John, Thank-you for that kind introduction. It is certainly a pleasure to be here today.

When my daughter Grace asked me where I was going today and I told her I was coming to your class, she assumed it was going to be another speech about politics and the election and she told me to try to sound happier.

I spend a lot of time in Washington and there is very little to be happy about. But I promise not to bore you with along review of the up-coming election. John gave me a sketch of your course and some topics to address, so probably the best way to start is to give you a little overview of my past and my role at LabCorp. We can spend some time discussing the role of the in-house lawyer and

the Chief Legal Officer. I can try to outline some of the challenges we face in our industry. Finally, John mentioned that you may be interested in my thoughts on how one can move from the legal side to the business side, and what that means. I will try to touch on these topics but I would rather be mercifully brief and take the time to have a

conversation

about

what

you

specifically may want to know. I would also add that I would like to be as candid with you as possible today, so I would appreciate it if what we discuss here today stays here. So, I come from a family of scientists, I am the only non-PhD in my family and, to this day, I dont think they think that much of my career choice.

I certainly did not start out with an interest in the law. Full disclosure I never wanted to be a lawyer. I was a political science and history major and was all set to go to graduate school in international relations and then hopefully enter the Foreign Service. I was in my fifth year of undergrad and, honestly, I will never forget being on the phone with my mother

who said Sam, you are a lot of things but you are no diplomat. She then cheerfully informed me that they wished me the best of luck in whatever I wanted to do in the future but that if I wanted any further financial assistance, they would pay for law school or med school, thats it. Well, it wasnt going to be Med School, so I figured I better take the

LSAT. At least it sounded like a nice alternative to working for a few years. I had the good fortune of graduating from law school in a good economy and jobs were not hard to find. After a detour I ended up at the Chicago office of Jones Day, one of the largest law firms in the world and proceeded to work 100 hour weeks in the long quest for partnership. A funny thing happened along the way to partnership, law firms,

including Jones Day, had a huge bulge of associates and not all of us were going to make it. Long story short, I ended up at Baxter International the in house job I never wanted. My view and a prevailing view at the time was that the in-house world was for those who failed at law firms. I suppose there is some truth to that, but you would never have me go back to a law firm.

I moved from Baxter to Allegiance (a spin-off) later acquired by Cardinal and a long long year in Columbus Ohio. Not a nice place to visit and not a place I wanted to live. Back to Chicago to be General Counsel at Stepan Company, and, after promising my wife we would never leave Chicago again, eight years ago we came here and I started at LabCorp.

That brings us up to date to today. Im giving you all this background because never in a million years would I have predicted that I would be living in Chapel Hill, North Carolina, run a government relations program - work on two presidential campaigns - testify before congress or grand juries or any of the day to day things that come up in this job that I promise you cannot make up.

I was the beneficiary of having some really good bosses who believed that career development and employee promotion were part of their job and being at the right place at the right time. You need to be flexible in your own personal development plan and be ready to take advantage of opportunities when they arise. So, now I am the Chief Legal Officer of Laboratory Corporation of America

Holdings.

I dont run the Law

Department day-to-day, we have a General Counsel that does that. The for: The Law Department Compliance I am the Chief Compliance Officer (or the guy who goes to jail if we do something wrong) Government Affairs Corporate Secretary Law Department ultimately

reports to me, I have responsibility

 Shareholder Services Public Relations Community Affairs Internal Audit or the corporate equivalent of the secret police. If you asked me how much time I spend being a pure lawyer I would say 10%. I think that is about right. First, let me give you a very brief overview of who we are at LabCorp, how we view the macro environment.

We are a Fortune 500 Company with more than 95 percent of our operations, 32,000 employees and more than $5 billion in revenue coming from North America. We are one of the largest testing LabCorp patient

independent tests almost

diagnostic 500,000

laboratories in the world.

specimens every day in the areas of allergy, clinical trials, diagnostics, genetics, indemnity, forensics,

infectious diseases, oncology and occupational testing. Our laboratories run 24 hours a day, 365 days a year. One interesting fact I learned recently, in the last three years close to 200 million people almost 2 out of every 3 Americans have had one or more specimens tested in a LabCorp facility.

But we are still only a tiny part of the healthcare spending. Total spending on laboratory testing amounts to only 2 to 3 percent of all healthcare spending but we drive 70 to 80 percent of the healthcare decisions in America. And we have even the potential to to the system in terms of

contribute

more

healthcare system.

Over $12 billion per year could be saved from avoiding hospitalizations of patients misdiagnosed for cardiac events now a simple blood test in the ER can identify a real heart attack from a bad case of indigestion. The direct medical costs of diabetes alone are more than $116 billion annually. A simple and early blood glucose test could help dramatically reduce the onset of diabetes.

Early testing for Chronic Kidney Disease can help slow the decline of kidney function and save more than 30 billion over ten years. Mapping your entire genome is now feasible and affordable. diagnostics medicine. And we do this and more for less and less money. A hypothetical test reimbursed at $10.00 in 1984 and We have personalized made amazing gains in genetic

is reimbursed at $3.83 today in real (inflation adjusted) dollars a 62% reduction in real payment over the past 27 years.

And we are doing this all in an industry and a healthcare system that is broken and going broke.

This is a vast healthcare system.

It is currently 18% of the gross domestic product and growing. By

2015, we will spend more than $4 Trillion in total health care costs over 20% of our GPD.

It is the number one employer that is not the federal government. There

are more than 6 billion claims per year for healthcare.

The Medicare system, the largest health system in the United States, is not fundamentally solvent. We have more than 77 million baby boomers coming into the system. The number of enrollees in Medicare will double in the next 15 years.

 We

are

spending billion By

few on the

hundred Medicare.

today 2035

forecast is that we will spend 3 trillion dollars on Medicare. In 1965 in this country, 4 and 1/2 people were working to fund a Medicare person. Over the next 20 years, only 2 and 1/2 of us will be working to fund a Medicare person.

One more piece of bad news, chronic disease.

The 10% of patients that suffer from chronic disease account for 75% of the nations health care spending.

Virtually ALL of the spending growth in Medicare over the last 15 years resulted from increased

spending on people with multiple, chronic conditions.

And the number of chronically ill expected to DOUBLE by 2020.

This is all happening as we are facing fiscal armameggdon at the end of the year.

There

is

the

expiration

of

the

Alternative Minimum Tax. Price: trillion. $85 billion, full fix $1.1

The Bush Tax Cuts, a two year extension billion. is at least $300-400

We have a fiscal healthcare crisis as well.

There is another SGR/Doc fix, price: $30 billion, full cost $300 billion.

There is the 2% Medicare sequester at the end of the year.

The Affordable Care Act will start to flood the into the Medicare and Medicaid programs starting in 2014, making this all much more difficult to manage and pay for.

In a nutshell, thats the picture of front of us at LabCorp.

Some of it is depressing and there are a lot of things we cant control, but the street isnt exactly going to give us a pass.

We have to grow, its a simple as that.

You can get through a bad quarter once in a while with an unexpected event or a special charge to wrap up some overhang on your stock. But the street expects growth.

You have to have a story on your stock on why its worth buying and holding. They expect revenue growth,

even in a tough environment.

 They set earnings targets and stock price targets and we are expected to get there.

We get there through acquisitions. We have been in a more than decade long consolidation of the laboratory industry.

The laboratory industry is a 60 billion dollar market. 55% of that market

sits with hospitals. Some of that is work we dont want or cant do. The immediate turn around testing that has to be done inside the hospital.

A big chunk is work we can do, 10-15 billion. It is lab work sent in to their lab by doctors in the health system, outreach work where they are

competing against us and reference work, work they can send to us or

other labs usually specialized esoteric testing.

The rest of the market is highly fragmented; we are about 10 percent of that market. There are more than a thousand independent laboratories of different sizes and if they are looking to monetize their investment they are going to sell to us or Quest Diagnostics.

The

problem

with

market

consolidators is that you have to keep rolling up and the larger you get, the more you have to buy. At some point there is an end to consolidation and if you have not developed a plan B moving into adjacent markets, developing new innovative products, growth

comes to a crashing halt and the stock suffers.

What role do lawyers play in dealing with those challenges?

We play several important roles.

First, we have to be wise stewards of our budget. We have to run the

legal function like a business.

Some

of

that

is

the

routine

blocking and tackling legal work. Ordinary billing agreements, complaints, leases, privacy

complaints, and the list is endless.

We have lawyers that do that, we work on 500-800 agreements every month. We have routine litigation All of that is

and claims handling.

important and there is nothing wrong with the work, but the staff that performs that work are not the up and comers in the company. Look some people want to come in do their work and go home and we need them. Some of that work we have outsourced to India.

Today, roughly 25% of the work done in our contracts group and 15% of the work done in our

litigation groups is outsourced to India. Costs have declined and time has improved. turnaround

While we sleep there are working.

We are also a strategic buyer of legal services. Roughly 30-40 million

dollars a year.

The U.S. legal services industry has grown to an estimated $150 Billion annually, doubling every twenty years over the last century.

It is a highly fragmented marketplace and we really only participate in a small portion of the overall market. There are more than a million lawyers in the country with approximately 100,000 lawyers

working at the 250 largest firms where we generally spend most of our dollars. The first thing we realized is that we barely knew most of the law firms or

lawyers that we worked with.

The

next thing we realized was there was no way we were going to get know multiple lawyers at 200 plus firms across the country. Like most of business in my opinion our biggest task is building relationships with law firms. Consider this, in a recent survey of 427 law departments, 72 attributes relating to law firm selection were

assessed and ranked. The Top 10 included: - Being innovative and creative, and - Being loyal to the relationship Costs did not make it anywhere close to the Top 10. In fact, ranked in the bottom 10 attributes were things like hourly rates and alternative fee arrangements.

On the other hand, in another survey of almost 100 Chief Legal Officers, over half had consistently, for the last 3 years terminated one to three significant law firm relationshipsnot due to costbut due to relationship issues. We made the decision to radically consolidate the firms we worked with. Over a two year period we dramatically reduced the number of firms we worked with.

As LabCorp has grown, overall legal spending has declined and quality by any measure has improved. Most of our work is now with 6 law firms around the country. After managing the law department like any other business, we have to be part of getting the job done.

By getting the job done I mean helping the business achieve its

objective, not being a road block and at the same time managing risk responsibly.

At the end of the day, we arent there to observe and make comments and we cant just say NO

It is really rare that someone is doing something that is illegal or where there is no path forward. A lot of the

time its helping find a better path to get to the business objective. I expect our lawyers to advise but also recommend.

They should be held accountable for their recommendations, just like any other member of their team.

We have to do this with imperfect information. There is not a lot of time

to research a nuanced legal answer. We have to give our best judgment and advice in formulating a strategy and, most importantly we have to be willing to take some risk. We have to recognize that we run our business in a huge grey area. Regulators

second guess you all the time, but you cant wait for the perfect solution.

The third thing we have to is be a bit of the police man and sometimes the conscience of the company.

Precisely because we dont have P&L responsibility, we have a little less immediate pressure and a little bit more time to consider the big picture on whatever the challenge is.

Many times, our business leaders know what we should do, but need a little support or cover that the lawyers made them take an action which short term wasnt good for business.

Sometimes there isnt a clear answer at all.

Let me give you an example. When I was at Cardinal Health, a large

pharma business

distributor segments,

among we

other had a

problem with a cancer drug we had been distributing.

We discovered that the chemo agent had not been stored in refrigerated environment. The result was that the chemo agent may or may not have been fully active and effective when it was administered to patients.

The problem was that there may have been no effect to the chemo agent, agent which was highly toxic. Giving more of the agent could poison the patient. At the same time we had a lot of the stuff out in the pipeline.

We could:

 Do nothing (which may not harm anyone) Notify the FDA and initiate a recall (which would surely

generate litigation, bad PR and a loss of business) Send notices to physicians and let them decide what to do.

I will tell you that there is honestly no correct legal answer, but no one

wanted to make the call and insisted that it was a legal decision.

What would you do?

Or, what do you do if your company made the foam insulation on the space shuttle and you think that you may have found part of the root cause of the foam separation that brought down the Columbia but the

investigators have not asked for the information.

For outside lawyers, they can sleep well doing nothing but protecting the client thats your job. Its not that easy for the in-house lawyer and the general counsel or chief legal officer.

Ben Heineman, the former general counsel at General Electric summed it up: The first question is what is legal? The last question is, What is right?

For these types of discussions, you have to have built up a reservoir of trust with your CEO and other leaders. Its also hard, I have an

obligation to go to the Board if I think a material legal issue is not being addressed.

With Sarbanes Oxley regulations, I can have an affirmative duty to go to the regulators.

As Chief Compliance Officer, I walk around with independent liability if I dont act.

And I can be held responsible for failing to uncover an illegal bribe paid in China or an over billing of the Medicare program in Birmingham Alabama.

These are all difficult conversations to have with business leaders, many of whom also control the fate of your employment.

If you find yourself at a company where you are the one having to make these calls too often, my advice is to find a new job.

The tone at the top is critical these days. It is the most stressful part of my job but it is always the most rewarding.

I can tell you the number of different issues with no clear answer that arise is limitless. At the end of the day, its what I think I am really paid to do at LabCorp.

SO, finally, I wanted to touch on how lawyers can make the move to the business.

It certainly happens at LabCorp.

Our CEO, Dave King, was the General Counsel of the Company. Jay Boyle, our Chief Operating

Officer, was the head of litigation. He was actually the second lawyer hired at LabCorp.

5 of the top 25 leaders at LabCorp at lawyers.

If that interests you, my first piece of advice is to work for a regulated company where lawyers are needed. Lawyers are involved in almost every we do at LabCorp. heightened state of Given the legal and

regulatory risk, almost any decision is at least run past the lawyers.

But beyond that, our senior lawyers participate in day to day tactical

issues of getting business done as well as contributing to the broader strategic dialogue we have on where we want to take the company. They are there is a part because they dont act like lawyers they are helping getting business done.

Second, you have to be willing to take a risk. I know it sounds self-

evident, but lawyers are very risk

averse.

Your training is to identify

what could go wrong build perfect walls around risk.

We are still called counselors, and the formative years at a law firm skew to a role where we describe options to a client and let them choose.

Most of the lawyers that have worked for me never want to take that leap to having P&L responsibility. All of the legal training and law firm experience pulls you in the opposite direction.

Third and last, you have to ask. No one is going to hand it to you. That usually means you have to be willing to take some things on when you are too busy. If you are waiting for a

time when you have time, it will never come.

But even if you dont make that formal move to the business side, if you have established that trust with your fellow executives and are

viewed as a business partner, you will find yourself more and more involved in helping to build your companys strategy.

You occupy and unique position within the company. You get to see a lot of what doesnt work, you get to know more of the company than many other executives.

Either

way,

you

have

the

opportunity to make a unique contribution to your company. I

have found it to be the most rewording part of my legal career.

I hope I at least grazed some of the topics that may be of interest to you. Id really love to use the rest of the time to answer your questions or discuss anything else I may have missed.

Thanks again for the opportunity to spend some time with you, I havent really thought about these issues together like this, but it is helpful to me to collect these thoughts as I work with my team back at LabCorp to improve.

So with that, happy to answer any questions you may have.