Risk Management

McAfee Sues Law Firm that Defended CFO

McAfee stopped paying legal fees to WilmerHale for its ex-finance chief after he was convicted of fraud. Now it's alleging the lawyers overcharged ...
Kate PlourdJuly 22, 2008

More than a year after former McAfee CFO Prabhat Goyal was convicted of corporate fraud, the antivirus software maker is headed back to court. This time it’s suing the law firm that represented its former finance chief for over-billing the company more than $6 million.

In April, McAfee filed a $12 million lawsuit that accuses the law firm Wilmer, Cutler, Pickering, Hale and Dorr, of overcharging the company in its defense of the former CFO. McAfee also charges the attorney firm, known as WilmerHale, with fraud, theft, negligence, and breach of fiduciary trust, according to court documents.

According to The Record newspaper, McAfee accuses the law firm of “shamelessly employing over 100 WilmerHale timekeepers in the feeding frenzy.”

The law firm fired back, filing a motion to dismiss the case last Thursday. In a statement sent to CFO.com, WilmerHale said that the entire case is without merit and “no more than a pretext to avoid its advancement duties to Mr. Goyal — which it recognized for five years, without complaint.”

WilmerHale represented Goyal during the five year federal investigation and the five-week jury trial, which ended in a May 2007 conviction on 15 charges of securities fraud, filing false reports to the Securities and Exchange Commission, and making false statements to auditors.

Goyal was part of a scheme at McAfee’s former company Network Associates, in which executives overstated revenue by $470 million and understated losses by $330 million from 1998 to 2000, according to federal prosecutors.

The law firm also contends that McAfee broke an indemnification agreement under the company’s bylaws, which its says entitled Goyal “to indemnity for the fees and expenses reasonably incurred by him in connection with his successful defense.” McAfee stopped paying Goyal’s legal fees when he was convicted last May. But the firm argues that until the case, which is pending an appeal in district court in Northern California, is over the company has no claim.

Goyal has already fired back against his former employer for cutting his legal defense. When McAfee stopped paying the fees he sued McAfee for breaking the indemnity agreement. McAfee former general counsel Kent Roberts, who also had legal fee payments cease around the same time, sued McAfee in a separate case, according to WilmerHale.

The judge ordered McAfee to file a response to WilmerHale’s motion by 5 p.m. on July 23. McAfee did not return calls from CFO.com seeking comment.

In a response filed Tuesday, McAfee said that the law firm’s motion was based on a pair of faulty assumptions and should be denied. First, the company claims that the indemnity agreement between Goyal and McAfee is irrelevant. Second, it contends that the law firm can’t use Goyal’s lawsuit because it was filed after McAfee sued WilmerHale.

“The Delaware lawsuit was filed after this case, and was filed for the singular purpose of giving WilmerHale an excuse for attempting to avoid a Texas trial,” McAfee asserted in court papers.