Risk Update

Conflicts PR — When Conflicts Allegations are Promoted via Press Release

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While I don’t have hard data, I’m finding myself coming across more instances of aggrieved parties issuing formal press releases specifically focusing on lawyer/law firm conflicts allegations.

Like many have said about disqualification motions in general, the use of such communication tactics may be strategic. Clearly, exposure via reprint on Yahoo News (see below) and similar sites, and associated search engine implications are a bit different from coverage of these matters by the legal press.

And excerpting these here gives me pause as they understandably lack the “we asked the other side for a response [and they either did or did not response]” portion.

Still, this may be a trend that grows as we watch. And, regardless, it’s an interesting data point. Here’s a recent example that caught my eye: “Ebony Magazine Files Grievance With State Bar of Texas Against Attorney David Abner for Conflict and Ethics Violation” —

  • “ATLANTA, July 31, 2020 /PRNewswire/ — Immediately after Ebony ownership filed a complaint with the SEC against Jacob Walthour and Blueprint Capital LLC (“BPC”) alleging insider trading; they filed another SEC complaint against John Robinson and Consequent Capital (“CC”) CRD # 285262 for violating the very same privacy policy and fiduciary responsibilities they list on CC’s website by providing Parkview Capital Credit’s (“PCC”) confidential information to media outlets for financial gain. Today Ebony Magazine filed a third SEC complaint and legal Grievance with the Texas Bar against David Abner.”
  • “Ebony accused Abner, a licensed attorney, of conspiring with Walthour and Robinson to force Ebony into Bankruptcy invalidly. David Abner and Associates is on record as PCC’s General Counsel but also a creditor for Ebony. ‘This is an absolute conflict between a lender and their lawyer to conspire to do an illegal takeover,’ says Ebony spokesperson Michael Wilcox.”
  • “David Abner has an Ethical responsibility not to create legal conflicts, especially when it can be detrimental. Also, by joining as a creditor when the lender hired him is borderline illegal. Lawyers should be a cut above. Consequent allowed their manager, Jacob Walthour, to provide confidential information to the media, and Parkview had their Lawyer lose his Ethics, says Ebony spokesman.”
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Risk Update

Conflicts Accusations — MoFo ‘Skullduggery’ Suggested & A Confidential Conflict

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MoFo Accused of ‘Skullduggery’ in Divorce of Google Search Engine Programmer” —

  • “The wife of Scott Hassan, robotics entrepreneur and principal programmer of the Google search engine, is suing Morrison & Foerster for being a ‘willing architect and facilitator’ of Hassan’s scheme to ‘cheat’ her out of millions of dollars after she filed for divorce in 2015.”
  • “In a suit filed Tuesday in Santa Clara County Superior Court, Allison Huynh alleges that Morrison & Foerster violated its ethical and fiduciary duties when the firm picked sides after representing the couple individually in separate business matters.”
  • “The complaint alleges that Paul ‘Chip’ Lion, a Palo Alto MoFo partner, and the firm continued to represent Hassan and some of the couple’s jointly owned businesses even after a family court judge disqualified them from advising him on the dissolution of their marriage.”
  • “Huynh says the firm ‘orchestrated a fire-sale’ of the assets of robotics company Suitable Technologies, which she has a half interest in, according to the complaint. She alleges the deal was an effort to score a personal tax benefit of more than $90 million for Hassan.”
  • “‘We deny all the allegations made by the Plaintiff against the Firm and its representatives and we will address them in the proper forum,’ a firm spokesperson said via email.”

Conflict arises in synagogue shooting defense” —

  • “More than a year into the prosecution of the man accused of firing on a Poway synagogue — killing one person and injuring three others — a conflict of interest has arisen on his defense team.”
  • “Attorneys Kathryn Nester, who is executive director of the federal public defender office, and Kimberly Trimble conferred with three experts, all of whom have vast experience in trying death-penalty cases, and all came to the conclusion that this was not a conflict that can be waived by Earnest, they said in a court filing. They declined to give more details on the conflict.”
  • “‘The nature of the conflict is protected by attorney-client privilege,’ they wrote.”
  • “Attorney and judge conflicts of interest are carefully vetted at the beginning of each case. For one to arise this late is unusual.”
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Risk Update

Postal & Remote Edition — MP Conflicts Accusation, Proposed FLA Bar Opinion on Cross-border IP Practice

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Now MP targets Herbert Smith over Post Office work” —

  • “An MP has urged both the justice and business select committees to investigate the role of law firms – and in particular Herbert Smith Freehills (HSF) – in helping client companies accused of wrongdoing set up compensation schemes.”
  • “As we reported earlier this month, that complaint concerns in part HSF’s work on the Griggs review, which dealt with compensating victims of the fraud but was ultimately deemed flawed and is now being re-run.”
  • “Mr Hollinrake said he was “astonished” that the firm was also advising the Post Office on its recently announced compensation scheme for subpostmasters who suffered a “shortfall” in using the flawed Horizon computer system that led to many being wrongly accused and convicted of theft.”
  • “HSF acted for the Post Office last year in settling group litigation brought by some of the subpostmasters. The firm denies any conflict of interest.”
  • “In his letter to justice select committee chair Sir Bob Neill MP, Mr Hollinrake said: ‘The mere fact that HSF acted on behalf of the Post Office in the legal action with the responsibility to minimise losses should prohibit them from taking any role in a compensation scheme.'”
  • “An HSF spokeswoman said: ‘There is no conflict with the firm acting for the Post Office on this matter.'”

Florida Bar UPL Committee issues proposed opinion stating that out-of-state lawyer may practice federal law remotely from Florida home” —

  • Florida Bar’s Standing Committee on the Unlicensed Practice of Law: Proposed UPL Advisory Opinion FAO #201904
  • “The proposed advisory opinion states that an out-of-state licensed attorney who is working remotely on federal intellectual property rights matters (and not Florida law) from his or her Florida home for an out-of-state law firm and no public presence or profile in Florida as an attorney would not be engaging in the unlicensed practice of law. The advisory opinion will be filed with the Florida Supreme Court on August 17, 2020.”
  • “It is the opinion of the Standing Committee that the Petitioner who simply establishes a residence in Florida and continues to provide legal work to out-of-state clients from his private Florida residence under the circumstances described in this request does not establish a regular presence in Florida for the practice of law.”
  • “Consequently, it is the opinion of the Standing Committee that it would not be the unlicensed practice of law for Petitioner, a Florida domiciliary employed by a New Jersey law firm (having no place of business or office in Florida), to work remotely from his Florida home solely on matters that concern federal intellectual property rights (and not Florida law) and without having or creating a public presence or profile in Florida as an attorney.”
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Risk Update

“Endless Risk” — A Taxing (Tainted) 401(k) Law Firm Disqualification

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Yesterday we highlighted recent writing from the professional responsibility practice at Clyde & Co. Today, sauce for the gander (as my favorite first officer would say) — Here’s the latest from Karen Rubin at Thomson Hine:

Citing “endless risk,” district court DQ’s firm from 401(k) case” —

  • “A New York district court judge earlier this month disqualified a firm representing hundreds of 401(k) plan participants based on a conflict of interest. The judge called the risks posed “endless,” and requested additional briefing on whether the firm would be allowed to remain as counsel in related arbitration proceedings in Missouri. The ruling spotlights the sometimes-thorny conflict issues that can arise in ERISA litigation.”
  • “In two of the actions, The Klamann Law Firm represented profit-sharing plan participants who alleged ERISA violations based on several breaches of fiduciary duty against the participants’ employer, the trust investment manager and the plan advisory committee along with the advisory committee’s individual members.”
  • “At the same time, in Missouri, The Klamann Law Firm was representing a number of claimants, including three individual former members of the plan advisory committee, in arbitration proceedings against the employer and the trust investment manager. Claimants’ claims in the arbitration were nearly identical to the litigation claims asserted in the two New York district court cases.”
  • “Citing its broad discretion to invoke the ‘drastic remedy’ of disqualification whenever a lawyer’s conduct ‘tends to taint the underlying trial,’ the district court noted that the Second Circuit considers adverse representation of current clients improper per se. The burden is on the lawyer to show that there will be no actual or apparent conflict in loyalty or ‘diminution in the vigor of [the lawyer’s] representation.'”
  • “The court noted that claims in the New York District court complaints made it ‘evident’ that plaintiffs intended to sue both the employer and the plan advisory committee for fiduciary breaches committed while two and possibly all three of the individual members were on the committee — the same members The Klamann Firm was representing as claimants in the Missouri arbitration.”
  • “Under many circumstances, a current-client conflict is waivable if each client gives informed consent. Timing is everything, however. Here, the firm said it had obtained consent of its clients — but only too late, wrote the court. Consent ‘needed to be obtained prior to… undertaking representation of adverse interests, not in response to a motion to disqualify.'”
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Risk Update

Money Matters (and Conflicts) — Lack of Firm Financial Controls “Not Unusual” & Wealth Management Services a Poor Practice

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Clyde & Co have launched a new risk newsletter: “Lawyers’ Risk Management Newsletter, July 2020” —

  • “Mr. Wetterman cheated the firm out of USD 361,646.47 by submitting and obtaining reimbursement for 382 separate sham travel expense requests between 2015 and 2019. Unfortunately, this story is not unique or even particularly uncommon.”
  • “This story, and other incidents of similar ilk, demonstrate the importance of the adage ‘trust – but verify.’ The story exemplifies the fact that law firms often repose trust in their lawyers – and even in non-lawyer employees with roles involving access to the firm’s finances – without having in place the appropriate controls to fulfill the firms’ ethical and fiduciary obligations to “verify.” The ethical duties relating to managing client funds are found in Rule of Professional Conduct (“RPC”) 1.15, and the duty not to “engage in conduct involving dishonesty, fraud, deceit or misrepresentation” is found in RPC 8.4 (c). In addition, lawyers owe their firms, and their firms’ clients, fiduciary duties to the same effect. Also important are RPC 5.1 and 5.3 – the duty of supervision.”
  • “It is not sufficient for a firm to place trust in its attorneys and staff, and thereby possibly enable them to steal or embezzle the firm’s or its clients’ funds, without having appropriate oversight policies and procedures in place. Here, the scheme was possible because the firm permitted its lawyers to submit travel expense claims for reimbursement without requiring any appropriate proof of the validity of the claims.”
  • “Regrettably, Thomas Wettermann’s case is not unusual. A strong internal control environment is not just a best practice but a way to protect the law firm, its clients and its employees. Although no set of policies and procedures can prevent fraud completely, putting in place appropriate financial controls will significantly reduce the opportunities for wrongdoing and will help to protect the assets of the firm, not least its good name. The policies and procedures described above are not a comprehensive list. Rather, firms should consult with their outside accountants and advisors on the policies, procedures and controls best suited to their own particular needs.”

N.Y. Lawyer Can’t Also Provide Wealth Management Services” —

  • “A non-practicing New York lawyer who’s been working in wealth management for 20 years and now wants to open a law office and provide investment advisory services to law clients can’t ethically do so, the state bar said.”
  • “‘The conflict between the legal and non-legal services is so severe that informed consent cannot cure it,’ the bar’s ethics committee said in an opinion.”
  • “A state professional conduct rule ‘expressly allows’ lawyers to provide legal and non-legal services to the same client, like lawyer-accounting services, the opinion said. But some ‘dual practice conflicts’ can’t be remedied with informed client consent because of the conflict, it said. The opinion cited the example of lawyers acting as real estate brokers for the same transaction.”
  • “The lawyer could, however, provide wealth management services to non-legal clients if a disclaimer is provided that no lawyer-client relationship is being formed, the opinion said.”

 

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Risk Update

Judicial Conflicts — When Amicus Briefs Create Conflicts Considerations & Other Judicial Demonstrations

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Does a Judge have to recuse if a conflicted party files an amicus brief? Or should the brief be struck?” —

  • “As a general matter, federal judges will recuse if they have some sort of relationship with one of the named parties. Indeed, most clerks will screen cases, to avoid assigning a matter to a judge that would create a potential recusal. Occasionally, conflicted cases slip through the cracks–even at the Supreme Court. Sometimes the identity of all parties isn’t obvious, and a conflict only becomes clear after the case is assigned. But what happens when the conflict arises based on an amicus brief? Friends of the court may file briefs long after the panels are assigned. And these filings may give rise to conflicts of interest. What should a court do in such a case?”
  • “In 2018, the Federal Rules of Appellate Procedure were amended to address this situation. Rule 29(a)(2) provides:
    • ‘Any other amicus curiae may file a brief only by leave of court or if the brief states that all parties have consented to its filing, but a court of appeals may prohibit the filing of or may strike an amicus brief that would result in a judge’s disqualification.'”
  • “In short, if an amicus brief would create a recusal, the court can strike it.”
  • “Judge Andrew Brasher, a new member of the Eleventh Circuit chose a different approach. Today he recused from en banc consideration of Florida’s felon disenfranchise case. There was no conflict with any of the parties. Rather, he identified a conflict because the Alabama Attorney General, his former employer, filed an amicus brief.”
  • “As an ethical matter, I think it better for the judge to step down than to strike the unwitting amicus brief. FRAP 29(a)(2) permits that resolution, but it is eminently unfair to the parties. Put yourselves in the shoes of the attorney who spent time and money writing a brief, only for it to be invalidated. However, this practice sends a clear signal to the market: clients who agree with Judge Ho’s general jurisprudence may be hesitant to hire Gibson Dunn to file an amicus brief for the Fifth Circuit, lest their brief force a recusal.”

Panel: Judges may attend demonstrations, must monitor participation” —

  • “Judges are not required to remain silent on turbulent issues, such as racial justice and police killings. But a California judicial ethics panel had some advice Wednesday for any judges who may be considering attending a protest demonstration or a similar political event: Don’t go, unless you’re sure it won’t raise questions about your impartiality.”
  • “Judges and judicial candidates ‘are not required to surrender their rights or opinions as citizens,’ the state Supreme Court’s Committee on Judicial Ethics Opinions said, quoting from California’s ethical standards for judges. ‘They shall, however, not engage in political activity that may create the appearance of political bias or impropriety.'”
  • “And in an era of social media, the committee said, ‘judges should always assume that their attendance will be known and that their conduct may be subject to comment and reporting.'”
  • “That development may help to explain past ethical advisory opinions that allowed some California judges to attend the massive Women’s March held in numerous cities on the day after President Trump’s inauguration in January 2017. Organizers described the event in advance as peaceful and nonpartisan, and, according to the ethical opinions, participants in the march could maintain their public impartiality as long as they did not identify themselves as judges.”
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Risk Update

Blog Update — Our Continuing Journey

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I’m very pleased to welcome a new sponsor of the Bressler Risk Blog: Accuity.

They reached out some time ago as they look to expand their support of the legal market, particularly in the US, and it became clear that exposure here would be a nice fit for them. (My readers are just the folks they want to reach.)

What this means (and what it doesn’t)
I started this site and newsletter as an experiment, supplementing my “day job” as a consultant with a bit of risk blogging, after a near-decade long risk blogging run in a past life. Coupled with wonderful notes of encouragement from the community, sponsor support will help me keep the machine humming.

Those notes from readers really are indeed motivating and appreciated. For those looking to support the blog, sharing it with your friends and colleagues and encouraging them to join the mailing list is another great way to aid the cause.

  • For anyone curious about editorial implications (this is a risk and compliance blog so the irony of the topic isn’t lost on me), please rest assured that I take that seriously.
  • I generally cover what I personally find interesting. Sometimes that involves a vendor, but most of the time it doesn’t.
  • What you will see moving forward is a new monthly “thank you” post to our sponsors, which will include an explicitly commercial message promoting (hopefully interesting and relevant) content that may be commercial. Email readers will also see a discrete newsletter footer with brief commercial messages.
  • This is well in line with practices other blogs and publishers follow.
  • Fundamentally, the core spirit and focus of the blog remains unchanged.

Oh, and I would note that other sponsors are welcome… So tell your vendors and partners (several of whom are longtime readers as well — hello there) to help themselves reach the risk audience and support BRB.

And, if you’re inclined to lend a bit of attention and consideration to the domain of my new sponsor, I’d certainly be grateful. Here’s the gist of their story and offering:

ACCUITY IN BRIEF

  • US firms are facing growing expectations for Anti-money Laundering (AML), Know Your Client (KYC), and Financial Crime / Counter-terrorism Financing (CTF) compliance — increasingly mirroring the strict standards enforced in international jurisdictions.
  • Accuity supports the demanding challenges facing law firms with the industry’s largest, most up-to-date database of high-risk entities — including Sanctions, Politically Exposed Persons, Adverse Media, Enforcement and State-Owned Enterprise data. The information we make available covers millions of entities in 250 countries and territories, from 1,300 enforcement agencies and 30,000 Media Sources and all global sanctions lists.
  • And this information can be integrated directly into your existing business intake and conflicts software (including purpose built specialist solutions and practice management system modules), or accessed through intuitive, online search and reporting tools.

If this is of interest, please do take a moment to check out some of their more detailed materials at this link, and even fill out their form to get it touch.

If you do get in touch, and tell them you’re doing it because Dan put in a good word, an angel will get her wings, I’m told… >smile<

(Having spent some time on the phone with their account manager, Teddy Peck. I can say that he seems to be a reasonably stand up kind of chap, for a salesperson. And I tend to be pretty hard on those folks… But I’ll leave firms to do their own due diligence on the specifics of their service.)

Now, back to the risk blogging.

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Risk Update

Evolving Staffing Perspectives — Risks and Rewards of Remote Work

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Following yesterday’s post on recruiting, training and developing law firm risk staff, this article  caught my eye. While not focused on the legal profession, this piece in the Wall Street Journal on evolving perspectives on remote work was fascinating, resonated in several respects. It’s well worth a read for anyone navigating these shifting streams: “Companies start to think remote work isn’t so great after all” —

  • “Four months ago, employees at many U.S. companies went home and did something incredible: They got their work done, seemingly without missing a beat. Executives were amazed at how well their workers performed remotely, even while juggling child care and the distractions of home. Twitter Inc. and Facebook Inc., among others, quickly said they would embrace remote work long term. Some companies even vowed to give up their physical office spaces entirely.”
  • “Now, as the work-from-home experiment stretches on, some cracks are starting to emerge. Projects take longer. Training is tougher. Hiring and integrating new employees, more complicated. Some employers say their workers appear less connected and bosses fear that younger professionals aren’t developing at the same rate as they would in offices, sitting next to colleagues and absorbing how they do their jobs.”
  • “Months into a pandemic that rapidly reshaped how companies operate, an increasing number of executives now say that remote work, while necessary for safety much of this year, is not their preferred long-term solution once the coronavirus crisis passes.”
  • “‘There’s sort of an emerging sense behind the scenes of executives saying, ‘This is not going to be sustainable,’’ said Laszlo Bock, chief executive of human-resources startup Humu and the former HR chief at Google. No CEO should be surprised that the early productivity gains companies witnessed as remote work took hold have peaked and leveled off, he adds, because workers left offices in March armed with laptops and a sense of doom.”
  • “Few companies expect remote work to go away in the near term, though the evolving thinking among many CEOs reflects a significant shift from the early days of the pandemic.”
  • “One benefit of working together in person, many executives said, is the potential for spontaneous interactions. Mary Bilbrey, global chief human resources officer at real-estate giant Jones Lang LaSalle Inc., returned to her Chicago office in early June, as the company reopened its spaces. She noticed that she was soon having conversations with peers that wouldn’t have happened in a remote set up—a discussion sparked by a passing question in the hall, for instance. ‘They weren’t going to think about scheduling a 30 minute call to do it,’ she said.”
  • “The toll of extended work-from-home arrangements is likely to affect career development, particularly for younger workers, several executives said… And then there’s the challenge of training employees who began work after the pandemic began and have had to work remotely from the start… They don’t have the same casual day-to-day opportunities to ask more experienced workers for help or advice that they would if they were working in the same office, even as the company has tried to connect people virtually. New employees in marketing and analytics roles haven’t been able to quickly pick up company jargon and shorthand in meetings, leaving some of them lost.”
  • “More companies now envision a hybrid future, with more time spent working remote, yet with opportunities to regularly convene teams.”
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Risk Update

Risk Resourcing — Recruiting Retaining and Developing Law Firm Risk Staff in the Age of Covid-19

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Today’s post is a bit of a self-referencing inception loop, but hopefully will be of interest. I wrote and posted an article on LinkedIn. A brief excerpt below, with the full report accessible via the link. I’d welcome readers (good), the click of the magic “like” button (better) and any comments (best) in the response to: “On Recruiting, Retaining and Developing Law Firm Risk Staff in the Age of Covid-19” —

  • “Last week, I attended another engaging virtual risk round table event hosted by my friends at InOutsource. The session focused on recruiting, retaining and developing risk staff — with an emphasis on navigating the challenges of today’s remote workplace. Participants included risk leaders and managers from large- and mid-sized firms, responsible for conflicts, intake and related compliance responsibilities. Discussion was quite open and illuminating — some highlights and points of interest:”
  • The Retention & Growth Challenge
    • A small conflicts department reported that present circumstances have bolstered their arguments for additional resources to grow the department. Given the strategic importance of client intake and risk management, and lawyer expectations for service, making the business case for increased investment has become easier in some respects.
  • The Recruitment Challenge Meets Remote Opportunities & Challenges
    • At the same time, several participants pointed out that today’s default remote working model is opening up new opportunities and a broader talent pool, as their firms are no longer strictly limited by geography of their home or satellite offices.
    • But others share concerns about opposite side of that equation — that as more firms become more open to broader geographic hiring, competition for talent will increase as well.
  • The Advancement Challenge
    • Another prominent firm raised the question of “advancement,” sharing that conflicts staff would like to stay in place, but also want to see a path for their own careers to develop. Discussion explored how positions, roles and responsibilities can be structured to provide new opportunities for individuals to progress in their careers without having to make lateral moves.
  • Training Tribulations
    • The community commiserated on the true breadth and scope of risk training. It’s not just policy and process, but also technology and other general skills. Those include effective communication — most critically the ability to interact with lawyers in both written and verbal forms — and critical thinking.
    • Others shared Yoda-like challenges trying to teach new resources to “unlearn that which they have learned” — as experienced resources new to their firms struggle to adopt the different policies and practices of their new employers, reverting to legacy approaches instead. In those instances, managers suggested that hiring “fresh” resources with a general law firm background and teaching them conflicts may be more effective.
    • Finally, discussion turned to third-party training resources and learning management. There was active interest in the availability of third-party resources to help firms develop team skills.

Please do see the full article for more detail, including results of an event survey. And do offer up any comments. If this is a hit, perhaps will invite more active dialogue…

 

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Risk Update

Conflicts Allegations — Disciplinary Debate Tied to Penn State/Sandusky Matters (and More)

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Former Penn State General Counsel Reprimanded Over Sandusky Grand Jury Representation” —

  • “The former general counsel of Pennsylvania State University, Cynthia Baldwin, was publicly reprimanded in a live YouTube stream Wednesday over how she represented three former university employees during the Jerry Sandusky child abuse investigation.”
  • “‘Your concurrent representation of these clients created a significant risk that your ability to consider, recommend or carry out an appropriate course of action for each client would be materially limited by your representation of Penn State,’ James Haggerty, chair of the disciplinary board of the Supreme Court of Pennsylvania, said during the reprimand.”
  • “Following the hearing, Baldwin, who served as a justice on the Supreme Court of Pennsylvania from 2006 to 2008, told Corporate Counsel the investigation against her was biased and referred to the process as ‘aberrant.'”
  • “Baldwin was accused of disclosing privileged information while testifying before a statewide grand jury and failing to disclose a conflict of interest to former Penn State vice president Gary Schultz, former Penn State president Graham Spanier and athletic coach Tim Curley.”
  • “In 2018, a panel appointed by the disciplinary board of the Supreme Court of Pennsylvania recommended that Baldwin be cleared of ethics violations. Baldwin said the high court should have followed their recommendation.”
  • “[Chief Justice] Saylor allegedly told Feudale that a lawyer’s disciplinary complaint against Baldwin was forthcoming and that Feudale should ‘assist in every way with providing information in support of the disciplinary investigation.’ Saylor also allegedly said that assistance and discipline was necessary because Baldwin ’caused us a lot of trouble when she was on the Supreme Court with her minority agenda.'”
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