Tuesday, November 15, 2011

What if Penn State had in-house counsel in 2002?

Penn State

If there had been a general counsel at Penn State in 2002, would Joe Paterno still be its head football coach?  We will never know for sure, but I have to think that events might have turned out differently and better for everyone involved.

Missing from media reports is the fact that Penn State had no in-house general counsel’s office when the key events of 2002 occurred.  Instead, the general counsel role was performed by a local outside law firm for more than five decades.

The scandal.  As has been widely reported"In 2002, a graduate assistant allegedly saw [former Penn State football coach Jerry] Sandusky raping a boy in the showers of a campus athletics facility.  The graduate student . . . informed [head coach] Joe Paterno. . . .  Paterno then alerted his boss, the school's athletic director [who in turn informed the University's president]."  See CNN reportNo one at the University reported the incident to the police as required by law.  Subsequently, it is alleged, more incidents of child abuse occurred.  See CNN timeline.

Last week, upon learning of the events as reported by a grand jury, the University’s board of trustees fired its legendary coach (Paterno) and the University’s president.  See Penn State announcement.

What if there had been an embedded general counsel at Penn State?  It wasn’t until January 2010 that Penn State appointed a former Pennsylvania Supreme Court Justice, Cynthia Baldwin, to serve as the University's first employed general counsel and chief legal officer.  Her appointment included a mandate to help establish and organize the University's Office of General Counsel.

As stated in a January 2010 press release, when the University announced the hiring of Baldwin as its general counsel:

“The University's decision to create an in-house legal counsel is based on a recommendation from an external peer review conducted last year.  The conventional model used now by peer institutions is to have in-house counsel oversee legal work and to perform core activities such as reviewing contracts and policies, establishing procedures, and advising the Board of Trustees and senior management."

A painful leadership lessonMost leadership lapses don’t hurt outside of the pocketbook.  This one does, painfully.  Additional children may have been abused after the 2002 incident (if allegations are true).  Reputations have been severely tarnished or destroyed.  And, as to the pocketbook, there is speculation that Penn State stands to lose sizable millions of dollars in booster contributions and other revenues.

There are some parallels to the Ohio State University football scandal exposed earlier this year, which resulted in the firing of OSU’s revered football coach Jim Tressel.  See Jim Tressel - I'd hate to be your compliance officer.  Both coaches (Paterno and Tressel) had stellar reputations for their ethical conduct and as positive role models.  Their dismissals suggest, unfortunately, that both were participants in significant leadership lapses.

No guarantees, but still the better practice to have in-house counsel.  A key benefit of having in-house counsel is that they are embedded in the organization.  As such, they are closer to the information loop, and they are better positioned to prevent or mitigate legal compliance gaps.

There is no guarantee that the presence of an in-house general counsel at Penn State would have prevented more harm.  Ohio State had a general counsel and it didn’t prevent Jim Tressel from losing his job.  And more recently, it has been reported that T
he Citadel had its general counsel involved in a 2007 investigation of alleged abuse, and yet The Citadel still failed to report the incident to law enforcement officials.  See ReVille Citadel accusations detailed in documents.

The flip-side of these benefits is that the status of in-house counsel as employees of the organization sometimes impacts the perception of their “independence” (or their actual independence).  Occasionally, this employee status will weaken the influence that in-house counsel have in getting the organization to take the more difficult (but better) path within a range of arguably permissible conduct. 

In those most challenging of circumstances, in-house counsel might engage an outside law firm to provide a supplemental or independent legal review, as Penn State has just announced it might do to investigate the current scandal. See Statement by Pennsylvania State Board of Trustees.

Notwithstanding these disappointing outcomes, the optimist in me believes that in-house general counsel are in the best position of anyone in senior management to provide the leadership needed to take unpopular but better courses of action.

This summary was prepared by Perry Cone and posted at LeadingInHouse.com

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