Biglaw

Skadden Partner Retires While Prosecutors Allege 'Serial' Misstatements

Skadden argues that it made innocent mistakes, but the bottom line is that the firm should never have found itself in this position in the first place.

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The Biglaw behemoth may have stepped into an ethical morass when a veteran partner withheld evidence from prosecutors for years, erroneously claiming it constituted work product. This is the tangled web a firm can weave when it opts to represent both a company and its executive in a conflagration of related civil and criminal matters.

Now the partner, Eric Waxman, has left the firm. Early retirement at 58 years young. In his wake, his old firm mounts a court battle to defeat a disqualification motion brought by the government. Waxman and Skadden maintain that it was all a series of innocent mistakes. Does that excuse hold water? Judge Andrew Guilford will have to decide later this month.

The case spirals out of the acquisition of AMO by Abbott Laboratories in early 2009. James Mazzo, the CEO of AMO, allegedly couldn’t keep his trap shut and told his ballplayer buddy Doug DeCinces of the Baltimore Orioles about the deal. The government says that DeCinces told his teammates and they all traded their way into the maw of NYSE’s fraud protection system.

Gabe Friedman, at Bloomberg BNA’s Big Law Business, explains where Skadden and Waxman went wrong:

Skadden was AMO’s corporate transactional counsel at the time, and Waxman interviewed its then-CEO Mazzo, who disclosed he was friends with DeCinces, one of the individuals on the NYSE list, according to prosecutors. Waxman also interviewed DeCinces.

Meanwhile, Skadden also began representing Mazzo — in addition to AMO — in anticipation of insider trading investigations. Exactly when this happened is in dispute: Skadden attorneys claim its representation commenced in February 2009 but prosecutors allege Skadden started representing Mazzo in July 2009.

In 2011, prosecutors served Waxman with a grand jury subpoena to testify about what DeCinces had told him.

But in letters and court documents, Waxman claimed his interview of DeCinces was conducted for Mazzo, and was therefore protected under the work product rule. He also claimed AMO never asked him to interview anyone for the NYSE inquiry. Based on Waxman’s statements, and also a sworn declaration from Mazzo, the court quashed the subpoena for him to appear and testify to the grand jury.

Oops. And the crux of Skadden’s defense is that they just kind of forgot who requested these interviews and if they were ever shared with AMO. And, hey, maybe that’s true. This is a complicated case. Lot of ins, lot of outs, lot of strands to keep in the ole Duder’s head. Unfortunately for Skadden, innocence doesn’t cut it for a top-tier firm.

Perhaps they’ll prevail in not getting booted off this case, but Skadden’s Richard Marmaro makes a classic understatement when he declares, “Skadden has already accepted the harm to its reputation caused by Mr. Waxman’s mistakes before the Court.” Well, yeah. These just aren’t mistakes that Skadden can afford to make, innocent or otherwise. As a veteran of these sort of cases, it’s standard freaking operating procedure to bring in another firm to represent the officers if there’s any risk they may have acted against the best interests of the company. The company that is, you know, your client. How did a firm of Skadden’s size and stature convince itself that it didn’t have to do this?

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Once the firm had any inkling that Mazzo may have, individually, put the company at risk, it was time to deliver the Upjohn warning and shuttle him off to another lawyer. Even if, as here, AMO and Mazzo decided to waive any potential conflict, it’s just a boneheaded move that risks… well, exactly this situation.

Instead, the firm continued to represent both the company and the executive accused of insider trading, taking all the lumps associated with a messy, conflicted mess of representations. Which is bad enough if Skadden’s right that its misrepresentations were innocent, but the government’s not too sure. As is so often the case, the prosecutors urge the court to “follow the money”:

Prosecutors wrote that Waxman made intentional misrepresentations in order to conceal evidence – including what he learned while interviewing DeCinces in 2009 – from them. Further, they cited public records that indicated the firm billed at least $6.3 million between 2011 and 2013 creating “a substantial financial interest” to continue representing Mazzo despite what prosecutors described as a conflict of interest.

“The adverse impact of Skadden’s misconduct is hard to overstate,” prosecutors wrote in their motion seeking to disqualify the firm.

That smacks of hyperbole. And Skadden argues as much, accusing the government of filing a motion “replete with false accusations and innuendo.”

But regardless of whether or not Skadden can prevail in keeping on the case, as Marmaro said, the damage to their reputation on this one is done.

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Skadden Partner Retires Amid Questions about Conflicts [Big Law Business / Bloomberg BNA]

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