The review will be led by Jenner & Block chairman Anton "Tony"
Valukas, who won wide regard for investigating Lehman Brothers after
the financial services firm collapsed in 2008. His report alleged
that the firm used accounting gimmicks and had been insolvent for
weeks before it filed for bankruptcy.
But GM has worked with Jenner & Block since 2002, and at least two
of the automaker's former top attorneys, Robert Osborne and Elmer
Johnson, were partners at the Chicago law firm.
GM said lawyers from the firm King & Spalding, which represented GM
during some of its bankruptcy proceedings and some other litigation
work since, will also work on the recall review ordered up by CEO
Mary Barra. More than 1.6 million older vehicles are affected.
Co-leading the recall investigation with Valukas is GM's current
general counsel, Michael Millikin.
"To me, there is a conflict of interest," said Monroe Freedman, a
legal ethics expert and law professor at Hofstra University School
of Law. "A reasonable person might question whether the firm wants
to curry favor with GM, so it can maintain a good relationship or
obtain future work."
GM spokesman Selim Bingol said there is no conflict of interest and
that Valukas "has been charged to go where the facts take him and
give the company an unvarnished report on what happened. He is the
ideal person to do that, given his understanding of our business and
his reputation for adhering to the highest standards."
Jenner and King may indeed speed things along, said Stephen Gillers,
a professor at New York University School of Law. "It makes sense as
a matter of efficiency since the firms know the client," Gillers
Barra in a letter to employees last week promised an "unvarnished"
look at the recall that is occurring 10 years after the issue first
came to light. She has not granted any interviews on the matter.
GM is recalling cars to correct a condition that could allow the
engine and other components, including front airbags, to turn off
while the vehicle is traveling at high speed.
The failure is believed to be caused when weight on the ignition
key, road conditions or some other jarring event causes the ignition
switch to move out of the "run" position, turning off the engine and
most of the car's electrical components mid-drive, with sometimes
catastrophic results. GM has recommended that owners use only the
ignition key with nothing else on the key ring.
King & Spalding referred questions to GM. Valukas declined to
comment on his appointment by GM, which said late Monday that Jenner
& Block is "doing other work for us."
CONTROLLING THE INFORMATION FLOW
GM may be focused on controlling the flow of information from the
"If they want to send message to shareholders that they have
uncovered everything, they might hire an independent firm," Richard
Painter, a professor at University of Minnesota Law School, told
Reuters. "But they may want to disclose just enough to keep
shareholders informed, and keep other things private to keep legal
defenses available to them."
Sources previously said GM's team of investigators had begun
interviewing employees involved in the problems surrounding the
ignition switch, which first came to the company's attention in
[to top of second column]
GM went through a U.S. government-led bankruptcy in 2009, which is
the dividing line between what became known as "old GM" and "new
Valukas served as lead counsel for the U.S. Securities and Exchange
Commission's four-year investigation of "old" GM's pension
accounting, which concluded with no allegations of fraud or
Jenner & Block was the lead outside counsel for GM's initial public
offering in 2010 when it returned to the market as a public company
following its bankruptcy restructuring, and it has said in filing
that it has worked for GM since 2002.
In addition, some partners at the firm have relationships with GM
that go back even farther.
A Jenner & Block spokesperson on Monday declined to comment on how
much the firm bills GM annually, and on whether there was any
concern within the firm of a real or perceived conflict of interest
in Valukas leading GM's internal investigation of the
WAITING FOR PARTS
The No. 1 U.S. automaker has said the recall will begin next month
when it has the replacement parts. Most of the affected vehicles are
in North America.
While recalls are not unusual, the number of fatalities involved and
the way GM handled this one stretching over the past decade has the
potential to cost the company hundreds of millions of dollars in
fines and possible legal damages, in addition to tarnishing its
U.S. safety regulators have also opened an investigation into
whether GM reacted swiftly enough. The National Highway Traffic
Safety Administration sent the automaker a list of 107 questions
about the recall to answer by April 3.
In addition to ordering up an apology and crafting the letter to
employees with Bingol's help, Barra has designated assignments for
top executives related to the recall, according to a person familiar
with the situation.
Barra placed global product development chief Mark Reuss in charge
of working with supplier Delphi Automotive to obtain the replacement
parts as quickly as possible and assigned North American head Alan
Batey to work with GM dealers on serving the customers, said the
person, who asked not to be identified discussing the recall.
She also involved GM quality and customer service chief Alicia Boler-Davis
as well as Bingol, who is in charge of GM's governmental affairs in
Washington, the person said.
(Additional reporting by Jessica Dye in
New York; editing by Matthew Lewis and Peter Henderson)
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