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March 10, 2009

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Dear Sang,

I'm a junior real estate associate at a big firm in Manhattan. While I'm not interested in leaving my firm, I recently met with a headhunter who's called me for the last few years to talk about my options later. He told me that I shouldn't have any problems getting another law firm position on my own but that he'd like to be my exclusive recruiter. In exchange, he told me that he'd give me a cut of the commission he received from whatever firm ultimately hired me. When I looked surprised, he showed me a form contract with his company's logo that said his company would pay me $5,000 if I worked with him exclusively and one of his clients hired me. I don't know if kickbacks are legal in your industry but the fact that he had a contract made it seem more acceptable somehow and he didn't act like there was anything "un-kosher" about it. Will I get in trouble if I work with this guy and take the money? Maybe he's just being generous?

Signed,
Don't Want Any Trouble

Dear Troubled:

Just last week, I attended a seminar at the Harvard Club of New York organized by the National Association of Legal Search Consultants ("NALSC" is described more fully below). The panel topic was entitled "Ethical Dilemmas in Recruiting" and the audience was made up of legal recruiters who are members of NALSC and therefore, committed to upholding the highest ethical standards in the industry. As I read your note, I kept thinking about all those recruiters who are devoted to ethics and thought about how we'd like to give your "generous" recruiter a nice, swift and painful kick in the rear. Put more plainly, your recruiter is not an ethical professional and he's tempting you down a dangerous path. Please, do not follow his lead.

The short answer to your question is yes, you will probably get into a heap of trouble if you work with this guy, take his money and get caught. While I'm not aware of any federal or state statutes that criminalize the use of kickbacks in the legal recruiting industry per se, I am confident that every legal employer I know would be outraged to learn that a newly hired attorney had acted in concert with the recruiter who had introduced him to the organization. Any law firm or company that discovers the existence of a "kick-back" relationship between a new employee and the recruiter who was engaged (and ultimately paid) by that organization will question the employee's integrity and suspect that any/all confidentiality in connection with the search was compromised.

Let's talk about how badly this could play out for you. First, you should remember that you are accountable to the New York Lawyer's Code of Professional Responsibility which generally views any payment or receipt of money in connection with a business referral as reprehensible (Disciplinary Rule 2-103, Solicitation and Recommendation of Professional Employment). While DR 2-103 governs the idea of kickbacks in the context of lawyers referring business to one another, the rule sends a very clear signal of disapproval on the notion of kickbacks generally. But putting aside the fear of disciplinary action by the New York State Bar Association Committee on Professional Ethics, can you imagine what your new employer will think of you? The leadership of the firm will severely question your professional judgment if they learn that you aligned yourself in such a blatantly improper way for a few thousand dollars when New York lawyers are already compensated handsomely. It's also not hard to imagine that the firm will question your real motivation for joining the firm. In their eyes, will you still be the great "catch" that fit in perfectly or will you be the greedy associate who couldn't care less about which firm employed him as long as a few extra dollars were involved?

Something else to think about is the contract that exists between a legal recruiter and the legal employer that engages his services. Having negotiated and signed hundreds of these placement agreements over the years, I'm prepared to bet the house that there is a strict confidentiality clause that states that any information that the recruiter learns about the legal employer during the course of the search must remain strictly confidential and that any violation of the confidentiality clause will nullify the agreement. It's never a dramatic or heavily negotiated clause of the placement agreement; a confidentiality provision is typical in a contract between two parties because the importance of confidentiality is unambiguous. A "kickback" emanating from a business transaction between two parties necessarily means that an inappropriate third party is involved and that confidentiality between the original two parties is tainted. If you're the third person receiving the kickback, you're the tainter. Yuck.

I'd also like to address the "form contract" that this recruiter showed you. That the recruiter and his organization might have institutionalized their unethical conduct with a form (complete with corporate logo) does not make the conduct ethical. It's merely a "smoke and mirrors" tactic to distract you from what your conscience is telling you: his proposition is bad news. If anything, the form contract suggests a scheme of shady ethics and shoddy representation. If this recruiter successfully tempts you into entering into a contract with him for a financial handoff, you risk being stuck even if you change your mind. What happens if you sign the contract and suddenly realize that your headhunter isn't very knowledgeable about the market and/or is no longer very responsive to your calls or emails? Try to tell him that the deal is off and he'll tell you that this isn't an option. After all, you've signed a contract and if you try to back out of it, he'll probably threaten to reveal the terms of the contract to all the clients that have received your materials in order to protect his interests. This recruiter has already demonstrated his lack of professionalism by providing you with such a contract in the first place. Yuck, yuck, yuck.

Something else to consider: most candidates choose to work with one recruiter exclusively because the recruiter has demonstrated expertise in the industry, a strong reputation for excellence and "connects" with the candidate personally and professionally. Beyond the bad ethics here, if a recruiter needs to offer money in order to secure a candidate's loyalty, shouldn't you immediately question whether he knows what he's doing?

Now that I've hopefully steered you back onto an ethical path, and you've realized that this recruiter could have seriously compromised your professional reputation, can I encourage you to investigate your recruiter's background? Is he, or his recruiting organization, a member of any governing body that imposes penalties for bad behavior, such as the National Association of Legal Search Consultants (NALSC)? NALSC is the national organization for the legal search profession that was founded in 1984 by a distinguished group of legal search experts across the country. NALSC's primary goal is to elevate professionalism in the legal search industry by establishing and enforcing a standard of ethical business conduct; all members of NALSC agree to abide by the NALSC Code of Ethics (to learn more about NALSC, www. nalsc.org).

Article III, section 3 of the NALSC Code states: "Except for fee-sharing agreements between search firms, no member shall make payments of any kind to gain business referrals or to induce others into a relationship as a client or candidate."

If you determine that your recruiter or his recruiting company is a member of NALSC (the NALSC website has a members directory), I'd ask you to seriously consider reporting (confidentially) your run-in to the NALSC Ethics Committee as this behavior is clearly prohibited by the NALSC Code of Ethics. The integrity of any profession risks compromise if inappropriate behavior by any member(s) of that profession isn't acknowledged, reported and addressed by the proper authorities.

On the other hand, your recruiter might not be a member of NALSC; this wouldn't surprise me as there are hordes of maverick recruiters who are reckless and refuse to be governed by a code of ethics. If this is the case, I don't know of any way to meaningfully curtail his activity other than by word of mouth. I'll confess that I was pretty angry when I read your note and in a very "Law & Order" move, I'd love to set up an undercover operation whereby he is exposed to his clients just as he believes he's about to make a placement; he quickly becomes a pariah and is pushed out of the business (cue "Chariots of Fire" soundtrack). But the reality is, there are yucky people in every business and sometimes, the best thing to do is stay out of their way. Do stay out his way. Good luck with all of it and please stay in touch.

Sang

Do you have a question about your legal career? Click here to email Sang directly.

SANG J. LEE, ESQ

Sang is the President and Managing Partner of SJL Attorney Search, LLC. Over the years, Sang has placed hundreds of attorneys in the New York metropolitan area with global, national and boutique law firms and has partnered with numerous Fortune 500 corporations, investment banks and technology companies in identifying top talent for in-house legal departments.

Sang has been invited to speak at Stanford Law School, New York University School of Law and New York University's School of Continuing Education and City College of New York. She was a panelist at the 2004 NALP End of Season Series for the session entitled "Dog Eat Dog: The Reality of the New York Legal Market" and has also been featured on panels for NYCRA and the Association of the Bar of the City of New York. Sang consults for the Office of Career Services at New York University School of Law where she counsels, coaches and prepares law students and alumni for interviews with prospective employers.


ABOUT SJL ATTORNEY SEARCH, LLC

Founded in 2003, SJL Attorney Search, LLC is a legal recruitment firm that works closely with law firms and other sophisticated legal employers to identify, recruit and ultimately hire qualified attorneys. Our consultants have successfully placed associates, partners and corporate counsel of varying rank in all practice areas of law, including mergers and acquisitions, capital markets, global finance, real estate, bankruptcy, tax, labor and employment, ERISA, intellectual property and litigation. In an industry that has a reputation for sharp elbows and cutting corners, we hold fast to our core values of integrity, quality, team work and accountability.

We understand the immense value of relationships and so, we have assembled a team of proven relationship builders in the firm. In addition to a research staff that supports our firm's goal to cull and store the best market information, SJL Attorney Search is proud that our consultants include former practicing attorneys with tremendous academic credentials, a former senior law firm administrator, a former law school professor and a former senior marketing executive. Please visit www.sjlsearch.com to learn more about our consultants and our firm.

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