“Covington Revenge Deepens Worries of Defending Trump Targets” —

• “President Donald Trump’s decision to punish Covington & Burling for representing former Special Counsel Jack Smith will feed some firms’ worries about letting lawyers volunteer to represent former Justice Department attorneys.”
• “Private attorneys seeking to represent DOJ workers being forced out or investigated had already faced pushback from their firms’ executive committees over concerns such work will hurt their brands and cut into billings, according to interviews with 12 attorneys.”
• “Some firm leaders, citing corporate clients threatening to walk if they get crosswise with Trump, have rejected outright or put up roadblocks to partners seeking approval to represent DOJ lawyers, FBI agents, and other civil servants who’ve faced various forms of attack, three lawyers familiar with the decisions told Bloomberg Law. That was before Trump’s executive order Tuesday pulling the security clearances of Covington lawyers and vowing to cancel any government business with the firm.”
• “‘I continue to see as I reach out and recruit lawyers to help me that there is an absolute battle in many of the firms between playing a role or staying out of it,’ said Mark Zaid, a national security lawyer who’s been helping Trump’s perceived foes at DOJ and other agencies match with pro bono counsel from large and small shops.”
• “Zaid last month sued on behalf of FBI agents to halt the administration from releasing identities of those involved in Trump-related investigations. He said the problem is pronounced at law firms that have well-established Washington offices and are governed by out-of-town managing partners.”
• “There are Democratic and Republican partners at firms who are ‘gung ho and really want to play a role in challenging this administration,’ but they’re getting pushback from leadership, Zaid said. It’s typically over the unprofitable time suck of pro bono matters and the potentially negative public relations impact on existing and prospective clients, added Zaid, who himself had his security clearance pulled by Trump earlier this month.”
• “The attorneys declined to name law firms due to the sensitive nature of internal deliberations.”
• “Individual attorneys want to enter what they see as a nonpartisan battle to preserve democracy by filing merit systems complaints for terminated federal employees, representing Jan. 6 prosecutors under investigation from DOJ and Congress, or participating in litigation to halt Trump policies. Firms’ senior decisionmakers, however, agonize about the sustainability of representing current and former government employees opposite the administration, according to multiple attorneys.”
• “Such strain isn’t new, but one Big Law partner said he’s never witnessed this level of concern in which firm leadership worries they could jeopardize their economic future by protecting the rule of law.”
• “‘I am seeing from individual attorneys who are former DOJers a real wakeup moment with the Thursday night massacre’ in which multiple prosecutors resigned over leadership’s order to dismiss charges against New York’s mayor, said Erica Newland, who leads Protect Democracy’s civil service protection project. ‘They are enraged and understand the existential nature of the threat for both the culture and norms of the Department of Justice.'”
• “Zaid said that some Big Law partners have found a workaround when firm leaders block their involvement. They’ve continued supporting the cause in the background, while letting lawyers from other firms sign court filings, he said. This can protect the reputation of white collar defense partners when later advocating for corporate clients, such as in urging DOJ to decline prosecution.”
• “Adding to firm leaders’ concerns is that a few competitors have warmed up to Trump, a significant turnabout from when much of Big Law shunned the president following the Jan. 6 Capitol insurrection.”

“Elon Musk’s DOGE Adventure Leads to Knotty Accounting Question for Tesla” —

• “How much influence does Elon Musk have over the U.S. government? Enough that Tesla will need to make a judgment call on a disclosure issue that once would have been unthinkable for an American private-sector company to contemplate.”
• “Here is the question at hand: Are Tesla and the government ‘related parties’ for purposes of generally accepted accounting principles?The answer would appear to be yes, as wild as that might seem.”
• “As the functional leader of the Trump administration’s Department of Government Efficiency, or DOGE, Musk has rapidly amassed enormous power over vast portions of the U.S. government, nearly wiping out entire agencies and targeting others for elimination, while directing mass employee layoffs. Officially, Musk has been designated a ‘special government employee.’ He also is synonymous with Tesla, the electric-vehicle maker where he is chief executive, the largest shareholder and the face of the company.”
• “The related-party designation would mean Tesla, in its disclosures to investors, could have to start reporting transactions it has with the government if they are significant. It also would underscore how powerful Musk has become. U.S. accounting standards say the reason for requiring such disclosures is that ‘transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist.'”
• “Other public companies have named the U.S. government as a related party before in their disclosures, including American International Group, General Motors, Fannie Mae and Freddie Mac. But that was because the government had bailed them out and taken large ownership stakes during the 2008 financial crisis. If Tesla were to start identifying the government as a related party in its reports to investors, it would be because of the amount of control Musk wields over the government, not the other way around.”
• “Under U.S. accounting standards, Tesla and the government would be considered related parties if one of them ‘can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.'”
• “Jack Ciesielski, founder of the asset manager R.G. Associates in Towson, Md., and a member of the Financial Accounting Standards Board’s Emerging Issues Task Force, said Tesla and the government fit that description. ‘Tesla and Musk have significant influence over the U.S. government,’ he said. ‘I don’t think there’s any definition you can come up with that says they’re not related parties.'”
• “The same analysis would apply in principle to Musk’s other companies, including SpaceX, which has billions of dollars of federal contracts, and the social-media company X. However, unlike Tesla, those other companies aren’t publicly held, so they don’t file their financial statements with securities regulators.”
• “Tesla in its latest annual report identified several of Musk’s other companies as related parties, including SpaceX and X. It said its transactions with those companies didn’t have a material impact on its financial statements. Tesla didn’t say how much of its $98 billion of revenue last year came from the government. The company didn’t respond to requests for comment.”
• “The importance of Tesla’s relationship with the government goes beyond commercial transactions. Tesla customers can receive as much as $7,500 in federal tax credits for the purchase of electric vehicles, under current law. Tesla also has been the subject of numerous government investigations, including by the National Highway Traffic Safety Administration, where DOGE has been directing layoffs.”
  Tesla mentioned DOGE only once in its last annual report, filed Jan. 30. In a risk-factor disclosure, Tesla said it is highly dependent on Musk’s services and that ‘he does not devote his full time and attention to Tesla,’ noting that he holds management positions at five other companies and is involved with other ventures, as well as DOGE.”
• “Listing the U.S. government as a related party might not trigger any other immediate changes to Tesla’s books, and it shouldn’t be a problem for Tesla shareholders. If the government and Tesla do significant amounts of business together, the related-party designation would help provide transparency into the extent of those dealings. Investors would be the intended beneficiaries of the disclosure. Taxpayers, too, could benefit from some additional sunlight.”

“Ethics ruling bars law firm from taking hospital clients in Blue Cross case” —

• “A judge in Alabama has barred a large U.S. law firm from representing plaintiffs in major litigation accusing Blue Cross Blue Shield of underpaying hospitals, physicians and other medical providers for years.”
• “The decision on Wednesday [2/26] was a rebuke for 1,100-lawyer law firm Polsinelli, which is known for representing healthcare companies and which had been advising clients on potentially opting out of a $2.8 billion class-action settlement in the Blue Cross case in order to sue the insurer on their own.”
• “Chief U.S. District Judge R. David Proctor in Birmingham said in his ruling that attorneys who now work at Polsinelli had earlier represented Blue Cross Blue Shield of Alabama in the case, creating an ethical conflict.”
• “‘Lawyers who until recently did substantial work for (Blue Cross) in this litigation are now at a firm that is taking materially adverse positions against it — in that same litigation,’ Proctor wrote in his order.”
• “In the underlying litigation, hospitals and other health providers claimed Blue Cross and some of its affiliates violated antitrust law by dividing the country into exclusive areas where they agreed not to compete with each other. The providers’ class action, filed in 2012, said the alleged conspiracy increased the cost of insurance and drove down reimbursements. Blue Cross Blue Shield denied wrongdoing but agreed in October to settle with the plaintiffs for $2.8 billion.”
• “Alabama-founded law firm Maynard Nexsen had been one of the firms defending a Blue Cross affiliate in the case, Blue Cross Blue Shield of Alabama, billing thousands of hours. In 2024, some of the Maynard Nexsen attorneys left the firm to join Polsinelli, the decision said.”
• “Lawyers for the plaintiffs who negotiated the settlement complained earlier this month that a different Polsinelli lawyer was talking with clients about opting out of the deal and potentially filing their own lawsuits, violating ethics rules against conflicts of interest.”
• “Attorneys for Polsinelli denied that Polsinelli’s hiring of a handful of lawyers from Maynard Nexsen created a conflict. Polsinelli said clients that are weighing whether to accept the settlement did business with non-Alabama Blue Cross companies. ‘The right to counsel of one’s choosing is a bedrock principle of American jurisprudence,’ Polsinelli told Proctor.”