Vakulas Report on GM In-house Legal Dept.
Randy Johnston
Overview
Timeline for 100 Deaths*
• 1997 – Ignition switch is designed; implemented in 2002
• 2004 – Customers report stalls; Engineers review; Bulletins to
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dealers only; Considered a convenience issue only.
2006 – GM Legal starts receiving airbag non-deployment cases
2007 – Outside reports link problem to the ignition switch –
problem “fixed” w/ new part, same part number.
2010 – Outside counsel warns of punitive damages risk
2011 – Legal meets with Engineering over airbag problem
2011 – Outside counsel warns of punitive damages risk
2012 – Outside counsel warns of punitive damages risk
2013 – Deposition “bombshell”
2014 – GM issues first recall
*Compensation Fund acknowledges at least 109 deaths.
The Fallout
• “The failure of this legal department is stunning…I do not
understand how the General Counsel for a litigation
department that had this massive failure of responsibility, how
he would be allowed to continue in that important leadership
role in his company.” (US Senator Claire McCaskill)
• “In this instance, the lawyers enabled purposeful concealment
and cover up, and possible criminal action that is the subject
right now of this investigation.” (US Senator Richard Blumenthal)
• “The Legal staff can and should play a critical and unique role
in assisting with the identification, analysis and resolution of
safety issues that have given rise to customer claims.” (Jenner &
Block [Valukas] Report, May 29, 2014)
Valukas (315 page) Report Criticisms
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Failure to identify problematic trends/patterns;
Failure to elevate issues to senior attorneys;
Tolerance of inappropriate delays;
Failure to recognize the implications of outside
investigator conclusions; and
Construing their role to narrowly.
“New” Reality
• Recent U.S. Deputy Attorney General said:
• “Major corporate fraud cannot happen over an
extended period of time without the complicity of
accountants, lawyers and other professionals ….
• “Recent government investigations have further
proven our commitment to follow the evidence
wherever it leads – to not only those executives but
also those lawyers or other professionals who
defraud the investing public.”
Welcome to the playground.
The fighting will start shortly.
• Recognize conflict of being GC and corp. officer.
• Company won’t protect you.
• Company may even blame you (Valley Coke case).
• Company culture won’t save you.
• Report often, in writing.
• Don’t ignore being ignored.
• Get insurance.
• Hire your own counsel.
• Quit and keep quiet unless, ….