Norman Schwartz, Bio-Rad CEO
Norman Schwartz, Bio-Rad CEO (courtesy photo)

SAN FRANCISCO—Attorneys at two outside firms hired by Bio-Rad Laboratories Inc. raised concerns about the job performance of general counsel Sanford Wadler before he was fired in June 2013, Bio-Rad’s CEO Norman Schwartz testified on Monday.

Patrick Norton, a former Steptoe & Johnson partner who led the company’s internal investigation of potential Foreign Corrupt Practices Act violations, recommended that Bio-Rad fire Wadler as early as 2011 for failing to address FCPA issues until they had grown into a full-blown crisis, Schwartz said.

The CEO also testified that Davis Polk & Wardwell partner Martine Beamon said Wadler “apparently had done no due diligence” to support allegations of FCPA breaches in China. Schwartz said Davis Polk senior counsel Daniel Kelly Jr. told him in the spring of 2013 that he believed Wadler was “setting himself up to be a whistleblower” by reporting the issues to the audit committee of Bio-Rad’s board.

“It was obvious to me that Sandy was a loose cannon and we didn’t know what he would do next,” Schwartz said.

Schwartz’s testimony about the complaints from outside counsel came in the second week of trial in a case that pits Bio-Rad against its longtime general counsel. Wadler, who contends he was fired in retaliation for reporting potential FCPA problems in China, is pursuing $8 million in back pay and stock compensation.

Bio-Rad’s trial lawyers Quinn Emanuel Urquhart & Sullivan had the awkward task of airing the details of the company’s massive FCPA settlement as evidence of Wadler’s shortcomings as a lawyer. The company paid $55 million in 2014 to settle claims with the Securities and Exchange Commission and Department of Justice that it paid bribes to officials in Thailand and Vietnam and kept inadequate records for its business deals in Russia.

According to Schwartz, the FCPA problems first came to light in 2009 when employees in the company’s accounting department discovered irregularities in the company’s books for Thailand. In a subsequent performance review for Wadler that was admitted into evidence Monday, the FCPA issues were described as “a real black eye” for the company. Wadler’s review said that the legal department should have been “more assertive or inquisitive” in keeping the company in compliance with the FCPA throughout its international operations.

According to Schwartz, he resisted myriad calls for Wadler’s job during the period that the company’s internal investigation was underway.

“I had worked with Sandy for many years,” said Schwartz. “At the end of the day I wanted to give him a second chance.”

According to Schwartz, the company’s board backed Norton’s initial call for Wadler’s termination in 2011. But Wadler weathered that crisis. In February 2013, when he made a report to the board’s audit committee raising allegations about additional problems in China, both Norton and lawyers at Davis Polk were hired to investigate. Neither firm agreed with Wadler’s assessment about China.

Beamon, the Davis Polk partner in New York who headed up the firm’s China investigation, said that Wadler “had a very hard time articulating what the issue was and what the facts were and apparently had done no diligence to substantiate any of the allegations.”

“For me, this was I guess what you might call the last piece of the puzzle,” Schwartz said.

Wadler’s lawyer, James Wagstaffe of Kerr & Wagstaffe, pointed out that Davis Polk’s presentation on its findings, which was made to the board two days before Wadler was terminated in June 2013, said the documents that Wadler had brought to the company’s attention “warranted further investigation.”

Wagstaffe suggested that, as CEO, Schwartz should be held accountable for the company’s FCPA woes.

“Why didn’t you get fired as the captain of the ship?” Wagstaffe asked.

“That’s a good question,” Schwartz said.

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SAN FRANCISCO—Attorneys at two outside firms hired by Bio-Rad Laboratories Inc. raised concerns about the job performance of general counsel Sanford Wadler before he was fired in June 2013, Bio-Rad’s CEO Norman Schwartz testified on Monday.

Patrick Norton, a former Steptoe & Johnson partner who led the company’s internal investigation of potential Foreign Corrupt Practices Act violations, recommended that Bio-Rad fire Wadler as early as 2011 for failing to address FCPA issues until they had grown into a full-blown crisis, Schwartz said.

The CEO also testified that Davis Polk & Wardwell partner Martine Beamon said Wadler “apparently had done no due diligence” to support allegations of FCPA breaches in China. Schwartz said Davis Polk senior counsel Daniel Kelly Jr. told him in the spring of 2013 that he believed Wadler was “setting himself up to be a whistleblower” by reporting the issues to the audit committee of Bio-Rad’s board.

“It was obvious to me that Sandy was a loose cannon and we didn’t know what he would do next,” Schwartz said.

Schwartz’s testimony about the complaints from outside counsel came in the second week of trial in a case that pits Bio-Rad against its longtime general counsel. Wadler, who contends he was fired in retaliation for reporting potential FCPA problems in China, is pursuing $8 million in back pay and stock compensation.

Bio-Rad’s trial lawyers Quinn Emanuel Urquhart & Sullivan had the awkward task of airing the details of the company’s massive FCPA settlement as evidence of Wadler’s shortcomings as a lawyer. The company paid $55 million in 2014 to settle claims with the Securities and Exchange Commission and Department of Justice that it paid bribes to officials in Thailand and Vietnam and kept inadequate records for its business deals in Russia.

According to Schwartz, the FCPA problems first came to light in 2009 when employees in the company’s accounting department discovered irregularities in the company’s books for Thailand. In a subsequent performance review for Wadler that was admitted into evidence Monday, the FCPA issues were described as “a real black eye” for the company. Wadler’s review said that the legal department should have been “more assertive or inquisitive” in keeping the company in compliance with the FCPA throughout its international operations.

According to Schwartz, he resisted myriad calls for Wadler’s job during the period that the company’s internal investigation was underway.

“I had worked with Sandy for many years,” said Schwartz. “At the end of the day I wanted to give him a second chance.”

According to Schwartz, the company’s board backed Norton’s initial call for Wadler’s termination in 2011. But Wadler weathered that crisis. In February 2013, when he made a report to the board’s audit committee raising allegations about additional problems in China, both Norton and lawyers at Davis Polk were hired to investigate. Neither firm agreed with Wadler’s assessment about China.

Beamon, the Davis Polk partner in New York who headed up the firm’s China investigation, said that Wadler “had a very hard time articulating what the issue was and what the facts were and apparently had done no diligence to substantiate any of the allegations.”

“For me, this was I guess what you might call the last piece of the puzzle,” Schwartz said.

Wadler’s lawyer, James Wagstaffe of Kerr & Wagstaffe, pointed out that Davis Polk ‘s presentation on its findings, which was made to the board two days before Wadler was terminated in June 2013, said the documents that Wadler had brought to the company’s attention “warranted further investigation.”

Wagstaffe suggested that, as CEO, Schwartz should be held accountable for the company’s FCPA woes.

“Why didn’t you get fired as the captain of the ship?” Wagstaffe asked.

“That’s a good question,” Schwartz said.

Copyright The Recorder. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.