GM Report Critical of Legal Dept., Recommends Changes

GM Report Critical of Legal Dept., Recommends Changes Photo: BriYYZ, via Wikimedia Commons

A senior in-house counsel is reportedly among 15 employees at General Motors Co. who were “removed” from their jobs over the faulty ignition-switch scandal. And a report from an internal investigation lists two pages of recommended changes in GM’s legal department.

GM CEO Mary Barra said Thursday that some of the 15 employees “were removed because of what we consider misconduct or incompetence. Others have been relieved because they simply didn’t do enough: They didn’t take responsibility; didn’t act with any sense of urgency.”

GM spokesman Alan Adler told CorpCounsel.com that “the 15 includes members of GM’s engineering, policy and legal staffs. We’re not providing additional detail.” Adler also declined a request for an interview with GM general counsel Michael Millikin or anyone else.

But the Detroit News reported those leaving include “a senior lawyer and at least one vice president.” And Automotive News reported that in-house lawyer William Kemp, GM’s top attorney on safety issues, was asked to leave. Meanwhile, Millikin, 66, remains at the company.

Barra said disciplinary actions short of removal were also taken against five other unidentified employees who played a role in delaying the recall of 2.6 million cars. At least 13 deaths have been linked to the faulty switch.

The disciplinary actions follow the completion of an internal investigation on why it took a decade to recall the defective cars. The inquiry was led by Millikin and outside counsel Anton Valukas, a former federal prosecutor and now chairman of Jenner & Block. King & Spalding also helped in the investigation.

GM sent the report to the National Highway Traffic and Safety Administration, which released it Thursday [PDF]. It names a number of in-house counsel who knew about the defect, including Kemp; but Millikin wasn’t one of the people named.

The report states that by 2011, outside counsel privy to GM engineers’ data had repeatedly warned in-house counsel that GM could be accused of “egregious conduct due to its failure to address” the safety issue, including punitive damages.

In 2013, in one key case involving a fatal crash, it was discovered that a GM engineer who approved the original switch later changed the switch in newer models without notifying anyone else at GM.

King & Spalding attorney Philip Holladay wrote an almost desperate letter saying, “This case needs to be settled. … There is little doubt that a jury here will find that the ignition switch used on [a certain] 2005 Cobalt was defective and unreasonably dangerous, and that it did not meet GM’s own torque specifications.”

Holladay’s April 2013 letter said the plaintiffs’ lawyer would cite the fact of “an investigation [of faulty switches] that has now been dragging on for almost two years as proof positive of GM’s conscience [sic] indifference and willful misconduct when it comes to the safety of its vehicles’ occupants.”

The internal probe found that several in-house attorneys were involved in discussing a possible settlement, including Kemp, who also served as a liaison between defect investigators and the general counsel’s office; Lawrence Buonomo and Michael Gruskin, both senior GM litigation attorneys; and Ronald Porter, a 30-year litigation lawyer.

The Valukas report then adds, “The evidence shows that neither Kemp, Buonomo, Gruskin, Porter nor any other GM lawyer elevated Holladay’s letter or specific issues related to the case to general counsel Michael Millikin prior to the settlement.”

So it is not surprising that the internal report included a list of 10 recommended changes in the legal department, most involving better communication about safety issues. “The legal staff can and should play a critical and unique role in assisting with the identification, analysis and resolution of safety issues that have given rise to customer claims,” the report states.

One recommendation was that the legal department provide “specific guidance concerning the types of issues that should be elevated to the general counsel,” including serious safety issues.

Other recommendations included:

  • Designate a member of the legal staff as a liaison with GM’s global vehicle safety organization; Millikin has already named North America general counsel Lucy Clark Dougherty to advise the global safety group.
  • Hold monthly meetings between GM legal staff and engineers for each specialty, such as power steering failure or rollover/roof crush, to discuss trends and potential safety issues.
  • Institute a process to elevate unresolved technical issues expeditiously.

The report concludes that no senior leader, including Millikin, knew about the safety issues and delayed recall until Jan. 31, 2014.

But even with its release, the report raised questions about Millikin’s role in the inquiry. Barra in March named Millikin and Valukas to lead the investigation.

When issues arose that put the legal department under scrutiny, critics said Millikin shouldn’t be helping to lead the probe. A GM spokesman on May 19 assured CorpCounsel.com that Millikin was still coleading the inquiry, despite the criticism of his appointment to the role.

But on Thursday, only Valukas’ name was on the report as lone author. And GM repeatedly referred to it as “the Valukas report.” The report indicates Millikin was interviewed twice as part of the internal investigation.

When asked about Millikin’s name missing from the front of the report, James Cain, GM’s senior manager for sales and executive communications, said: The “simple answer is that it is the report on an independent investigation conducted at the direction of Mary Barra and the GM board. The report is the work of the Jenner firm and Mr. Valukas.”

See also: “GM Report: Failures ‘Led To Tragic Results,’” from The National Law Journal, an affiliate of Corporate Counsel.

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