When the In-House Lawyers Run Amuck
We all know the jokes about lawyers. We have heard them over and over, at parties, with friends, and among colleagues. Right now, they seem particularly on point.
The Valukas Report lays out an ugly picture of in-house counsel at GM. If you have the stomach to read the entire report, it will make you sick and sad for our profession. It is a depressing story.
The GM debacle shows you how bad lawyers can lead to terrible results. It is as if they did not have a conscience and had no ability to tell right from wrong.
At the heart of the matter, the lawyers substituted the goal of serving GM, its client, over basic principles of decency and ethics. Combine that with instructions and strategies designed to prevent any record of what they were doing – GM officials were advised not to write notes during meetings.
No wonder lawyers continue to have a bad professional reputation. In the GM case, it is easy to link their failures to act in the best interests of their clients that led directly to the death of innocent people. That is a heavy burden for their shoulders and one they will have to live with for years.
Let’s start with the basic principle of zealous representation of your client – in this case, GM. Lawyers were aware of the safety problem, the failure of the ignition switch, and pushed engineers to resolve the issue. In the meantime, they were dealing with liability lawsuits for accidents and deaths caused by the faulty ignition switch.
In response to the engineering staff’s failure to act or to resolve the issue, the lawyers did nothing. They sat on their hands, and months later, they reached out and assigned the matter to a new engineer, while knowing that the problem continued to exist.
More importantly, the lawyers never bothered to inform their supervisor – the General Counsel about this matter. For years, they were struggling to fight product liability lawsuits and seeking engineering solutions, and they never bothered to tell their boss.
Assuming you believe the lawyers did not tell the General Counsel (which is hard to believe, or that the General Counsel should have known about the ignition switch issue), their failure to act is indefensible on any grounds.
Bad lawyering in this case led to death, not just higher penalties or fines. It exacerbated tragic losses suffered by innocent families. It is an important reminder to every lawyer – in-house, private practice or government – sometimes issues transcend narrow private interests, and an in-house lawyer needs to stand up and communicate to his/her bosses and senior management about a serious problem.
The GM in-house lawyering debacle is an important reminder and confirmation of the importance of an independent and empowered Chief Compliance Officer. I hate to say this but anyone who continues to argue that a CCO needs to report to a General Counsel, needs to re-examine his or her views based on the GM experience.
Can you imagine what would have happened at GM if an independent and empowered CCO discovered the ignition switch problem? Would they have allowed it to fester for eleven years?
A CCO has the ability to report directly to the board of directors and the CEO. If an empowered CCO knew what was occurring, at some point, a CCO would have walked right into the boardroom and/or the CEO’s office to identify and report the problem.
To those who continue to cling to the idea that in-house lawyers should be responsible for compliance, they need to answer for the GM debacle and the fact that in-house lawyers either acted without a conscience or in some instances, failed to act, resulting in disastrous consequences.