Overhaul ordered for GM's legal department

GM General Counsel Michael Millikin: Board has asked him to stay, Reuters reported.

UPDATED: 6/5/14 7:31 pm ET

WASHINGTON -- General Motors says its top attorney has survived today’s wave of firings, but outside investigator Anton Valukas is calling for a sweeping overhaul of GM’s legal department based on its handling of the ignition switch crisis.

Valukas’ report, released today, suggests a chronic lack of communication between GM’s attorneys and safety engineers -- and within the department itself.

Outside counsel warned GM’s legal department multiple times through the years “that GM could be accused of egregious conduct,” the report says. And yet, it concludes, General Counsel Michael Millikin didn’t learn of the defect until the end of 2013, even after his department settled lawsuits involving the defective part.

“Until the recall decision was made in 2014, he had not been informed of the lengthy review of the Cobalt’s ignition switch issue in which GM lawyer Bill Kemp had participated for years,” the Valukas report says. “He also had been unaware of the litigation involving fatal accidents by Cobalt drivers.”

Speaking to reporters today, GM CEO Mary Barra said the list of 15 employees separated from GM doesn’t include Millikin, who has worked for GM since 1977 and became general counsel in 2009.

The GM board asked Millikin to stay beyond the mandatory retirement age of 65, a GM spokesman told Reuters today.

The list of 15 departures does include Kemp, who could not explain in interviews with Valukas’ investigators why he had not told his boss about the ignition switch problems. He is no longer with the company, two sources told Automotive News.

Lawrence Buonomo, a senior GM lawyer who oversaw product-liability cases, has also left GM with the release of the report's findings, a source familiar with the matter said.

Buonomo headed committees beginning in March 2012 that decided how GM would settle lawsuits filed by accident victims, The Wall Street Journal reported. The Journal first disclosed Buonomo's departure late Thursday.

According to his Linkedin profile, Buonomo joined GM in August 1994 and handled commercial and class action litigation, as well as supplier insolvency and restructuring matters. He had also served as the administrative head of GM's in-house litigation team.

One of the committees chaired by Buonomo, the Roundtable, existed to evaluate legal claims, but a number of lawyers said it also served to detect safety problems, The Journal reported, citing the Valukas report.

The report signaled Buonomo out as a lawyer who didn’t share that view of the Roundtable committee's primary role.

“Buonomo, for example, said that it was not the Roundtable’s function to spot trends and that if a lawyer had to flag a trend, then the system had already failed,” the report states.

Valukas’ advice for fixing the legal department includes regular meetings between the global vehicle safety team and the legal team, regular talks between product litigation attorneys and the litigation manager about safety trends, and making one attorney a safety watchdog for the legal department.

Among the problems he identified:

-- GM attorneys reached settlements without telling the boss.

At one point, GM attorneys struck a $5 million settlement with a plaintiff over the defective ignition switch, but didn’t tell Millikin about it; $5 million is the largest settlement that GM allowed mid-level legal managers like Kemp to authorize without getting permission from the general counsel.

-- GM attorneys ignored the advice of outside counsel.

The report says that in July 2013, outside legal counsel warned GM attorneys that plaintiffs could make a “compelling” case that GM had known about the defect since 2005 and “essentially has done nothing to correct the problem for the last nine years.”

No one told the general counsel at any point, and Delphi, which supplied the defective part, wasn’t contacted for another three months.

-- Engineers got the impression that lawyers wanted them to keep quiet.

A presentation first released last month by the National Highway Traffic Safety Administration showed that engineers were encouraged to avoid words like “problem,” “safety” and “defect,” and instead use phrases like “does not perform to design.”

Valukas’ investigation also found that GM employees didn’t take notes at many safety meetings “because they believed GM lawyers did not want such notes taken.” There is no record of such an order, but it reached the level of “urban myth,” so for many meetings, investigators do not know who attended or what was discussed.

Mike Colias of Automotive News and Reuters contributed to this report.

You can reach Gabe Nelson at gnelson@crain.com

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