CCBJ July/August 2024 Edition

Page 20


Corporate Counsel Business Journal

JULY/AUGUST 2024 EDITION

VOLUME 32, NUMBER 5

Tips To Help You Build Your Bench

CASSIE MCBRIDE, FORMER SENIOR VICE PRESIDENT & GENERAL COUNSEL, SHARK SPORTS & ENTERTAINMENT, HIRES INDIVIDUALS WHO ARE UNAFRIAD TO BE CHANGE AGENTS

INSIDE

In-House Use of GenAI Soars Keys to Effective Leadership

Generative AI’s Transformation Potential for E-Discovery and Investigations AND MORE!

In This Issue

The participants in the CCBJ Network demonstrate, through their many contributions, their unwavering commitment to the advancement and success of corporate law departments. The engagement and support of these “partners of corporate counsel” assure we continue to develop and distribute the news and information this unique and sophisticated audience relies on to meet the evolving legal and business needs of their organizations.

Strategic Partners

American

Contract

Mitratech Thomson

Tips To Help You Build Your Bench

CCBJ: What led you to join the San Jose Sharks?

Cassie McBride: I joined the Sharks during the height of the pandemic, in the summer of 2021. It was 5 months after giving birth to my son and managing “return to work” as a new mother after a cross-country move. It was an incredible experience to join an organization that embraced me in an executive capacity while I navigated new-parent dynamics and is a testament to the supportive and inclusive culture of the team.

I began leading multiple functions (Legal, HR, DI&B and most recently, the Sharks Foundation/Community Impact), helping to drive the organization’s recovery from COVID, along with the change management that followed. As a live sports and entertainment business with an emphasis on bringing the community together, we worked to stabilize and reimagine ways to connect with employees and fans and to pioneer the industry. It’s been a rewarding experience to contribute to an organization that has seen so much change over the last couple of years and continues to make a positive difference in the community.

Please tell us about your leadership style and who or what has influenced it?

My leadership style aims to serve the populations I am influencing and is rooted in mentorship, respect and inclusivity. Having experienced different types of leaders at various teams and leagues, I strive to apply the learnings and positive attributes—including empathy, transparency and integrity—from my most influential leaders and mentors over

the years. I believe in fostering a collaborative environment where everyone feels engaged and in creating a safe space where people can freely express themselves. This facilitates better decision-making and improves a sense of belonging.

It’s important, especially in cross-functional leadership, to ensure all voices in the room are heard and not overlooked or disregarded.

What qualities do you look for when you’re hiring new people for your team?

I’ve spent significant time in my current role having to navigate human capital decisions and functional group

design. When building teams from the ground up, the most important thing one can do is invest the time to “build one’s bench,” and this applies regardless of role or function. Individuals who take initiative, are unafraid to be change agents and balance the big picture with the day-to-day details have a competitive advantage in the sports and entertainment industry and those are qualities I seek when hiring new people for my team.

How would you describe the culture of your organization?

Sharks Sports & Entertainment’s vision is to pioneer the future of sports and entertainment and our culture is grounded in that mindset. We are guided by our Pioneering Principles and our #TealTogether mantra, which help frame rules of engagement when it comes to the workplace and interacting with our colleagues and fans. Our culture also reflects our tech-centric market, where we embrace experimentation and innovation, on and off the ice.

Additionally, we pride ourselves on our investments in diversity, inclusion and belonging, both internally with respect to our employee experiences and externally in relation to our fans, partners and stakeholders. This is especially important as we continue to grow the game and expand access to hockey and ice sports throughout the Bay Area and beyond.

What is the most influential career advice you’ve ever received?

A piece of life advice that has translated well to my career is “always know before whom you stand.”

Both personally and professionally, the importance of knowing your audience is essential in life and necessary to become an effective lawyer and advocate. Framing

communications through this lens directly helps me to drive change and educate throughout an organization. It also serves as a great reminder that not everyone receives or interprets information the same way and that you must be intentional and sensitive to the needs of your stakeholders to be a successful influencer.

What changes would you like to see within the legal profession?

First, I’m excited to see how the legal profession will transform now that generative AI and large-language models have become relatively accessible and commonplace. The prospect of being able to drive efficiencies and promote greater access to the legal profession will open new doors and a renewed interest in this space. The legal profession has historically been subject to criticism when it comes to breaking the traditional mold and pioneering efficiencies and technology. But as we’ve seen success in hybrid environments, the industry has learned to adapt and I look forward to taking part in this next chapter in its digital transformation.

Second, lawyers have a tendency to let life pass them by because they are caught up in the daily grind. While it’s a fantastic quality to be “all in” and passionate about the work you do, we need to cut ourselves a little slack and actively define balance early on in our careers. Early on in my own career, I heard an executive discuss shifting the notion of “work-life balance” to “work-life integration,” to reflect the reality that we only have one life and work is part of it. This resonates with me to this day, as a working mom trying to do it all. I would encourage everyone in the profession to prioritize mental health and make the time and space to do the things you love and that make you fulfilled. 

During the Publication of this July/August 2024 Edition, Cassie has left Shark Sports & Entertainment and is now the Chief Legal Officer of the Tampa Bay Buccaneers.

Front

In-House Use of GenAI Soars

A recent survey of 105 in-house lawyers worldwide, conducted by contract automation platform Juro and well-known Silicon Valley law firm Wilson Sonsini, found that 14.3 percent of corporate counsel never use genAI tools, which is down from 45 percent last year. The survey surfaced popular uses such as drafting contract templates, document summaries, contract reviews, legal research and proofreading. On the horizon, the survey found emerging uses such as building legal chatbots, creating training contentand writing context-specific communications. Raj Mahapatra, a senior IP counsel with Wilson Sonsini, highlighted growing awareness in legal practice of AI-driven efficiency and accuracy. The rapid adoption of genAI is seen as a significant shift in legal technology, with Richard Mabey, CEO of UK-based Juro, emphasizing the importance effective partnering between legal teams and tech vendors.

Briefly

Axiom’s Expanded Portfoilio Fuels Nearly 2,000 New Client Engagements Since Janurary

Jason Downs Joins Hogan Lovells as Partner

Tracy Combs Joins Greenberg Traurig LLP in San Franscisco

Jill Nicholson Joins Dentons as Partner in Chicago

Boong-Kyu Lee Joins Altson & Bird as Partner

Abe Smith Joins Holland & Hart in Las Vegas as Partner

Claire Campbell Joins Kirkland & Ellis as Corporate Partner

Barnes & Thornburg Participates in Diversity Lab’s Moments to movements Hackathon

Alexandra Chauvin Joins White & Case LLP in London as Partner

Mark Allen is Set to Retire from FedEx Corporation as Executive VP, General Counsel and Secretary

Thomson Reuters Unveils Groundbreaking CoCounsel Drafting Tool, Transforming Legal Workflows with Unmatched Efficency and Precision

Matthew Cohn Joins Latham & Wakins LLP as Partner

Parisa Clovis Joins A&O Shearman in London

Rachel Han Joins Dorsey & Whitney LLP in Hong Kong

Required Reading

Too busy to read it all? Try these books, blogs, webcasts, websites and other info resources curated by CCBJ especially for corporate counsel and legal ops professionals.

ONLINE: Bloomberg Law

This piece from Bloomberg Law discusses a letter from Rep. James Comer (R-Ky.) urging U.S. Supreme Court Chief Justice John Roberts to bring the Judicial Conference into efforts to regulate the $15.2 billion litigation finance industry. Comer’s letter pushes for transparency rules, including disclosure of outside funding in federal lawsuits, a move designed to address concerns about funders controlling litigation and triggering national security risks. Other Republican lawmakers, including Rep. Darrell Issa (R-Ca.), want legislation mandating public disclosure of litigation finance agreements. Lawmakers cite evidence of foreign investment and harm to litigants, noting the role of Fortress Investment Group and Apollo Global Management in high-profile cases, questioning whether attorneys putting the interests of financiers over those of claimants. In an oversight committee hearing, Aviva Wein of pharma giant Johnson & Johnson testified that litigation finance harms manufacturers by promoting meritless claims. Robert M. Dow, Jr., an adviser to the Chief Justice, who has not commented on the industry, commented that private disclosure of funding agreements could mollify concerns over control of case by funders, noting that absent funder control, judges may not take issue with litigation finance.

PUBLICATION: Big Business Law

Roy Strom, a reporter with Bloomberg, asks how smaller firms can keep pace with larger firms in his Big Law Business column. “It’s no secret Big Law billing rates have been soaring,” he begins, noting that hourly rates are on the rise, including a 9 percent bump in Q1 2024. “Even in this inflationary environment, my eyes popped when I saw . . . what must be the mother of all billing rate hikes.” What brought a seen-it-all Big Law reporter up short? A 50 percent hourly rate increase – from $1,000 to $1,500 – from a Brown Rudnick partner. It certainly caught the eye of a seasoned bankruptcy judge. “That’s just beyond,” said Chief Judge Laurie Selber Silverstein. “There may be a reason. But a 50 percent increase in somebody’s rates is not something any client I ever had would have accepted.” Strom opines that the situation reflects a broad challenge for smaller firms like Brown Rudnick, ranked #139 in revenue in the AmLaw 200 player, which is not all that small. And that’s the upshot. “I won’t lie,” Strom continues, “it feels like a hard case to make. In December, an hour of the lawyer’s work was worth $1,000. What could possibly have happened that by April, when he’s worth $1,500?” That’s the challenge for firms such as Brown Rudnick. “The country’s top law firms are aggressively raising rates that are already significantly higher than those offered by smaller competitors,” he writes. “It’s unclear how quickly, or to what extent, smaller firms can make up the ground.” Strom concludes smaller firms with historically lower rate structures will always be in a bind as the upward surge continues. John O’Connor, a SF-based legal fee expert, tells Strom that there is “no downward pressure. He analogies to the miracle of compound interest. “[W]hat happens,” he says, “is rate increases over time that are slightly above inflation tend to make for very high rates.”

Contributors

Thanks to the law firms, technology companies, alternative legal service providers, management consultants and other supporters of corporate law departments who share their insights and expertise through the CCBJ network. Your participation is appreciated.

Mike Alvano is a corporate finance partner with Kutak and represents clients in mergers, aquistions and divestitures as well as focusing significant attention on recapitalizations, restructurings, joint ventures, private equity and debt offerings.

Mariza McKee is a structured finance lawyer and a trusted counselor to regional centers, new commercial enterprises, job creating entities and other stakeholders that raise and deploy EB-5 capital. Mariza is an active member of the EB-5 community. She also represents clients in a variety of other securities, commercial and merger and acquisition matters.

Mine Ekim is Managing Director of Legal & Compliance at Golden Gate Global. Prior to Golden Gate Global, she was at Dow Jones & Company, Harmonic (NASDAQ: HILT), SNR Denton, White & Case and Shell.

Bruce Kiefer is VP, Software Engineering for OpenText. He joined OpenText with the Catalyst aquisition in 2019 and brings more than 25 years of experience in the development of cloud software. Bruce has an undergrad degree in microbiology and an MBA from Colorado State University.

Elizabeth Rancourt-Smith is the Director of Legal Operations at Tilson Technology Management Inc. She currently serves as the ACC Legal Operations Co-Chair of the Tools & Technology Interest Group and on the Annual Meeting Steering Committee. Elizabeth is based out of Mid-Coast Maine.

McBride is a pro sports and entertainment executive and general counsel with more than 10 years of experience across the MLB, NFL, NHL and professional wrestling. Cassie formerly handled Legal, HR, Diversity, Inclusion & Belonging, Community Impact and The

Lee is Vice President and General Counsel at Flynn Group. She oversees legal matters for one of the largest private companies in the Bay Area. Before joining Flynn in 2018, Jaci was a partner in Jones Day’s Silicon Valley office.

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Cassie
Shark Foundation.
Jacqueline

Pulse

Keys to Effective Leadership

JACQUELINE LEE FLYNN GROUP

CCBJ: Tell us a little bit about yourself, Jacqueline.

Jacqueline Lee: I am a Bay Area native, both born and raised here. I attended college and law school in the Bay Area and am currently Vice President, General Counsel at Flynn Group, the largest franchise operator in the world. I have worked at Flynn Group for the last 6 ½ years, starting as Associate General Counsel leading business and tort litigation and after about a year, moving into my current role overseeing the entire legal department.

What led you to Flynn Group?

In the fall of 2017, a former partner and mentor at Jones Day, where I began my legal career as an associate, became the GC of what was then known as Flynn Restaurant Group. Not long after that, she reached out to me to see if I was interested in making a move in-house. I had recently made Partner and saw myself as a “lifer,” so I initially demurred. She hired me to represent Flynn’s sister company, Flynn Properties, in a commercial arbitration.

Although I’d been to trial before, this was my first opportunity to first-chair an arbitration team and it was through that arbitration that I met Flynn’s CEO Greg Flynn and CFO Lorin Cortina. Both were very impressive in the arbitration and did a great job telling our story. We received a judgment in our favor, including our attorney’s fees and I received an offer to join the company as Associate GC

handling the company’s litigation docket.

It was a chance to work in a fun industry with a former mentor and with leaders I’d gotten to know and respect. As difficult as it was the leave the firm where I started my career and made Partner, it turned out to be an offer I couldn’t refuse.

Tell us a little bit about your leadership style and who or what has influenced it, including your mentoring relationships.

One of my first and most impactful mentors is a partner at Jones Day named Greg. I’ve known him for 20 years. He was the very first person I met at the firm when I was interviewing for that summer associate job and remains one of the smartest, most talented trial lawyers I’ve ever worked with—and I’ve worked with a lot of great lawyers.

So much of what I know about leadership and advocacy, about writing, about client service, I learned from Greg. One of the things I most valued about my time spent with him was that even when I was the most junior person in the room, he wanted to know my opinion. As a developing lawyer, that gave me the confidence that I had something of value to offer, which was indispensable to ultimately building executive presence. It was a real gift, especially early on in my career. And that approach—of treating every team member like a peer, not a subordinate, as someone who has something valuable to say, is worthy of respectand is capable of great things—has really stuck with me and deeply influenced how I lead now.

What qualities do you look for when hiring new people for your team?

I look for hustle and heart; for people who care deeply about their clients and getting great results, but who also care deeply about each other and the folks on our crossfunctional teams. I’m very fortunate to work with colleagues who are not only extremely talented lawyers and legal professionals, but also deeply kind and funny people who enjoy working together. I think that’s the real magic of

Our culture can be distilled into 3 very simple precepts: care genuinely for people, play like a champion and win as one.

our team—and the lens through which I evaluate whether someone is going to be a great fit for our department and our organization.

How would you describe your firm’s culture?

Great question! I am very excited to describe our culture, which we’ve distilled down to 3 core values: (i) care genuinely for people, (ii) play like a champion and (iii) win as one. That really encapsulates our recipe for success.

“Care genuinely for people” speaks for itself. We care about our employees, our team members, our guests and our vendors as human beings, including their professional development and their lives outside of work.

“Play like a champion.” We love to win at Flynn. The culture is one where folks—and this is not limited to the legal department—are driven to get great results and do their best every day.

“Win as one” speaks to the team nature of our organization. We are an extremely cross-functional and apolitical organization. We’re not about what you can achieve as an individual—we’re about the great results we can accomplish as a team and the gratification that comes with that.

What is the most influential career advice you’ve ever received?

It’s more of an ethos. When I was in private practice, the firm asked each of us, “Who’s here because of you?” Not just in the sense of who we might’ve recruited for a job, but who has stayed because of us—because we noticed them, made them feel included, gave them an opportunity, believed in them.

To me, that’s been a specific, measurable way of answering the questions, “How am I contributing to the longevity and the stability of my organization? How am I contributing to the culture?” Asking myself who’s here because of me has played a big role in how I view my responsibility within an organization—from the moment I set foot in Jones Day as a first-year associate to the way I navigate my job as a head of the legal department at Flynn.

By asking yourself “Who’s here because of you?” you can take ownership of that question. No matter where you are in an organization or what role you play, it’s a reminder that you can make a difference in someone’s workplace experience, which I find very motivating.

What changes would you like to see within the legal profession?

There are 2 changes that come immediately to mind. One relates to civility in the profession. Recently I was on a meetand-confer call with opposing counsel. We were negotiating the scope of a subpoena, or some other discovery request and I had one of my more junior attorneys on the phone with me. After we got off the call, she remarked at how impressed she was that we both could be firm in our positions and zealous in our advocacy, while still being very respectful of one another. That really stood out to her. But what stood out to me was that what she viewed as the exception should be the rule.

We’re not about what you can achieve as an individual. We’re about the great results we can accomplish as a team.

In fact, it is the rule, yet there’s something about how the profession operates that that a civil exchange of positions was viewed as something remarkable by a junior attorney. That just has to change.

The second change I’d like to see is a move away from the billable hour to value-based pricing. I cannot tell you how much time is wasted administering billable hours policies, both on the law firm side and the in-house counsel side. It provides the worst incentives to law firms and creates a lot of unnecessary friction. In my experience, based on my 5 years in this role, the law firms that have embraced value-based pricing and other alternative fee arrangements have gotten more and more of our business because it’s clear to me that they have aligned their objectives with our objectives, so we’re “winning as one.” 

Jacqueline Lee is Vice President and General Counsel at Flynn Group. She oversees legal matters for one of the largest private companies in the Bay Area. Before joining Flynn in 2018, Jaci was a partner in Jones Day’s Silicon Valley office.

Generative AI’s Transformative Potential for E-Discovery and Investigations

BRUCE KIEFER OPENTEXT

CCBJ: What is OpenText’s Aviator program and overall vision of AI?

Bruce Kiefer: OpenText sees the current versions of AI centered around LLMs as complements to our information management DNA. Content can be organized, enriched and retrieved through LLM interactions. Aviator is the umbrella term used by OpenText to bring AI into our business applications. Aviators can take many forms, but you will generally recognize them as chat interfaces woven into product lines. There are Aviator initiatives for our content management tools, business networks, BI, developer, security and of course legal tech.

What is Legal Tech Aviator and what new features have been rolled out or will be rolling out for e-discovery over the last few months and the remainder of 2024?

OpenText has been bringing machine learning innovations to litigation products for over a decade. There have been some difficult problems over the years that didn’t have an obvious answer until the rise of useful LLMs in the last 4 to 5 years. With the launch of Axcelerate with Aviator in 2024 we released 2 new features with an additional feature releasing at the end of July:

Concept Cluster Labels: OpenText has used various forms of clustering in legal tech for a while. Most of these tools have been using complex algorithms to create groups of documents based on the strength of n-grams (more than 1-word phrases). We all know how to produce the most frequent n-grams in a list, but it was always hard to create a narrative summary. Looking at this problem with an LLM opened up new ways to communicate what is inside a concept cluster. Aviator provides a generically repeatable pipeline to use case level content, prompts and orchestration to get to an outcome. From this generic workflow, we have and will continue to release improvements that save our customers time.

We can now provide those readable summaries of the concept group labels in OpenText Axcelerate.

Key Document Summary: With Axcelerate with Aviator customers can also take a key document (complaint, meet and confer, brief) and search across many documents and use the LLM to summarize the main points across many documents. We have features to batch summarize individual documents which can be used for large document or transcripts or chats.

Aviator Review: Releasing soon, Aviator Review will provide customers with the ability to carry out responsive review across some or all of their documents. Because we understand how critical cost control and certainty are in document review projects we have built in the ability to refine your review criteria against a subset of the data. Once you are satisfied with the results that are being returned on the subset of data Aviator then provides an estimate of the cost to run the review criteria against the larger data set.

What benefits or advantages do you foresee the new Legal Tech Aviator features delivering for enterprise legal departments?

OpenText is lucky to have a group of product managers and developers that are very familiar with e-discovery and have been through many rounds of refining and enhancing predictive coding and TAR to deliver defensible, faster and less expensive review. We know that novelty is simply that, it doesn’t deserve to take time from our customers. We’re being thoughtful in the problems we are trying to solve and the benefit we can bring to customers - mostly through time savings. The current LLMs and our quickly maturing way to interact with them are producing interesting results that we are working to bring to the platform as new components of Aviator.

With the state of AI review at present what do you see as the interplay between AI review and human review? What part do you see ALSP and law firm review teams playing?

Over time our industry will begin the transition from TAR (technology assisted review) to HAR (human assisted review). The decade of TAR can briefly be summarized as propagating human decisions. A host of tools ushered in TAR - support vector machines, reinforcement learning, graphs and more were put to work on finding similar content where a previous decision could be used again.

If you found this email responsive, there’s more than an 85 percent chance you will find this email responsive too. HAR will be different. Humans will describe what they are hoping to do and the technology will carry out that work. The heavy lifting will shift from the human to the technology. The humans will be used to validate results, provide additional confirmation, or tease apart tougher decisions where the technology can’t make a decision on its own. Customers will of course judge their own risk appetite.

There could be cases that demand eyeballs on every document. But other cases may benefit from tilting the work from TAR to HAR. We want to provide the best options for your case.

What do you see as the future for AI review in legal matters?

The rise of managed review provided excellent cost options for carrying out document review. We’ve reached the end of a long, sustained pricing battle to review documents with people for less money. The remaining frontier is having the technology carry out more and more of the work. It’s not hard to see a time where first level review for responsiveness, privilege and hot documents could be carried out through the HAR model and then manage the next stages. The long history of technology tells us it gets better, faster and cheaper over time. I expect the same for LLMs and that means more and more work loads could be done via technology. 

in microbiology and an MBA from Colorado State University.

Bruce Kiefer is VP, Software Engineering for OpenText. He joined OpenText with the Catalyst aquisition in 2019 and brings more than 25 years of experience in the development of cloud software. Bruce has an undergrad degree

Unlocking Strategic Potential: Enhancing Legal Operations for Greater Impact

ELIZABETH RANCOURT-SMITH

TILSON TECHNOLOGY MANAGEMENT

In the fast-paced corporate world, we know that in-house legal departments are under constant pressure to do more with less. Balancing risk mitigation and defending the enterprise, while acting as proactive business partners and managing divisional business aspects while remaining innovative may seem like an impossible task. However, by shifting the focus from merely “doing more with less” to “doing more, smarter,” the strategic potential of utilizing a functional Legal Operations practice can be unlocked. This shift involves better utilizing these professional possibilities to their fullest, allowing teams to better add necessary resources with strategic finesse.

The Strategic Value of Legal Operations

Legal Operations, when deployed effectively within the legal function, can be a strategic asset. However, many in-house teams have struggled to utilize Legal Operations properly, often relegating it to back-office administrative roles, expanded paralegal duties, or technology project management. The challenge is often not the existence of Legal Operations but the way it is utilized. Before you cut your Legal Operations department resources, look at how they’ve been structured – you may have a business superhero waiting in your wings.

Optimizing Legal Operations Structure

Legal Operations can take on different structures based on organization size, structure and industry. In many cases, Legal Operations functions as a shadow IT department focused on implementing and managing a legal tech stack separate from the enterprise technology stack. This approach can limit its strategic value and undermines it potential effectiveness.

Integrating Legal Tech with Enterprise IT Strategy

To maximize the effectiveness of technology-focused Legal Operations, it’s crucial to integrate the legal tech stack with the broader IT strategy. This includes:

• Data Security: Ensuring legal tech tools meet enterprise standards for security certifications and data ownership preferences.

• Vendor Relationships: Aligning with IT’s vendor preferences, including ethics and diversity goals.

• Long-term Planning: Coordinating legal tech deployment with the enterprise’s long-term technology roadmap.

This integration ensures that legal technology investments are aligned with enterprise goals, extending their lifespan and enhancing their value. It also builds strategic trust between Legal Operations and IT, reducing the burden on Chief Legal Officers and General Counsels. A strategically minded, IT focused Legal Operations professional will always be aware of the priorities of the enterprise IT team and its long-term goals.

Expanding the Role of Legal Operations

While technology is a significant part of Legal Operations, its role should not be limited to this niche. Viewing Legal Operations holistically, akin to other operational leaders, places the business aspects of in-house legal within its purview. This approach allows the head of Legal Operations to act as a true business partner, connecting the strategic focus of the legal team with the broader enterprise goals. Be cognizant that they don’t get pushed into a back-office administration role; it is easy for operations professionals to get stuck sorting out the weeds, especially those who come from task and deliverable-mindsets derived from paralegal and administrative work.

As Legal Operations is often more centrally positioned within the organizational hierarchy, it has a close relationship with other business stakeholders. This positions them to more acutely understand the working mechanisms of the organization and what can be done to meet business needs. Equipped with knowledge of the CLO’s strategy, the daily work of the legal teamand the needs of business stakeholders, a skilled Legal Operations leader can optimize processes and solve problems effectively. This allows lawyers to focus on practicing law while operational

professionals handle the enabling aspects.

Strategic Benefits of Legal Operations

A strategic Legal Operations function can lead to:

• Cost-Effectiveness: Achieving long-term cost savings in a traditionally cost-centered environment by using tools, processes and people optimally and ensuring the business of in-house legal is dialed-in.

• Stakeholder Engagement: Enhancing connections with internal stakeholders to be the ultimate problem solver and business partner.

• Reputational Excellence: Improving the organization’s reputation for effective legal operations both internally and externally - no more “black box” or “department of no.”

Optimizing the utilization and strategic alignment of Legal Operations frees up legal professionals to focus on their core responsibilities, thereby increasing their productivity and overall value to the organization. Before considering reductions or cuts to Legal Operations, it’s essential to evaluate its current utilization and explore opportunities to uncover and enhance its strategic impact.

By rethinking the role of Legal Operations and leveraging it as a strategic force, in-house legal teams can achieve greater efficiency, effectiveness and alignment with enterprise objectives. This not only enhances the legal function but also contributes to the broader success of the organization. 

Elizabeth Rancourt-Smith is the Director of Legal Operations at Tilson Technology Management Inc. She currently serves as the ACC Legal Operations Co-Chair of the Tools & Technology Interest Group and on the Annual Meeting Steering Committee. Elizabeth is based out of Mid-Coast Maine.

Lifting The Veil: Corporate Transparency Act Compliance for EB-5 Stakeholders

The EB-5 compliance landscape is facing a new regulatory horizon with the introduction of the Corporate Transparency Act (CTA).

Enacted as part of the National Defense Authorization Act for Fiscal Year 2021, the CTA aims to enhance transparency and combat illegal activities by requiring certain business entities to disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury. This legislation, which came into effect on January 1, 2024, holds significant implications for the EB-5 community, including regional centers, new commercial enterprises (NCEs), job-creating entities (JCEs) and their managers.

The CTA was enacted to address a critical gap in the United States’ anti-money laundering (AML) framework. Historically, the lack of a centralized registry for beneficial ownership information has been a significant challenge for law enforcement and regulatory agencies in combating illicit financial activities. Anonymous shell companies, which do not require disclosure of their true owners, have often been used to launder money, finance terrorism, evade taxes and engage in other forms of corruption. The Financial Action Task Force (FATF), an international standard-setting body for AML and counter-terrorist financing measures, criticized the United States for its failure to collect beneficial ownership information, urging corrective action. In response to this criticism and the growing recognition of the risks posed by opaque corporate structures, Congress introduced the CTA as part of the broader Anti-Money Laundering Act of 2020.

The CTA aims to enhance transparency, strengthen the integrity of the financial system and provide law enforcement with the tools needed to track and prevent illicit activities facilitated through anonymous entities.

CTA Reporting Requirements

The CTA’s reporting requirements introduce a crucial shift in regulatory expectations for certain U.S. entities. It

designates as “reporting companies” certain entities either formed or registered to conduct business in the United States. These companies are required to file a Beneficial Ownership Information (BOI) report with FinCEN, the U.S. Treasury’s financial intelligence unit. The BOI report must contain detailed information about the reporting company, such as its full legal name, alternative business names, current U.S. business address, jurisdiction of formation or registration and its IRS Taxpayer Identification Number (TIN) or a foreign tax identification number, if applicable.

Additionally, the report must include information on each “company applicant” and “beneficial owner.” A company applicant is defined as the individual, such as a controller, an accountant, or a lawyer, who files the document that forms a domestic reporting company or first registers a foreign reporting company to do business in the United States. A beneficial owner is an individual who either directly or indirectly, exercises substantial control over the entity or owns at least 25 percent of the entity’s ownership interests. For each of these individuals, the BOI report must provide their full legal name, date of birth, current residential or business address, a unique identifying number from an acceptable identification document (such as a passport or driver’s license) and a scanned copy of the identification document.

The information submitted to FinCEN through the BOI report is not made publicly available, ensuring privacy and confidentiality. However, it can be accessed by U.S. federal law enforcement agencies for investigative purposes. Additionally, with appropriate court approval, certain other enforcement agencies can access this data. Non-U.S. law enforcement agencies may also request this information through a U.S. federal agency. Financial institutions can access the disclosed information, but only with, among other things, the explicit consent of the reporting company. The reporting requirements introduced by the CTA represent a significant effort to enhance transparency and accountability within the U.S. business environment. This push for greater clarity has particular relevance in the EB-5 sector, with its often complex, multi-tier transaction structures.

EB-5 Entities and CTA Compliance

The applicability of the CTA to the EB-5 industry introduces a new layer of regulatory oversight that impacts various entities involved in the typical EB-5 transaction structure. Regional centers, which sponsor EB-5 projects, play a pivotal role in ensuring compliance with applicable law, including the new requirements introduced by the CTA. As the entities responsible for overseeing compliance that extends to new commercial enterprises (NCEs) and job-creating entities (JCEs), regional centers must be particularly vigilant in adhering to the CTA’s mandates.

NCEs, serving as the primary investment vehicles for EB-5 investors, are typically structured as limited liability companies or limited partnerships. These entities, along with their managers, may find themselves subject to the CTA’s reporting obligations. Similarly, JCEs, which are the ultimate recipients of EB-5 funds for project development, could be required to comply with the CTA, depending on their organizational structure and business registration status.

The CTA’s reporting requirements underscore the importance of transparency, clarity and accountability among members of the EB-5 transaction team. As such, regional centers, NCEs and JCEs must carefully assess their compliance obligations to navigate this evolving regulatory environment successfully.

Exemptions and Implications

There are several exemptions to the reporting requirements of the CTA that mitigate the reporting obligations for certain entities. Understanding these exemptions is crucial for EB-5 entities to determine their compliance obligations. One notable exemption applies to “large operating companies.” Entities that employ more than 20 full-time employees in the United States, report over $5 million in gross receipts or sales on their U.S. tax returns, including those of affiliates and maintain an operating presence at a physical office within the U.S., are exempt from the CTA’s reporting requirements.

Additionally, the “subsidiary exemption” may be relevant

for certain EB-5 entities. Under this exemption, entities that are wholly owned or controlled, directly or indirectly, by one or more exempt entities might also be exempt from the reporting requirements. This could potentially apply to NCEs or JCEs that are subsidiaries of larger, exempt entities.

The pooled investment vehicle exemption under the CTA could also potentially apply to some EB-5 entities. For an EB-5 entity structured as a pooled investment vehicle to qualify for this exemption, it must be identified by its legal name by the applicable investment adviser in its Form ADV (or successor form) filed with the Securities and Exchange Commission (SEC). While this exemption may be applicable to some EB-5 entities, it is important for each entity to carefully evaluate whether they meet the specific criteria set forth in the regulations.

For EB-5 entities, especially regional centers, it is essential to assess their eligibility for these exemptions based on factors such as size, activities, or regulatory status. NCEs and JCEs should also evaluate their exemption status based on their ownership structure and business registration status. For further details on the CTA’s exemptions and their implications for the EB-5 community, stakeholders are encouraged to refer to the guidance provided by FinCEN and consult with legal professionals specializing in EB-5 and corporate compliance.

Reporting Timeline

The CTA establishes specific deadlines for reporting companies to file their initial BOI reports with FinCEN. Entities formed or registered to do business in the U.S. before January 1, 2024, must submit their reports no later than January 1, 2025.

Mine Ekim is Managing Director of Legal & Compliance at

For entries formed or registered between January 1, 2024, and December, 31 2024, the inital report must be filed within 90 calendar days within their formation or registration. Entities formed or entered on or after Janurary 1, 2025, are required to file their reports within 30 days of formation or registration. These timelines are crucial for ensuring timely compliance with the CTA’s reporting requirements and avoiding potential penalties for late submissions.

Penalties for Violations

The CTA imposes penalties for non-compliance. Willful failure to report accurate beneficial ownership information or knowingly providing false or fraudulent information can result in civil penalties up to $500 for each day the violation continues and criminal fines up to $10,000, imprisonment for up to 2 years, or both. Moreover, the penalties for unauthorized disclosure of beneficial ownership information include civil penalties of up to $500 per day and criminal penalties of up to $250,000 and imprisonment for up to 5 years.

Significance of the Yellen Case

The constitutionality of the CTA was challenged in National Small Business Association, et al. v. Yellen (2024). The U.S. District Court for the Northern District of Alabama declared the CTA unconstitutional and suspended its enforcement against the plaintiffs, finding that it exceeded Congress’s power. The

plaintiffs argued that the CTA’s disclosure requirements infringed upon their constitutional rights due to privacy and security concerns. The Justice Department, on behalf of the Department of the Treasury/FinCEN filed a Notice of Appeal on March 11, 2024, to appeal the Court’s ruling.

The CTA is not currently being enforced against the Yellen plaintiffs: Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Associationand members of the National Small Business Association (as of March 1, 2024).

While FinCEN stated it will not enforce the CTA against the plaintiffs (pending appeal), the broader implications of this decision remain uncertain. Entities that are not plaintiffs in the Yellen action are expected to comply with the CTA. This legal development highlights the importance for EB-5 stakeholders to stay informed

Mike Alvano is a corporate finance partner with Kutak and represents clients in mergers, aquistions and divestitures as well as focusing significant attention on recapitalizations, restructurings, joint ventures, private equity and debt offerings.

about the evolving legal landscape surrounding the CTA.

Key Compliance Considerations for EB-5 Entities

Navigating the CTA’s requirements demands diligence and a proactive approach from EB-5 stakeholders. Here are essential compliance considerations:

1. Determine Reporting Status. Assess whether your EB-5 entity falls under the definition of a reporting company or qualifies for an exemption. This may require a thorough review of the entity’s structure, activities and financials.

2. Identify Beneficial Owners. Identify all individuals who meet the criteria of beneficial owners. This may involve reviewing ownership structures, control mechanisms and equity interests.

3. Collect Required Information. Gather the necessary information for each beneficial owner and company applicant, including legal names, addresses and identifying numbers.

4. File Timely Reports. Ensure that initial and subsequent reports are filed within the specified deadlines.

5. Maintain Records. Keep records of the information submitted to FinCEN and any changes to beneficial ownership.

6. Monitor Legal Developments. Stay informed about ongoing litigation and potential changes to the CTA and its implementing regulations. The outcome of cases like Yellen could have significant implications.

7. Changes to Investment/Organizational Documents. Stakeholders should consider including representations, covenants and indemnification provisions for CTA compliance in existing and new agreements.

Conclusion

The CTA introduces a new layer of regulatory oversight for EB-5 entities, aimed at enhancing transparency and combating illicit financial activities. Navigating the CTA’s

requirements demands a proactive approach, with careful attention to the identification of beneficial owners, timely reporting and adherence to exemptions. As the legal landscape evolves, particularly in light of recent challenges to the CTA’s constitutionality, EB-5 stakeholders must remain vigilant and prepared to adapt their compliance strategies.

This article provides a general overview and is not legal advice. EB-5 stakeholders should consult with legal professionals to understand their specific obligations under the CTA and the EB-5 Reform and Integrity Act of 2022. For further guidance on compliance with the CTA, visit FinCEN’s website and explore their resources, including FAQs and compliance guides. 

A special thank you to Anastasia Weston, Associate, Kutak Rock LLP for her help on the article.

The Article was first published in IIUSA’s Regional Center Business Journal May 2024 Edition. The footnotes are available online.

Mariza McKee is a structured finance lawyer and a trusted counselor to regional centers, new commercial enterprises, job creating entities and other stakeholders that raise and deploy EB-5 capital. Mariza is an active member of the EB-5 community. She also represents clients in a variety of other securities, commercial and merger and acquisition matters.

LEGAL TECH STARTUP SPOTLIGHT

CEO: Victor Bornstein Ph.D

HQ: Boulder, CO

# of Employees: 21

7.09x

Description:

Operator of a artificial intelligence algorithm-based platform intended for the analysis of individual personal injury claims. The company’s software lets plaintiffs with legititmate claims identify and retail the attorney for the case and quickly identify claims that have merits, enabling plaintiffs to find the best lawyer for the case and helping law firms quickly find cases with merit.

Most Recent Financing Status

The company raised $6.9 million of seed funding in a deal lead by Charge Ventures and Divergent Capital (New York) on March 11, 2022, putting the company’s pre-money valuation at $17 million.

Source: Pitchbook (As of June 2022)

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