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After GM: Can in-house lawyers survive?

The allegations are prima facie awful. In-house lawyers defending wrongful death claims knew for eleven years that some GM vehicles had an ignition flaw that could cause accidents. They didn't report the flaw internally or to regulators because they didn't want to prejudice GM's position in ongoing or future litigation.

The ignition flaw, GM has now acknowledged, eventually resulted in 13 people being killed in 54 accidents. The company was forced to recall about 30 million vehicles at a cost of more than $2.5 billion.

Of the 15 employees GM has fired because of the ignition hazard, half were in-house lawyers or investigators working for the law department.

Not satisfied, U.S. senators said last week they want more law department scalps, including the general counsel's. And it probably won't be long before a politically ambitious prosecutor suggests criminal charges against some of the former in-house lawyers.

GM is an extreme example. But something similar could happen to any in-house lawyer. Here's why.

The part of business life that involves civic duties used to be called corporate citizenship. During the past ten years, or maybe less, it came to be known as ethics and compliance. As always, words matter. And the difference between corporate citizenship and ethics and compliance matters a lot.

Corporate citizenship usually stayed in the background. It was typcially about things like company support for little league baseball teams or sponsorship of a clean-up day at the town park. Only when things went very wrong did corporate citizenship mean something more, like it did after thalidomide, Bhopal, and Three Mile Island.

The modern equivalent of corporate citizenship -- ethics and compliance -- is up front. Now people expect ethics and compliance to be part of the corporate fabric and not second fiddle to anything, including the profit motive. And everyone inside the company is expected to be an ethics and compliance officer. There are even huge cash rewards from the government for employees who take their ethics and compliance roles to the extreme by blowing the whistle on their company.

The modern idea of ethics and compliance is well understood and no one is arguing against it. But for in-house lawyers, it's a big problem.

A lawyer is supposed to be an advocate for his or her client. In exchange for faithful advocacy, lawyers have traditionally enjoyed protection against public condemnation and government reprisal, even when representing vile and unpopular clients or causes.

But for in-house lawyers today, advocacy is colliding head on with the modern concept of ethics and compliance.

We'll have more to say about this in coming posts.

A final note: So far, we haven't heard anyone criticizing or threatening GM's outside counsel for not reporting the ignition flaw.


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.