July 18, 2014 at 11:33 am

Daniel Howes

Embattled legal chief tests GM's culture of loyalty

GM's General Counsel Michael Millikin drew fire at Thursday's hearing. (Lauren Victoria Burke / AP)

Score two for the Senate in the deadly ignition-switch recall case of prosecutors-turned-senators vs. GM’s chief lawyer.

In anticipation of testimony Thursday, where General Motors Co.’s general counsel, Michael Millikin, ended up sounding vague and unsure who does what on his staff, Missouri Democrat Claire McCaskill posed the question GM struggled to answer: “How in the world in the aftermath of this report did Michael Millikin keep his job?”

How, indeed, considering the serial failures of GM’s legal staff detailed in a 315-page report by Anton Valukas, chairman of Jenner Block and a former U.S. Attorney in Chicago. And given Millikin’s muted performance Thursday before a Senate Commerce subcommittee, it’s fair to ask how long the GM veteran lawyer will remain on a job he’s held since July 2009.

“I respectfully disagree,” CEO Mary Barra — not Millikin — answered McCaskill, the subcommittee chair. “Mike Millikin is a man of high legal integrity with extensive global experience. I need him on my team.”

After the hearing, Barra reiterated her defense: “When that man sees an issue, he is the first to champion doing the right thing. I want him as part of my leadership team. He’s a key part of the team.”

Whatever he saw, he saw too late, and his only defense beyond firing a few lawyers and shaking up his staff has been to say he didn’t know. It’s true: Millikin does have extensive international experience, having searched the globe for purloined GM purchasing documents in the 1990s, worked the ill-fated alliance with Fiat SpA in the early 2000s, and done an obligatory tour on the supervisory board of GM’s European unit, Adam Opel AG.

He’s got a reputation inside GM as a “good lawyer.” He worked closely with the past six CEOs, earning a reputation as a stickler for the rules and steeped in corporate law. He is considered to be very close to Barra, several insiders say, which may explain why she is openly resisting suggestions the 37-year GM lawyer should begin his retirement soon.

Like CEOs before her, Barra is known to be intensely loyal to colleagues with whom she’s worked — an endearing trait that can prove fraught in a CEO trying to manage an internal crisis. Just ask Rick Wagoner, who confided after his unceremonious ouster in March 2009 that one of his few regrets was his demonstrated tendency to stick too long with underperformers.

Recruiting a new general counsel from the outside, and getting him or her up to speed amid such a complicated and high-profile legal mess, would be enormously difficult, the thinking goes. But is a general counsel whose staff was warned four separate times of potential exposure to punitive damages in connection with the ignition-switch recalls, whose lawyers failed to connect mounting lawsuits to the switches, whose tenure is synonymous with poorly communicating silos, the credible choice to lead systemic change of GM’s legal staff?

Outsiders, including GM’s critics in Congress, can be forgiven for answering no. They know what they see, and that’s evidence of a legal staff under Millikin that didn’t communicate effectively with engineering or safety, didn’t heed the warnings of outside counsel, didn’t alert the company’s top lawyer, the CEO or the directors to a crisis almost certain to affect GM’s books for years to come.

Barra “is making a valiant effort to change a calcified corporate culture that was dominated by an incompetent legal department,” McCaskill told the St. Louis Post-Dispatch after the hearing. “The thing that worries me is that I think she has a blind spot about Mr. Millikin and some other top lawyers of the company ... It is hard for me to imagine that she can truly get on the other side of this until the general counsel is changed.”

The recall of defective ignition switches blamed for at least 13 deaths and dozens of accidents, part of global recalls totaling more than 29 million vehicles worldwide, is serving to question Millikin’s abilities as a manager of GM’s sprawling legal team. Each new round of hearings, and a continuing stream of news reports, shows his legal staff to be uncommunicative, lacking candor and rife with incompetence.

“If GM is really serious about changing its culture,” said Sen. Richard Blumenthal, D-Conn., “the place to start is in your legal department. My view is the team needs to change. Right now the buck stops at an empty desk. This company is not well served by your continuing.”

Blumenthal, a former five-term attorney general of Connecticut, has emerged as a fierce critic of GM and its lawyering. He wants the criteria of its planned compensation fund expanded; he’s co-sponsoring legislation with Sen. Edward Markey, D-Mass., to track vehicle safety defects; and his disdain for Millikin and the shop he runs is palpable.

None of that is a surprise to Millikin, who spent the past three days prepping for his Senate appearance. Described by people who know him well as an occasional “hot head” bordering on volatile, Millikin and his colleagues decided the wisest course to pursue before a committee headed by McCaskill, a former prosecutor from Kansas City, would be to chose cooperation over confrontation and play it cool.

Whether that worked, and what dividends it may pay, remains to be seen. If it is true that mid-level lawyers failed to inform GM’s top cop of the festering ignition-switch debacle blamed for deaths, accidents and corporate negligence, the burden is on Barra and Millikin to prove that their congressional inquisitors don’t have a legitimate point:

Namely, that the road to restoring GM’s credibility runs through a general counsel’s office tarnished by mistakes of the company’s own making.

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Daniel Howes’ column runs Tuesdays, Thursdays and Fridays.