A few days ago I made some observations about the extent to which a New Jersey legal firm whitewashing Chris Christie's role in Bridgegate was churning the file (at taxpayer expense, of course). The fact is, that sort of thing is business as usual for that sort of firm, and though outrageous, was not necessarily an indicia of decline in the profession or society.
But this is rather emblematic of something seriously rotten in the republic:
When lawyers for Hewlett-Packard shareholders filed a lawsuit contending HP’s management and board “abdicated their duties” and engaged in “unlawful behavior” in the disastrous 2011 takeover of Autonomy, it looked as if we might finally find out what really happened.
Was it a huge fraud by top executives at the British software company, as HP has asserted in writing down nearly $9 billion of its $11 billion acquisition?
Was it incompetence at HP, which shelled out so much for a company that had been rejected by nearly every other potential buyer?
Or some of both?
How naïve to think that a shareholders’ suit would turn out to have anything to do with the truth, let alone any meaningful relief for HP’s long-suffering shareholders. If the plaintiffs’ lawyers in the case — led by the respected and well-connected San Francisco firm of Cotchett, Pitre & McCarthy — have their way in court next week, the questions will go unanswered. Not only that, the lawyers are essentially jumping ship, proposing to settle the suit and join forces with HP in its pursuit of Autonomy’s former executives.
In return, HP will pay the shareholders’ lawyers an $18 million retainer and up to a total of $48 million in fees.
What will the shareholders get? They’ll get no money. On the contrary, it’s their money HP will be spending on the lawyers’ fees. They’ll get no personnel or board changes. They won’t find out who’s to blame or what went wrong. What they will get are some corporate governance reforms, which HP needn’t disclose in any detail.
I don't know if the plaintiff's lawyers will get away with this, but the mere fact that they think they can speaks volumes about the extent to which Wall Street ethics and thinking has seeped into the legal profession in particular (at least at the white shoe firms) and society as a whole.
First, lets take a step back and look at the lawsuit brought on behalf of the shareholders. HP paid huge bucks for a company (Autonomy), which turned out to be worthless. The HP Board claims it was defrauded. This may be true. However, it is by no means a defense, certainly not a complete defense, to the shareholders action. It is the job of the board to ferret out fraud when considering putting shareholder money into buying other companies. Certainly Autonomy, to the extent it continues to exist and has recoverable assets, is liable to the Board for its fraud, if fraud there be. But the shareholders should have two pockets to look to: Autonomy's, which may be a shallow pocket indeed, and the collective pocket of the directors and officers responsible for failing to detect the fraud, which pockets may be much deeper than Autonomy's. It may be legally irrelevant, but it is worth noting that those pockets have been systematically filled, over the years, with shareholder's dollars.
The shareholder's lawyers, if they win court approval for this transparent piece of bribery, will effectively deprive their clients of access to those deep pockets, in exchange for some meaningless “corporate governance reforms”.
The conflict between the lawyer's interest here and those of their clients is obvious. Even if the settlement had some independent merit, the $48 million dollar bribe in attorney's fees doesn't pass what we lawyer's usually call the “sniff test”, but in this case we should probably call the stench test. We are supposed to avoid even the “appearance of impropriety”. Perhaps there are people who don't see an appearance of impropriety here, but most of them are probably spending their days in front of computer screens, coining money by manipulating stocks in a rigged market.
I've been around a while now, and I have no illusions about the legal profession as a whole. There are some very good people in the profession, and there are some who are as only as good as they need to be. But I am pretty confident that even the latter would have shied away from proposing something so blatant as this deal in open court ten or fifteen years ago. A decent respect for the opinion of mankind would have led them to conceal the real deal, and construct a more plausible settlement for public consumption. This deal announces to the world that the Wall Streetization of the upper reaches of the legal profession is complete. I'm no expert on the period, but it's hard to believe this sort of thing would have been tolerated in the Gilded Age, the last time that the government was so firmly in the hand of the .01%. Harking back to Loudon Wainwright's classic, this is not just one dead skunk in the middle of the road; this is a whole clan of them, truly stinking to high heaven.
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