Saturday, October 01, 2005

Pass the Gravy, Please

24/7 RealMedia, a NASDAQ-traded Internet advertising company, is by all accounts a real success - expanding its business, generating a lot of favorable publicity and yes, making money. (Let's just forget about that sordid Henry Blodget business.) But it looks like these guys still have some growing up to do, governance-wise.

I say this because the company's recently filed proxy statement reveals that it paid about $200,000 last year to a law firm in which "immediate family members" of Executive VP and General Counsel Mark Moran, who also serves as a director, have a "material interest."

Now the fact that the firm of Moran & d’Arcambal ain't exactly Cravath, Swaine & Moore means nothing; there are a lot of talented lawyers at small local firms. But could these folks be a little too close for comfort? Moran & d’Arcambal partner Siobhan Moran is Mark Moran’s sister, and his mother, Grace Moran, is "of counsel" to the law firm. (BTW: Earlier this year, in a case unrelated to 24/7, a judge sanctioned another of the law firm's partners - he's Siobhan's husband, as it happens - for slipping the videotape of an opposing party's deposition to the Fox TV show A Current Affair. Siobhan, also said to be present at the deposition, wasn't fined.)

I'm not accusing anyone of doing anything wrong here. But in the age now upon us, in which regulators expect lawyers to act as corporate watchdogs, is it wise for a general counsel to buy legal services from his loved ones? Can shareholders expect The Law Firm of Mom, Sis, and Brother-in-Law to remember that their actual client is the company, not Brother General Counsel? And are they likely to go over his head if they think he's doing something wrong? You don't have to be an ethics expert to see an issue here.

24/7 Chairman and CEO David Moore likes his general counsel: In a recent interview, he said Mark Moran had done "an astounding job" and praised him for "the fact that 24/7 has never been hit with a wrongful termination or shareholder lawsuit."

It really turns me on when a CEO speaks warmly of his lawyer. However, if Moore and Moran want to keep things copacetic, Moran ought to break the news gently to his family, perhaps over Thanksgiving turkey,that 24/7 RealMedia no longer needs their services.

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