Look for Fraud, Blame the Lawyers

February 7, 2007 | Filed Under Investigations, Tactics 

We’ve heard of “shoot the messenger.” There’s a new variant in the Government Accountability Office’s ongoing investigation of the Department of Homeland Security.

According to the Associated Press, the GAO feels that DHS lawyers are frustrating efforts to root out alleged waste, fraud and mismanagement:

“They’re not very responsive. They don’t give information quickly,” said David Walker, head of the GAO.

“Every document we seek to review has to be reviewed (first) by the general counsel’s office,” Walker added. He said the department’s general counsel wants to “sit in on every interview,” which he deemed inappropriate.

Walker said when there are more lawyers than other staff involved, “you’ve got problems.”

“I agree wholeheartedly,” said Inspector General Richard Skinner. “It’s not a denial of information, but it’s very cumbersome to obtain information.”

Skinner also said that having a supervisor or attorney present when his office interviews an employee “sets a chilling effect” and tells the employee he’s presumed not to be a team player.

Is the GAO really that naive?

Without knowing anything about the specifics of this investigation or the pace of DHS’s response, the notion that an in-house legal department should permit government interviews of employees without counsel present is mind-boggling. Or that there is something wrong with legal review of documents before they are produced.

Anyone who has dealt with regulatory document requests knows that they sometimes require a semi-trailer truck with Bates-stamped contents to be fully responsive.

I imagine DHS Secretary Michael Chertoff (himself a former prosecutor, Judge and Assistant Attorney General) doesn’t want to appear before Congress down the road and have new Majority counsel serve up documents he hasn’t seen and witness transcripts he hasn’t been briefed on. Having been on the other side of that table, Secretary Chertoff definitely knows who is having more fun.

One small note: until last month, the DHS GC was Phil Perry, son-in-law of Vice President Dick Cheney.

I’m sure he enjoyed riding shotgun on this investigation.

Ready, fire, aim...

Apple’s New GC: What Honeymoon?

January 23, 2007 | Filed Under Investigations, Managing, Governance 

The first 100 days of a new GC’s tenure is typically a period marked by a fresh start, a bit of a honeymoon to get settled in, and optimism about the future.

Apple announced the appointment of Donald Rosenberg last November. Late December featured the completion of a report by a special committee of the board regarding past stock option practices.

Last week, fresh off the announcement of the iPhone, Apple CEO Steven Jobs made another command performance. According to the San Francisco Chronicle, Mr. Jobs appeared (with lawyers in tow) at federal offices to talk with DOJ and SEC investigators about past stock option practices.

Quite a first 60 days for Mr. Rosenberg, given the part of the alleged focus of the government investigation: the Apple legal department. No doubt the last 40 days of Mr. Rosenberg’s fresh start will require a lot of hard work and demand no small amount of leadership.

No sign yet that changes at the US Attorney’s office in San Francisco detailed by The Recorder are slowing down the government’s investigation.

James Baker and the BP Safety Review

January 16, 2007 | Filed Under Investigations, Crisis Planning, Compliance, Governance 

Fresh off chairing the Iraq Study Group, former Secretary of State James Baker has delivered a report to BP regarding the March 2005 accident at its Texas City refinery. Fifteen people died, 170 were injured.

The complete report is here (374 pages…). BP has committed to follow its 10 recommendations (summarized here by the Wall Street Journal).

The first one is rather stark from a compliance and governance perspective:

1: The Board of Directors of BP, BP’s executive management (including its Group Chief Executive), and other members of BP’s corporate management must provide effective leadership on process safety. Those individuals must demonstrate their commitment to process safety by articulating a clear message on the importance of process safety and matching that message both with the policies they adopt and the actions they take.

And this item will haunt BP’s board and senior management for at least five more years:

9: BP’s Board should monitor the implementation of the recommendations of the panel (including the related commentary) and the ongoing process safety performance of BP’s U.S. refineries. The Board should, for a period of at least five calendar years, engage an independent monitor to report annually to the Board on BP’s progress in implementing the panel’s recommendations (including the related commentary). The Board should also report publicly on the progress of such implementation and on BP’s ongoing process safety performance.

I wrote about the BP legal response previously.

The recent announcement that BP CEO John Browne would be stepping down later this year doesn’t seem entirely unrelated. Further management changes are ruled out for the time being.

The energy business is ferociously intolerant of operating mistakes, given the volatile nature of the materials being handled. This reality drives most industry companies to obsess about safety. Better having engineers on the site sooner rather than lawyers drafting a report later.

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