On Tuesday, Ben Hallman at AmLaw Litigation Daily overcame his ire and did a little investigating. His hard work paid off with confirmation that Joseph Allerhand (Columbia BA ’75, Georgetown JD ’78) of Weil, Gotshal & Manges is representing AIG in the bonus investigation, following on previous work he’s done for the company.
Today, Hallman’s colleague Zach Lowe throws Hogan & Hartson under the bus. According to his sources, the firm sent a team of lawyers to the Congressional hearing. At least seven partners, including firm chairman J. Warren Gorrell (Princeton AB ’76, Virginia JD ’79), refused to comment.
Here’s the problem I have: I will bet dollars to donuts that Geithner asked some variation of “Do those contracts mean we have to pay?” And of course, the lawyers looked at the four corners of the contract and said “Yes.” Maybe they even added “…and if you breach, you’ll be exposed to double damages under some Connecticut law.”
Geithner asked the wrong question. He should have said “How can I get out of paying these contracts?” If he phrases the question that way, the answer is everything you’ve seen elsewhere: public policy exception, changed circumstances, employees are terminable already and not entitled, etc. Frankly, I suspect he got the answer he wanted.
But this is why you can’t make decisions based solely on outside counsel’s advice. Lawyers in general like to act as if contracts are sacrosanct. They’re not. There’s a good reason there’s such a thing as an “efficient breach.” Parties are free to act in the manner that makes the best economic sense. But you’ll almost never get a lawyer to give you a straight-up recommendation to breach intentionally – particularly outside counsel.
Geithner took the chickenshit route. He figured he could just report that AIG was “legally obligated,” based on two major firms’ advice, and that would keep him out of trouble. Woops.
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