."
"Great."
*****
Three days later Bruce was back in Jack's office. "What have you got?"
"Not pretty. Recently, we have apparently been cutting checks to a company called "TMX LLC", aka TexMexEx, a recently formed Texas LLC. We are paying them a slightly above market price for 'freight forwarding' into Mexico. The total payments are over $500,000 for this year already. Here is the bombshell. The principals of TMX LLC are Hank and Robby from the Dallas office and their wives."
"What?"
"I know. It's crazy."
"Do you have documentation?"
"All here." Jack briefly reviewed the folder just handed to him.
"Okay. I will need to speak to Mr. Gunderson about this."
"Of course."
*****
The first thing next morning Jack was huddled with Seth Gunderson, Chairman & CEO.
"Jack, the implications of what you are telling me are enormous. We are a publicly traded company with public shareholders. We cannot have even the smell of impropriety."
"I agree. I propose to run this to ground, involving our accountants in the planning stage."
"That's fine. But what about Gordon?" Gordon Letterman was the corporate Executive Vice President immediately responsible for the operations in Texas.
"I am happy to meet with him and bring him up to speed. Meanwhile, I would like to talk to the accountants and get their input as to how to proceed."
"That sounds right. Let's reconnect this afternoon with specifics."
"Sounds good."
*****
Later that afternoon another meeting was convened. This meeting included Jack, Seth Gunderson and Gordon Letterman. "Gordon, I am sorry for any inconvenience, but Jack and his staff have turned up some disturbing information regarding our operations in Texas." Gordon made no response.
Jack spoke next. "Gordon, it appears that Hank and Robby, and their wives, may be involved in 'skimming' off our Mexican export business."
Gordon's response was immediate. "That is an outrageous allegation. These are honorable men who have performed well for us. There must be some mistake."
"Gordon, I understand your perspective, but the documents speak very loudly. We have no alternative but to investigate."
"Very well. But I want to go on record as saying that this is a huge mistake. We are going to get ourselves sued here. Surely there is an explanation for whatever documents have been found."
"We are going to investigate. Our public accountants are going to be very much involved."
Gordon's face was beet red. "Just put me down as saying I am opposed. This is going to be a disaster."
"Gordon, in some way, I hope you are right. But as a public company we need an open process. Jack is in completely in charge of creating that process. For now, I want you to understand that this investigation is strictly confidential. Not to be discussed with anyone."
"But I want it reported to the Board that I am opposed."
"That will be done at the appropriate time. Anything else?"
"No."
"Very well. Please conduct yourself appropriately."
"My thoughts, exactly."
*****
The next day Jack met with the head of the local office of the firm's independent accountants. After discussion, a strategy was agreed upon. The two executives whose names were associated with TexMexEx, LLC would be separately, but simultaneously, interviewed. The interviewing teams would consist of representatives of both the Legal Department and the independent accountants. There would be no advance notice of the agenda. Jack suggested an examination of the subsidiaries' executive travel schedule to facilitate timing the interviews.
A date, approximately 10 days out, was selected. Bruce would be paired with the Managing Partner of the local accounting office, both of whom would fly to Florida for an end-of-day meeting with Robby, dovetailing with a known trip by Robby to a customer's location. Jack would be paired with the partner most recently assigned to the company's account, both of whom would fly to Texas for a meeting, as close to simultaneous as possible, with Hank. There would be a telephone debrief immediately following. If circumstances warranted, terminations and surrender of company assets would follow immediately.
The lawyers and accountants met to develop a script for both teams to follow. It was agreed that the tone would be as neutral as possible at the outset. Both meetings would be tape-recorded. The partner designated to accompany Jack was Terri Simon, a relatively young and recently-elected partner in her firm, but senior on the most recent audit. Jack had met Terri previously, but had not had much interaction with her. He had a favorable impression of her and had no reservations about her competence. At the suggestion of the Managing Partner, Terri was brought into the strategy meeting and brought up to speed.
"Terri, have you ever been to the facility in Dallas?"
"No sir. Since the pandemic, the meetings I have had with personnel there have all been by video teleconference."
"No problem. Have your secretary call mine to coordinate travel schedules and accommodations. I am thinking we leave early that morning and return the next afternoon. I want to have enough time to have an employee meeting out there after the dust settles. It will give you a chance to meet some people in person and maybe tour the facility. Does that work for you?"
"Oh yes, that would be great."
*****
A little more than a week later Jack and Terri were seated in first class on a Delta flight headed to DFW airport. Terri was impeccably dressed in a grey skirt and matching jacket, completely appropriate to the occasion, but also very complimentary to her legs and figure. With few exceptions, the conversation was focused on the task at hand. As the plane started its descent Terri's was increasingly looking out the window.
