In the News - Full Article
Chicago Daily Law Bulletin
FIRM CULTURE, COMPETITION LINKED TO ETHICS
By Kate Schott; Law Bulletin staff writer
The competitive nature of a large law firm and its high expectations of lawyers to generate revenue may, at times, contribute to unethical decisions in practice, a law professor at Georgetown University told Northwestern University School of Law students Tuesday.
Milton C. Regan Jr. spoke about his forthcoming book, "Bankrupt in Milwaukee: The Story of a Wall Street Lawyer's Fall," at Northwestern's Pope & John Lecture on Professionalism.
He told the story of a young, driven partner in the New York law firm of Milbank, Tweed, Hadley & McCloy who was sentenced to 15 months in prison for not disclosing a potential conflict of interest in a bankruptcy case.
The story details John G. Gellene, who represented Bucyrus, a Milwaukee mining equipment manufacturer that filed for Chapter 11 bankruptcy in 1994. Gellene failed to disclose that the law firm represented South Street Funds, a secured creditor of Bucyrus, in two unrelated cases. Some say Gellene was a dishonest person while others said he was "pressured" by his colleagues into withholding the conflict of interest information, Regan said. But the Georgetown professor said the story is "not that black and white."
"It was on that theory that I set out to dig a little deeper and complicate things a bit," Regan said.
He said several factors contributed to the demise of Gellene's career, beginning with the lawyer himself. Gellene was a high achiever, who often worked in isolation and billed about 3,000 hours a year. And although Gellene passed the bar in both New Jersey and New York, "he never got around" to filling out appropriate paperwork in the latter state, Regan said. Thus, Gellene was never technically licensed to practice in New York.
Another factor was the culture of the large New York law firm, which expressed a desire in an internal memorandum to increase bankruptcy work, Regan said. Milbank, Tweed also rewarded attorneys who generated revenue through billable hours or client recruitment.
But what Regan said he found most compelling in his research of the case was the norms of a large law firm and specifically of a transactional law practice.
In the mid 1990s, Milbank, Tweed hired Lawrence Lederman, known for his work in corporate law, and mergers and acquisitions. Regan said he wonders if Lederman possibly had a role in Gellene's failure to disclose the conflict of interest because Lederman's work in transactional law reflected "the sense that conflict is not a big deal." Waiver of a potential conflict of interest is a common, informal process in transactions, Regan said.
Besides, Regan said, Gellene could have rationalized that if the conflict of interest rule was to be applied literally, then no major New York law firm could represent a debtor because they also represent so many creditors.
As a result, Regan said, Gellene may have felt full disclosure was not necessary.
"I think the kinds of factors identified are not unique to Gellene," Regan told the students. He suggested they broaden their "moral imagination" by identifying ethics matters in their own future cases.
And he told students not to underestimate a good mentor.
"Mentoring doesn't stop when you make partner," Regan said.
Before joining Georgetown in 1991, Regan worked in the law firm of Davis, Polk & Wardwell in Washington D.C. where he defended attorneys and accountants in liability and white-collar criminal actions. He also served as a clerk for the late U.S. Supreme Court Justice William J. Brennan Jr. and U.S. Supreme Court Justice Ruth Bader Ginsburg when she was a judge in the U.S. Court of Appeals for the District of Columbia.
Besides legal ethics and jurisprudence, Regan specializes in family and property law.
