“From Guaranteed Comp to Ethics Screens, How Big Law Navigates the Revolving Door” —

• “As the revolving door between the government and Big Law picks up pace this year, law firms are hiring a series of lawyers hailing from the same federal agencies they are litigating against in client matters.”
• “To guard against ethical violations, law firms and laterals face several procedures and restrictions. From setting up ethics screens on some matters to ensuring laterals from the government aren’t compensated for certain matters, these restrictions can add up when firms have several laterals from the government.”
• “The ethics restrictions are one consideration when firms hire lawyers from the government. Those restrictions are coming more into focus as law firms are hiring more lawyers from the government this year, especially from the Justice Department.”
• “‘When firms do a profitability projection, they factor in the hands-off period for the person’s prior agency for a period of time,’ D.C.-based Garrison partner Dan Binstock said, speaking generally on firms hiring government attorneys.”
• “Firms such as Milbank; Weil, Gotshal & Manges; Kirkland & Ellis; Mayer Brown; Paul, Weiss, Rifkind, Wharton & Garrison; and King & Spalding, among others, have all added government talent this year. Each one of these firms is also litigating against or adversarial to the government in client matters.”
• “Firms need to take into account how long a government candidate will be restricted from handling certain matters or advising clients on cases before their agency, which can vary in years.”
• “For instance, when Milbank hired SEC enforcement chief Gurbir Grewal this year, the firm noted he had to wait at least a year before handling matters involving the agency. At the same time, Grewal, as one of the highest-profile lawyers from the government this year, was likely paid a competitive partner compensation package.”
• “If a former government attorney is hired as an equity partner, the firm will have to ensure that the attorney isn’t sharing in fees generated when he or she was in government, from a client matter involving the government.”
• “‘A defined guarantee is often the clearest answer,’ noted D.C.-based Garrison partner Amy Savage, in a prior Law.com interview. ‘There are some firms that will back out of the portion of the profits they are barred from receiving, but that’s a much more complicated structure, and so in my experience, at least, the guarantees have largely helped to address that issue.'”
  Lateral Moves”
• “The ethics restrictions are also factors for when government lawyers move to firms. For instance, a job search can impact when or if a recusal is triggered for a government attorney from a case they may be working or overseeing at their agency.”
• “Mayer Brown is far from the only firm hiring lawyers from agencies they are litigating against.”
• “For such situations, it’s become common for a government lateral’s new law firm to establish an ethical screen—which prevents lawyers with conflicts of interest from sharing confidential information with others—particularly to separate that attorney from cases the firm may be handling before their old agency.”
• “However, these ethical screens can come up later in the courtroom.”
• “The efficacy of a screen could be challenged ‘in litigation, where a judge will rule whether or not it’s proper or improper for the lawyer or law firm to participate. I’ve heard some of that, and I think that’s much more common than bar prosecutions,’ said Michael Frisch, ethics counsel at Georgetown University Law Center.”
• “In some cases, an opposing counsel can try to get a law firm or attorney thrown off from a case, arguing there is a conflict of interest, noted Gerzhoy, of HWG.”
• “Despite law firms having to address all the restrictions, it’s unusual to see firms or attorneys face disciplinary action for violating these ethics rules, legal experts say. Part of it may be that violations can be ‘very difficult to prove,’ Frisch said.”

US Office of Government Ethics just published: “Incoming Employees and Ongoing Interests in Representational Services: Common 18 U.S.C §§ 203 and 205(a)(1) Issues and Solutions” —

• “The U.S. Office of Government Ethics (OGE) is issuing this Legal Advisory to provide guidance for incoming employees to the executive branch who may receive compensation for certain representational services provided prior to or during their Government service. “
• “The potential for such problematic payments arises most commonly for individuals who are leaving law firms to accept executive branch employment, and particularly for those who will receive a partnership share based on the firm’s profits for the entire year, including the period when the individual is in Government service. “
• “This Advisory provides an overview of the elements of 18 U.S.C. § 203 followed by a review of commonly problematic payments under the statute and typical methods used to resolve these issues. The Advisory then provides an overview of the elements of 18 U.S.C. § 205(a)(1), identifies problematic payments, and offers solutions. Finally, attached to the Advisory are three job aids to assist in screening incoming employees for potential issues under these statutes; distinguishing the timing elements of the statutes; and identifying common problematic payments and solutions under 18 U.S.C. § 203.”
• “Example 1: An incoming employee to the Federal Government, Alex, is an equity partner in a law firm who is entitled to a certain percentage of the firm’s overall annual profits (partnership share). The law firm engages in representational services and is compensated for those services. The law firm calculates and pays partnership share income each year in January based on profits for the preceding calendar year. Alex plans to leave their law firm on June 30 and begin Government service on July 1. The law firm’s standard method of calculating partnership share income would raise 18 U.S.C. § 203 concerns because the calculation would include profits from representational services performed during the six-month period after Alex left the firm and began Government service, from July 1 to December 31.”
• “Example 3: Same facts as Example 1 involving Alex, an equity partner. In recognition of the fact that Alex will only work half of the year at the law firm, the law firm offers to calculate Alex’s standard partnership share at the end of the year using the profits for the full year, but discount it by 50% to reflect that they only worked at the firm for half the year. The firm’s discount of the partnership share income by 50% does not resolve the 18 U.S.C. § 203 issues because the pool from which Alex’s partnership share is calculated will include profits from representational services made for the entire year, including the period while Alex is a Government employee. “
• “Example 6: An incoming employee to the Federal Government, Casey, is an attorney on a pending case involving representational services.28 Casey’s law firm agreed to accept the case on a contingency fee basis, so the law firm and the attorneys on the case will receive payment from the client only if they are successful in the matter. The case is ongoing when Casey begins Government service. To avoid issues under 18 U.S.C. § 203, the law firm agrees to pay Casey based on the hours Casey worked on the case instead of the contingency fee. Because Casey’s interest in the case has been reduced to a sum certain and is no longer contingent on the outcome of the case, this arrangement resolves the 18 U.S.C. § 203 issues.”