Bressler Risk Blog

“Law firm Paul Weiss fights to remain on Google’s ad tech antitrust defense” —

• “Law firm Paul, Weiss, Rifkind, Wharton & Garrison has asked a U.S. judge to deny a bid from Yelp (YELP.N) and another former client to bar the law firm from representing Alphabet’s Google (GOOGL.O) in litigation over its digital advertising business practices.”
• “Attorneys for Paul Weiss in a filing in Alexandria, Virginia, federal court accused Yelp and News/Media Alliance on Friday of ‘gamesmanship’ in their effort to disqualify the firm from serving as Google’s lead defense counsel.”
• “The U.S. Justice Department and a group of states sued Google in January. Yelp and the news media coalition are not parties, but they claimed in a filing that Paul Weiss was ‘switching sides’ to represent Google on matters that the firm had once counseled them on.”
• “Paul Weiss’s lawyers at Wilmer Cutler Pickering Hale and Dorr denied that the Justice Department’s case was ‘substantially related’ to any of the work that the firm provided to Yelp and the news alliance.”
• “In its filing, Paul Weiss said it has provided no legal work to Yelp or the news alliance since late 2020. The two clients left the firm then when their former Paul Weiss attorneys, Jonathan Kanter and Brandon Kressin, departed and opened a boutique law firm.”
• “The disqualification of Paul Weiss ‘at this late date would cause severe prejudice to Google,’ WilmerHale attorneys told the court. Paul Weiss said it has spent more than 10,000 hours so far on Google’s defense.”
• “Google tried unsuccessfully in September to force Kanter off the ad tech case, based on his prior work in private practice for critics of Google.”

“New Disclosure Site Slow to Post Judicial Stock Trading Reports” —

• “Delays in posting stock transactions and other financial disclosures by US judges to a new database are limiting the utility of a tool designed to improve public transparency of the court system, watchdogs said.”
• “The most recent mandatory securities transaction report available was submitted by a judge in April, according to an analysis by the nonpartisan judicial watchdog Fix the Court and a review of postings through Oct. 9 by Bloomberg Law.”
• “Annual disclosures are due to be published within 90 days of submission, while interim reports must be filed within 45 days of the transaction, under a law that took effect last year.”
• “The information is coming in, but the judiciary’s administrative arm tasked with operating the searchable database has struggled to process and post the annual and periodic disclosures by an estimated 2,500 judges. Things are moving far more slowly than a similar database maintained by Congress.”
• “A backlogged database ‘defeats the purpose of transparency’ as financial interest information ‘loses relevance’ the more time has passed, said Kedric Payne, senior director of ethics at the Campaign Legal Center and former deputy chief counsel of the Office of Congressional Ethics.”
• “The Courthouse Ethics and Transparency Act (P.L. 117-125), signed into law in May 2022, required the judiciary to establish an online database of publicly accessible financial disclosures submitted by life-tenured judges, including Supreme Court justices, as well as bankruptcy and magistrate judges. The law also made those judges subject to a 2012 law requiring federal officials to disclose periodic securities transactions worth more than $1,000 (PL-112-105).”
• “Sen. John Cornyn (R-Texas), a member of the Judiciary Committee and sponsor of the bill, said after passage that the measure ‘will help bring potential conflicts of interest to light and bolster public trust in our judicial system.'”

Hat tip to the reader who sent in this WSJ piece containing additional detail commentary on last week’s update: “American Bar Association Votes to Amend Rule on Client Due Diligence” —

• “Supporters of the change hope the move will help ward off more stringent regulation from lawmakers concerned about the use of lawyers to facilitate financial crimes.”
• “U.S. lawyers on Tuesday voted to adopt a revised rule that imposes a more explicit obligation to vet potential clients, as part of an effort to quell concerns about the use of lawyers to facilitate money laundering and other financial crimes.”
• “In a speech ahead of Tuesday’s vote, Kevin Shepherd, the ABA’s Treasurer, said that the U.S. Treasury Department recently had informed him that a failure to pass the resolution would cause the agency to take immediate regulatory action as well as to lobby for legislation imposing additional obligations on lawyers. ‘It’s simple political reality, and we ignore it at our peril,” Shepherd said.'”
• “The ABA last year lobbied against a bill in the U.S. Congress that would have extended anti-money-laundering regulations for the financial sector to lawyers, accountants and other professional-service providers involved in company formation and money transfer.”
• “Lawyers who aid criminals can be criminally prosecuted, but critics have argued that a lack of enforceable regulation enables some lawyers to continue working for potentially problematic clients while ignoring red flags.”
• “Although the amendments approved Tuesday are only a slight change to the ABA’s existing rules, they proved controversial, with a number of the group’s most prominent members giving speeches both for and against the proposal. The group’s two largest sections, representing business and litigation attorneys, voted before the annual meeting to oppose the resolution. Critics argued that the amendments were vague and exposed lawyers to discipline.”
• “‘The proposed rule opens every lawyer up to potential liability,’ Paul “Chip” Lion, a delegate for the ABA’s Business Law Section, said during a speech before the vote. ‘The presumption will be that the lawyer should have known that the lawyer’s services were being used to commit a crime, had the lawyer just delved a little deeper into the facts and circumstances.'”
• “It isn’t clear how far the new rules will go in convincing the industry’s critics that further regulation is unnecessary. Scott Greytak, the advocacy director for Transparency International U.S., which seeks to fight corruption, called the new rules ‘window dressing,’ saying they would have little effect.”
• “The rules don’t spell out specific steps that lawyers should take in vetting a client, and several observers pointed out that they don’t appear to create a definitive obligation to determine the true identity of a client, such as the beneficial owner of a corporation or limited liability company that seeks a lawyer’s services.”
• “Instead, the amendments add guidance advising lawyers that their due diligence should vary based on the perceived level of risk represented by a client. Under the new guidance, a lawyer’s familiarity with a client might be one factor that gives assurance that less due diligence is needed.”

Same subject, different context, like worth tracking for real estate practices: “US set to unveil long-awaited crackdown on real estate money laundering” —

• “The U.S. Treasury Department will soon propose a rule that would effectively end anonymous luxury-home purchases, closing a loophole that the agency says allows corrupt oligarchs, terrorists and other criminals to hide ill-gotten gains.”
• “The long-awaited rule is expected to require that real estate professionals such as title insurers report the identities of the beneficial owners of companies buying real estate in cash to the Treasury’s Financial Crimes Enforcement Network (FinCEN).”
• “While banks have long been required to understand the source of customer funds and report suspicious transactions, no such rules exist nationwide for the real estate industry.”
• “Instead, FinCEN has operated real estate purchase disclosure rules, known as geographic targeting orders (GTOs), in just a handful of cities including New York, Miami and Los Angeles. The new rule is expected to effectively expand GTOs nationwide.”
• “Transparency advocates pushing for a nationwide rule point to the example of Guo Wengui, an exiled Chinese businessman who, according to prosecutors, used an anonymous shell company to channel illicit profit from a fraud scheme into the $26 million purchase of a 50,000-square-foot New Jersey mansion in December 2021.”
• “Had Guo brought property across the Hudson River in Manhattan, it would have been subject to a GTO and likely flagged immediately to law enforcement.”
• “Guo, a onetime business partner of former Donald Trump adviser Steve Bannon, has pleaded not guilty to fraud charges. His lawyers did not respond to a request for comment.”

I’m pleased to invite our law firm risk readers to participate in the 2023 Risk Staffing Compensation Survey!

Last year’s exercise proved to be a great success. We saw participation from 80+ individuals, who contributed data on 375+ individual risk staff positions. (Let’s see if we can’t top that figure this year, shall we?) The final report came in at 14 pages and certainly proved popular.

I also received many encouraging notes of feedback and input from risk staff, risk managers, and firm leaders.

• Kudos to those managers using this industry data to advocate for and ensure that their team’s compensation is kept in line with industry averages.
• It was great to see several firms using the data to inform their staff recruiting and offer processes
• And it was particularly nice to hear from several individuals who were able to use the data to self benchmark and support their personal career efforts and growth.

This year’s exercise incorporates some lessons learned from 2022.

So if you’re an individual contribution looking to understand how your comp compares to your peers, or you’re a risk manager looking to keep your team (and potential new hires) on par with changing market standards, you don’t want to miss out.

SURVEY DETAILS:

• Participation open to law firm risk professionals only
• All responses will be treated confidentially
• Manager participants sharing data on their/their team’s roles and compensation will receive a report summarizing key findings and analysis
  • (The report may be shared internally within your firm, but not redistributed externally. So if you want the results, your best path is to participate!)
• Individual contributor participants sharing personal compensation data will be receive a personal benchmark compensation summary relevant to their specific role and firm demographics.

The survey will be open for the next month or so and can be accessed here: 2023 Risk Staffing Compensation Survey.

Feel free to share the link with law firm peers and colleagues.

And if anyone has questions, please do reach out to me directly. (Email readers can do that by just replying to this note — it’ll reach me. Others can use the contact form as well.)

Let’s see what we learn this round!

“Due Diligence Missteps Are Costly, and Smaller Firms Are Often Less Prepared” —

• “Skimping on due diligence when it comes to working with new clients can bear heavy consequences for law firms, such as Eckert Seamans Cherin & Mellot, which is in the midst of negotiating a $45 million settlement to make up for a former attorney’s alleged role in helping a merchant cash loan business and an investment services firm defraud investors of nearly $500 million.”
• “The law firm and former partner John Pauciulo are in hot water for their representation of an investment firm that solicited investors for Par Funding, a Philadelphia lending outfit whose owners are now subject to a raft of criminal charges. In the process of going after Par and investment firm A Better Financial Plan, the Securities and Exchange Commission censured Pauciulo for omitting details of risks in materials he prepared for potential investors.”
• “Meanwhile, the owner of the investment firm says in a malpractice suit that Eckert Seamans was negligent in its oversight of Pauciulo, who himself was allegedly negligent in either knowing and not disclosing or else not knowing about the criminal history and shady business practices of the owner of Par.”
• “However, not every firm has the same resources available to conduct proper and thorough due diligence when it comes to clients or affiliated businesses; according to law firm leaders and consultants, smaller firms have fewer resources to dedicate to diligence efforts, often resulting in added risk for the firm. Eckert Seamans, ranked No. 187 in the most recent Am Law 200 rankings, declined to comment on its own due diligence approach for this report.”
• “The firm is also fighting a long-running breach-of-fiduciary-duties lawsuit brought by a former gaming client in Pennsylvania federal court, which alleges it also represented a competitor in matters where the two had adverse commercial interests.”
• “Conversations with consultants and law firm leaders indicated that there is no set industry standard when it comes to law firms conducting due diligence.”
• “Even with fewer resources, there are several warning signs early on in an interaction with a client that might flag future problems for the firm, including one’s ‘Spidey sense’ about a client and its legal needs.”
• “Eileen Garczynski, senior vice president and equity partner at business insurance and risk management firm Ames & Gough, added that she felt ‘firms should be using checklists’ to make sure they address all concerns with a client.”
• “Her checklist of red flags included lack of information about an organization or client, a client having inexplicable revenue growth, a client’s refusal to provide information, stalling tactics, including rescheduling meetings early on, and having an advisory board full of people who don’t actually play a real role in the business.”
• “Garczynski also said that a client having frequent changes in professional relationships, such as switching counsel on a regular basis, might be an indicator of an issue.”
• “Even when attorneys are well-versed in spotting these red flags, however, things might still be missed when firms conduct due diligence. Garczynski pointed to a desire for speed as a possible reason behind neglecting or skipping thorough intake procedures.”
• “‘[There’s] a lot of motivated reasoning that can prevent the lawyer from seeing the warning signs,’ she said. But even larger firms are subject to missteps too. Levin pointed to the stress of the ‘eat-what-you-kill model,’ flagging it as a reason why attorneys may look the other way when red flags pop up.”
• “‘The problem with intake is it’s always so early… there may be a rush to it, so you might not get as much information as you really need,’ [University of Connecticut School of Law professor Leslie] Levin said. ‘Every firm in this country, big, little, no exceptions, has been unpleasantly surprised by a client engaging in fraudulent activity.'”