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Monday, June 09, 2014

Law - "How GM’s legal department failed the company and its customers"

That is the heading of a long article June 5th in Reuters by Alison Frankel that concludes:

I imagine that any lawyer who defends consumer products — whether inside a corporation or outside — will read Valukas’s report and wonder whether they would have behaved as GM’s lawyers did. Perhaps the next time any of them start to tell themselves that they’ve done enough to address safety, they’ll think again.
The article links to the 276-page May 29, 2014 document titled "The results of an investigation overseen by Anton R. Valukas, a former United States attorney, into the company’s handling of a defective ignition switch," posted by the NY Times.

Gretchen Morgenson wrote yesterday, June 8th, in the Sunday NY Times on the problems at G.M, under the heading "A Vow to End Hollow Nods and Salutes." A sample:

The report, which was the result of an investigation by Anton R. Valukas, a partner at Jenner & Block, says G.M. officials showed a “pattern of incompetence” that led to inaction on the defects, Ms. Barra said.

That’s the mild version. The report exposes a mind-set throughout the company that was so self-absorbed, so bent on self-preservation and self-protection that it routinely put its customers last.

The issue of the Cobalt ignition switch “passed through an astonishing number of committees,” the report states. “We repeatedly heard from witnesses that they flagged the issue, proposed a solution, and the solution died in a committee or with some other ad hoc group exploring the issue.”

That’s troubling enough. But the report also concludes that it was impossible to determine the “identity of any actual decision-maker” involved in these discussions. Even identifying who attended these meetings or discovering what topics they discussed was difficult. Why? Because minutes of the meetings, showing who attended and what was said, were rarely taken.

Such a practice seems intended to avoid accountability.

No minutes were taken, for example, at a December 2013 meeting about the potential recall. Such a record would have outlined the discussion by the three G.M. executives who attended, all of whom had to agree that a recall should be issued.

Some employees told Jenner & Block investigators they did not take notes at safety meetings “because they believed G.M. lawyers did not want such notes taken.”

Shifting responsibility for problems to others was deep in the company’s DNA, the report shows. Avoiding accountability was so automatic that it even had a name, like a yoga pose. “The G.M. salute” involved “a crossing of the arms and pointing outwards toward others, indicating that the responsibility belongs to someone else, not me,” the report said.

Along these lines was the “G.M. nod”— when everyone agrees to a plan of action after a meeting “but then leaves the room with no intention to follow through,” the report said.

Another disturbing aspect of the culture at G.M. was the “formal training” the company gave to employees writing about safety issues. A 2008 presentation, for example, warned employees to write “smart.”

What did writing smart mean? Words such as “problem” and “defect” were banned. Employees should instead use softer words — “issue,” “condition” or “matter.” Rather than write about a “defect,” employees should note that the car “does not perform to design.”

Sometimes entire sentences were forbidden, according to the report. “Dangerous ... almost caused accident,” was off limits, for example, as was, “This is a safety and security issue. ...” Finally, employees were advised not to use phrases such as “tomblike” and “rolling sarcophagus.”

Bill Vlasic of the Times wrote at length June 6th on the G.M. legal department's failures. Some quotes:
DETROIT — To the legal department at General Motors, secrecy ruled.

Employees were discouraged from taking notes in meetings. Workers’ emails were examined once a year for sensitive information that might be used against the company. G.M. lawyers even kept their knowledge of fatal accidents related to a defective ignition switch from their own boss, the company’s general counsel, Michael P. Millikin.

An internal investigation released on Thursday into the company’s failure to recall millions of defective small cars found no evidence of a cover-up. But interviews with victims, their lawyers and current and former G.M. employees, as well as evidence in the report itself, paint a more complete picture: The automaker’s legal department took actions that obscured the deadly flaw, both inside and outside the company.

While Mr. Millikin survived the dismissals this week of 15 G.M. employees tied to the delayed recall, his department was hit hard.

At least three senior lawyers are among the employees who lost their jobs as a result of the investigation conducted by the former United States attorney Anton R. Valukas. * * *

Mr. Valukas said employees he interviewed told him they had refrained from taking notes in safety meetings “because they believed G.M. lawyers did not want notes taken.”

Mr. Zitrin said banning note-taking was not a standard practice in corporate law offices.

The secrecy factor extended to how some employees kept or discarded old emails. According to two former G.M. officials, company lawyers conducted annual audits of some employees’ emails that could be used as evidence in lawsuits against the company.

The audits were part of a larger program called “information life-cycle management,” used primarily to downsize data in the company’s computers, a common practice in companies.

A G.M. spokesman, Greg Martin, declined to comment on the program and the legal department’s involvement in it.

The impact of Mr. Valukas’s report on the department has been swift and severe.

A person briefed on the employee dismissals said they included Mr. Kemp and Lawrence Buonomo, head of product litigation. A third lawyer, Jennifer Sevigny, was also dismissed.

All three lawyers were part of the team that handled the confidential settlement in which Mr. DeGiorgio, who has also been fired, was involved.

Even after being expunged from G.M., the lawyers are keeping quiet about the events leading up to the ignition-switch recall in February.

Posted by Marcia Oddi on June 9, 2014 11:24 AM
Posted to General Law Related