Lawyers as Whistleblowers

The notion that a lawyer would ever be a whistleblower offends most lawyers’ sensibilities, yet confounds the public. When a lawyer knows that a product is likely to cause injury or death, or when she has a good idea that company decisions will wreak financial havoc, why shouldn’t she be able (or expected) to blow the whistle? Recent moves by regulators are likely to make ...
Lawyers as Whistleblowers
Paul Paton, University of Alberta
The notion that a lawyer would ever be a whistleblower offends most lawyers’ sensibilities, yet confounds the public. When a lawyer knows that a product is likely to cause injury or death, or when she has a good idea that company decisions will wreak financial havoc, why shouldn’t she be able (or expected) to blow the whistle? Recent moves by regulators are likely to make that question a more difficult one. Individual responsibility for corporate wrongdoing is in the ascendancy, and lawyers are not immune.

The VW scandal last fall is just the latest in a series of corporate debacles that have politicians and the public asking, “Where were the lawyers?” A year earlier, GM was forced to recall millions of vehicles after an ignition switch flaw was linked to at least 13 deaths. A probe and subsequent 325-page report by Anton Valukas, chairman of white-shoe firm Jenner & Block, concluded that there was “a pattern of incompetence and neglect” at GM but no intentional cover-up. That said, the report’s harsh portrait of the company’s culture reserved special criticism for the internal legal team. Even worse, a New York Times investigation concluded that the “automaker’s legal department took actions that obscured the deadly flaw, both inside and outside the company.”

Two GM product-litigation attorneys were among 15 employees let go in the wake of the Valukas report. Former North American general counsel Michael Robinson was also forced out, and three other attorneys had left. General counsel Michael Milliken stayed in place, though press reports increasingly questioned his involvement, and his ultimate responsibility. How much is the responsibility of the company, and how much rests with the individual lawyers? Do the “crime-fraud” exceptions to professional confidentiality obligations in the US, solidified after Enron, present a justification or an additional burden?

The September 2015 release by US Deputy Attorney General Sally Yates of a memorandum entitled Individual Accountability for Corporate Wrongdoing ups the ante. In her speech, Yates noted, “While this is new for the corporate world, there’s nothing radical about the concept. … A drug trafficker can decide to flip against his co-conspirators. … A corporation should get no special treatment as a co-operator simply because the crimes took place behind a desk.”

Strong words. It’s one thing to hold lawyers accountable; it’s another entirely to incentivize them to rat on their clients. And yet that’s exactly what the Ontario Securities Commission’s proposed whistleblower program, released in late October 2015, appears to do. If adopted, the program would offer a “whistleblower reward” to individuals up to a maximum of $5 million who provide meaningful assistance to commission staff that results in a monetary sanction or voluntary payments totalling $1 million or more. Internal or external auditors, chief compliance officers, executive officers, directors and even in-house counsel
would be eligible for whistleblower awards in certain circumstances — for instance, when whistleblowers believe the organization is on the verge of engaging in misconduct that “is likely to cause substantial injury to the financial interest or property of the entity or investors.”

In the aftermath of Enron in 2002, the legal profession was rightly concerned about being turned into “gatekeepers” — essentially deputized as government agents against their own clients. While regulatory changes at the time were significant, they stopped just short of mandating or incentivizing lawyers to betray the essential duties of confidentiality and loyalty to clients considered sacrosanct, essential to the fundamental lawyer-client relationship. As events on both sides of the border demonstrate, though, the debate about the lawyer’s role and duties – to the clients and to the public – is far from over.

Paul Paton is the Wilbur Fee Bowker Professor and Dean of Law at the University of Alberta. He can be reached at [email protected].

Lawyer(s)

Paul Paton