Risk Update

Conflicts Considerations — Lawyer Board Service Risk Management, Federal Conflicts Rules Evolving

Be Aware of Risks in Serving on an Outside Board of Directors” —

  • “It is not uncommon for lawyers in private practice to join a board of directors for an outside organization. The opportunity may be in support of a cause of personal importance or for a private company.”
  • “At the outset, it can be helpful for the lawyer acting as a board member to define the scope of his or her role—specifically, whether the lawyer is acting as counsel to the board or whether he or she is simply a member of the board who happens to have a law degree.”
  • “Even where a lawyer is serving on the board in a nonlawyer capacity, attorneys may nevertheless feel tempted to provide legal advice to the organization. It is also possible that other members of the board may even solicit, or expect to receive, the attorney’s opinion as to the legality of the organization’s plans or ventures.”
  • “An attorney’s role on a board of an organization may give rise to alleged conflicts of interest for the attorney and the attorney’s law firm, regardless of whether there is an attorney-client relationship between the attorney and the outside organization.”
  • “Law firms can consider whether to require that their lawyers obtain firm approval prior to any board membership service, while also retaining the right to revoke approval. This is not required by the rules of professional conduct, but would allow law firms to evaluate the pros and cons of outside board service from a client service or even a public relations perspective.”
  • “The policy could vary depending on whether the entity is for-profit or nonprofit, or whether the organization is a client of the firm. It may also be worth noting the attorney’s relationship with the organization in the firm’s conflicts clearance database to avoid any potential conflicts with current or future clients.”
  • “Even where there is no actual or apparent conflict of interest, lawyers serving on outside boards can consider the optics of their role. Indeed, when an attorney serves on a board, the public may view the attorney’s law firm as supporting or having an association with the organization. This is especially so when the outside organization uses the board member’s firm name or logo to identify the board member.”
  • “To counteract the appearance of a formal relationship, law firms may consider implementing restrictions on the use of their name or logo, particularly for organizations with strong public viewpoints or political reputations.”
  • “Another issue to consider is ensuring adequate insurance coverage when serving as a board member to an outside organization. Generally, a law firm’s professional liability insurance only provides coverage for allegations of negligence in the provision of legal services in the event of a claim against the firm.”

Citing ProPublica’s Reporting on McKinsey, Senators Propose Bill Addressing Contractors’ Conflicts of Interest” —

  • “McKinsey consulted for the FDA without informing the agency of its work for opioid makers. Now lawmakers have introduced a bill to ensure federal contractors disclose conflicts of interest arising from private-sector work.”
  • “A bipartisan group of senators announced a bill this week aimed at curtailing the risk of improper influence when companies do work for both the federal government and businesses or other clients. Under the legislation, federal agencies would require prospective contractors to disclose business relationships with ‘public, private, domestic, and foreign entities’ that might pose a conflict of interest.”
  • “Existing federal rules already require the disclosure of actual or potential conflicts, which U.S. government agencies rely on to determine whether the situation can be mitigated or should disqualify a company from working on a given project. But most attention has focused on conflicts arising from work on different federal government projects. The question of how the existing rules apply to a contractor’s corporate clients is an issue that has received scant attention until recently, experts in contracting law say, and the new legislation seeks to remove any ambiguity around whether companies have to disclose possible conflicts arising from private-sector work.”
  • “There’s no evidence that McKinsey consultants working at the FDA took steps to benefit the firm’s commercial clients. Yet existing federal procurement rules require contractors to disclose relationships that present not only actual but also potential conflicts of interest, as well as ‘the existence of any facts that may cause a reasonably prudent person to question the contractor’s impartiality because of the appearance or existence of bias.’ Those rules were incorporated into McKinsey’s FDA contracts, which ProPublica obtained after filing a lawsuit under the Freedom of Information Act.”
  • “Jessica Tillipman, an assistant dean and government procurement law expert at George Washington University Law School, called the legislation a welcome development. As government contractors have merged in recent decades, the industry has grown more concentrated, increasing the risk of conflicts of interest, and the federal contracting industry, Tillipman said, could use clearer guidance on disclosure requirements tied to the private-sector work of government contractors.”
  • “‘Any attempt to address these growing problems is a good thing,’ Tillipman said, ‘and important to ensuring that we reduce these risks in the government procurement system.'”