* Lawyer leading probe investigated Lehman collapse
* Two outside law firms in probe have conducted work for GM
* Two of GM's former top attorneys worked for law firm
* House Energy and Commerce Committee to investigate recall
By Ben Klayman, Paul Lienert and Nick Brown
DETROIT, March 10 General Motors hired
two law firms with ties to the automaker to look into its recall
of cars blamed for 13 deaths, and a Congressional committee said
it would also investigate the company's response to a defect
that first came to light a decade ago.
The internal probe will be led by Jenner & Block Chairman
Anton "Tony" Valukas, who investigated Lehman Brothers after the
financial services firm collapsed in 2008, and alleged then that
Lehman used accounting gimmicks and had been insolvent for weeks
before it filed for bankruptcy.
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 King & Spalding, which represented GM
during some of its bankruptcy proceedings and other litigation
work since, will also work on the recall review ordered up by GM
CEO Mary Barra. Co-leading the recall investigation with Valukas
is GM's current general counsel, Michael Millikin.
"CONFLICT OF INTEREST"
Some legal experts said there could be a conflict of
interest for law firms with working ties to GM to be involved in
"To me, there's 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 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," he told Reuters.
In a letter to employees last week, Barra 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. More than
1.6 million older vehicles are affected.
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.
The House Energy and Commerce Committee said it is
investigating GM and the National Highway Traffic and Safety
Administration's (NHTSA) response to consumer complaints related
to the problems with ignition switches. ()
The committee, led by Michigan Republican Fred Upton, will hold
hearings in the coming weeks. Upton led the 2000 investigation
into Firestone tire failures on Ford Motor Co vehicles -
resulting in the TREAD Act that requires automakers to report
complaints of defects to the NHTSA.
"Did the company or regulators miss something that could
have flagged these problems sooner? If the answer is yes, we
must learn how and why this happened, and then determine whether
this system of reporting and analyzing complaints that Congress
created to save lives is being implemented and working as the
law intended," Upton said in a statement from the committee late
In an email, GM spokesman Greg Martin said the company was
"fully cooperating with NHTSA and will do so with the Committee,
CONTROLLING THE INFORMATION FLOW
GM may be focused on controlling the flow of information
from the review.
"If they want to send a 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
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 GM."
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 intentional misconduct.
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 filings 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
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."
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 reputation.
U.S. safety regulators have also opened an investigation
into whether GM reacted swiftly enough. The NHTSA sent the
automaker a list of 107 questions about the recall to answer by
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.