General Motors' choice of two familiar law firms to conduct an inquiry into its delayed recall of 1.6 million vehicles raises questions about their impartiality, as a New York Times article explores.
One of firms being used, King & Spalding of Atlanta, had defended the automaker against lawsuits involving fatal crashes blamed on ignition switch defects.
Hiring outside counsel is part investigation, part public-relations gambit and part legal strategy. In most cases, the goal is to limit damage to an institution’s reputation or to contain the financial harm to shareholders. . . .
To achieve those ends, law firms conducting the investigations must be viewed as forthright and uncompromised. In this respect, some critics have already questioned GM’s choices.
in their lengthy article on Sunday's business section cover, Matthew Goldstein and Barry Meier show why the supposedly independent investigators may be less than impartial:
The GM investigation will be led by Anton R. Valukas, . . . the chairman of Jenner & Block, which has done high-profile securities work for G.M. Both Jenner and King & Spalding have done product liability cases for the company. . . .
Greg Martin, a GM spokesman, said that both King & Spalding and Jenner & Block had “reputations for adhering to the highest standards.” . . .
GM retained the outside lawyers just days after it received a detailed order from the National Highway Traffic Safety Administration. The order directed GM to answer 107 specific questions related to the defect and the company’s handling of it. . . .
Both firms have done extensive work for GM The carmaker has used Jenner for more than a decade, and its work includes advising GM on its post-bankruptcy initial public stock offering and negotiating a $5 billion line of credit for the company in 2012. The firm’s website says it has represented GM in “product liability cases involving vehicle incompatibility/aggressivity; crashworthiness; air bags; rollover/roof crush and seatbelts.”
King & Spalding, in addition to its recent involvement in the ignition-switch litigation in Georgia, has represented GM in other product liability lawsuits arising from accusations of manufacturing flaws with the company’s vehicles. The law firm’s website lists GM as one of its “representative clients.”
A Boston attorney who handles corporate investigations tells The Times companies shouldn't use their regular law firms for internal inquiries.
"The perception is always going to be there; maybe you pulled your punches because there is a business relationship.”
A University of Delaware specialist in corporate governance also sees GM's choices as unwise. “I would not have done it because of the optics," finance Professor Charles Elson says in the article.
Related coverage at Deadline Detroit:
GM Tempest: Recall Delay Uproar Spreads In Multiple Directions, March 15
