NEW YORK, Nov. 22 (Reuters Legal) - The prosecution of Lauren Stevens, the former GlaxoSmithKline Plc in-house counsel who was recently indicted on charges of obstructing justice and falsifying documents, raises difficult questions that cut directly to the heart of the work lawyers do. The case also stands out because prosecutors have typically been hesitant to indict company lawyers, lest they appear to be deterring zealous advocacy.

Of nearly a dozen company lawyers who have found themselves facing major criminal charges in the last decade, a Reuters Legal review of public records found virtually none where the lawyer alone was prosecuted. In those cases, the in-house lawyer was one of a group of defendants, which often included members of senior management.

Stevens, though, stands alone. The indictment filed in federal court in Greenbelt, Maryland, charged her with obstructing a Food and Drug Administration investigation into Glaxo's marketing of its anti-depressant drug Wellbutrin SR. It alleged that Stevens knew the company had promoted Wellbutrin for unapproved use as a diet drug, but hid that information in her communications with the FDA.

In essence, Stevens is accused of committing crimes in the course of doing her job, which was to respond to the FDA's inquiry. Whether she wittingly withheld damaging information or simply acted as a vigorous advocate for her client will be for a jury to decide, should the case get that far. One of her lawyers, Brien O'Connor of Ropes & Gray, declined to comment.

But this is the kind of question that can keep company lawyers awake at night, as it highlights the line that lawyers must sometimes navigate between good lawyering and obstruction of justice. "A lawyer has an ethical obligation to advocate for his or her client, the company," said Jacob Frenkel, who handles criminal and securities defense cases at Shulman Rogers Gandal Pordy & Ecker, in Potomac, Maryland. "But there's a difference between an overt, obstructive act, which may be intended to mislead and deceive, and aggressive advocacy."

What's notable in the Stevens case is that prosecutors do not usually go after in-house lawyers, said Stuart Green, a professor at Rutgers School of Law in Newark, New Jersey. "I think there is a sense that there is a chilling effect that might result if you aggressively prosecute lawyers for acts done while representing their clients," said Green. "You are going to make lawyers more hesitant about aggressively representing their clients, and from a systemic perspective that is not a good thing."

LAWYERS MORE VULNERABLE

Prosecutors began looking more sharply at in-house lawyers after the accounting scandal that befell Enron Corp. in 2001. While in-house lawyers at Enron escaped criminal charges, the financial regulatory law passed in the scandal's wake, Sarbanes-Oxley, identified lawyers as "gate-keepers" of a company's conduct and increased their liabilities. "Enron was the rallying cry for 'Where were all the lawyers?' -- that sense of when you have the big corporate failures, that in-house lawyers must be responsible, they are the grease that makes things work." said Susan Hackett, general counsel of the Association of Corporate Counsel.

Following Enron, several lawyers were charged in accounting and securities fraud cases, usually along with defendants from the upper rungs of management. Jay Lapine, the former general counsel of McKesson Corp., was indicted with the former chairman of the company in a $9 billion accounting scandal. Mark Belnick, the former general counsel of Tyco International, was charged along with former CEO Dennis Kozlowski in a case alleging grand larceny. Belnick and Lapine were both acquitted at trial.

Including lawyers in these multi-defendant cases reflected in-house counsel's expanding role: As they have gained more responsibility over time, they have become more than mere scribes shuffling legal paperwork. They also make complicated decisions about business issues, such as awarding bonuses, blessing securities filings and approving accounting practices.

The options backdating scandal, which erupted in 2006, also led to a number of criminal prosecutions of in-house counsel, including the top lawyers at Monster Worldwide Inc., Comverse Technology Inc. and McAfee Inc. (The first two pleaded guilty; the latter was acquitted). But unlike Stevens, the lawyers in these cases were charged with helping to facilitate, and in some cases participate in, a questionable business practice.

In the Stevens case, the government may be hoping that she will provide information that can be used to pursue bigger fish at Glaxo. Or she may just be viewed as an easy target to hold responsible for the company's conduct. The indictment does point to an enduring theme in prosecutions of general counsel over the past decade: an attempt to hold someone accountable for alleged company misconduct. The government has refrained from indicting companies since the demise of Arthur Andersen, following the failed prosecution of the accounting firm, and that may be leaving company officials themselves more vulnerable.

The Justice Department has stepped up its investigations of drug companies for their marketing practices, but few executives have been found responsible for the practices it deems are illegal. Pfizer Inc., for instance, avoided major prosecutions last year by paying a $2.3 billion settlement over kickbacks and marketing practices.

Whether the Stevens prosecution represents an end run around Glaxo remains to be seen, but the company, which declined to comment for this story, has said in regulatory filings that it is cooperating with the government's probe into its marketing of Wellbutrin.

"I think it's a reflection that the government is so reluctant to do anything to a company, especially a company as large as Glaxo," said Jeff Ifrah of Ifrah Law in Washington, D.C. "The government is going to need to find people responsible, and if it can't bring down a company it will look to the officers, lawyers included."

The case is U.S. v. Stevens, U.S. District Court, District of Maryland (Greenbelt), No. 10-CR-694. U.S. Attorney for Massachusetts Carmen Ortiz; Assistant Attorney General Tony West; Assistant U.S. Attorney Sara Bloom; and trial attorney Patrick Jasperse of the Department of Justice represent the government. Stevens is represented by Ropes & Gray's Brien O'Connor in Boston and Colleen Conry in Washington, D.C., as well as Reid Weingarten and William Hassler of Steptoe & Johnson in Washington, D.C.

(Reporting by Carlyn Kolker of Reuters Legal)