By rights, there ought to have been champagne and party-poppers. It is not every day that you successfully manage the end of a multi-billion-pound claim against your company. But Victoria Cochrane, general counsel at Ernst & Young (E&Y), is instead merely quietly satisfied about the recent settlement between the accountancy giant and Equitable Life after months of acrimonious wrangling in and out of court.
“I’m satisfied that it was the right outcome,” she said, a few weeks after the end of the case.
Cochrane, who joined E&Y as its first in-house lawyer 14 years ago, is now the firm’s general counsel. She is also a partner, which she believes gives her extra authority with other senior figures within the organisation – they know she too shares E&Y’s risk.
E&Y has a team of over 70 lawyers worldwide. Most – around 60 – are based in the US. Cochrane works with a group of 10 in the UK, and there are a few other in-house lawyers dotted around the world. Compared with E&Y’s annual $17bn (£9.9bn) revenue, Cochrane says her legal spend is quite small.
“I spend what I need to spend,” she explains. “We don’t need outside lawyers very much. We use them for major litigation, and we’d use them for major corporate advice.”
The firm has amassed costs of about £25m for the three years of litigation with Equitable Life, spent on Barlow Lyde & Gilbert (BLG) and counsel including 7 King’s Bench Walk’s Jonathan Gaisman QC and Brick Court Chambers’ Mark Hapgood QC. Cochrane is effusive about BLG, which E&Y has used for litigation for a number of years.
“They’re very, very expert in their field and they’re very user-friendly; nice to deal with, very responsive and good value for money. They get ticks all round,” she says.
Linklaters is E&Y’s principal corporate adviser. The firm assisted the accountants on the 2000 merger with French management consultants Cap Gemini in 2000, and handles most of E&Y’s corporate work. Reynolds Porter Chamberlain and Farrer & Co have also done some litigation for E&Y. Mayer Brown Rowe & Maw acted on the accountants’ conversion to limited liability partnership (LLP) status in 2001.
Cochrane explains that the nature of the relationship between her department and external advisers is very much driven by teamwork. “They ask us what we’re really looking for – I want a relationship that works in that sense,” she says, pointing out that the in-house lawyer is the one with most of the power in the dealings with external solicitors.
The relationship between Cochrane, BLG’s litigation head Clare Canning, and the team of counsel was key in the fight against Equitable Life. The mutual assurance society launched its £2.6bn negligence claim against E&Y in 2002, and Cochrane says the case was marked out as unusual from day one.
“Right from the start, huge numbers were being bandied around, and Equitable went out in the press making a lot of noise about the claim. It was as if they were using the media as their main method of communication with us,” she says.
The case was further complicated by Equitable’s continued amendment of the claim. “There were periods when we were boxing in the dark,” explains Cochrane. “Our team did spend a lot of time looking at other possible angles. That was really helpful because it meant that there was nothing we hadn’t thought of.”
The policy paid off when, in September 2005, Equitable and E&Y finally agreed a settlement and the case was dropped. Not having Equitable to worry about means that Cochrane can now concentrate on her other responsibilities. Much of her time on a day-to-day basis is spent on quality and risk management. There are 40 people at E&Y working in this area, and Cochrane oversees them as well as managing the legal team. Issues include dealing with the problems that arise when E&Y is the third party in a contract, and drafting engagement letters.
“A lot of people see the accountants as an insurance policy,” she says. This can lead to E&Y being listed as a defendant in cases where it has had no direct involvement. Indeed the issue of auditors’ liability is a hot topic at the moment, and Cochrane is heavily involved in discussions with the Government and the European Commission over its future.
Explaining the issue, Cochrane says: “It’s incredibly important that we do something on liability for auditors. It matters because at the moment we have quite a difficult position as we are the only people who are not allowed to limit liability.”
Giving auditors the right to limit their liability with clients would, says Cochrane, change the way litigation is conducted in the UK. She and her fellow campaigners are working towards a monetary cap and proportionate liability too, so that claims the size of Equitable’s cannot be brought. The issue will affect more than just the Big Four accountants, and Cochrane is hopeful for success.
“The UK Government is quite sympathetic towards it,” she thinks, referring to the draft Company Law Bill introduced into the House of Lords on 1 November. “I think ultimately it will succeed.”
Ernst & Young
|Organisation||Ernst & Young|
|Legal capability||10 in the UK; 60 in the US|
|General counsel||Victoria Cochrane|
|Reporting to||James Turley, chairman|
|Main law firms||Barlow Lyde & Gilbert, Farrer & Co, Linklaters, Reynolds Porter Chamberlain|