Law firms make a good deal of money from delivering legal opinions to client guaranteeing the legality of certain transactions. It’s a largely under-reported but highly profitable business for law firms. Clients need to hedge the legal risk of their transactions—risks that a purchase of assets by a troubled company might be annulled when the company goes under, for instance—and law firms assume part of that risk by issuing letters to clients telling them everything can be okay. If the opinion turns out to be wrong, the client can sue the firm for the damages it suffered by relying on the firm.
But many corporate managers might not fully realize that you cannot hedge criminal liability in this way. If you commit a crime, no letter from a lawyer telling you it was okay will get you off the hook. What’s more, most criminal statutes don’t require that you had a guilty state of mind when you commit the crime. You simply have to know what you were doing, not that it was illegal. And there’s good reason for that. The opposite rule—immunity by way of ignorance—would encourage widespread, intentional and totally rational ignorance.
That might seem pretty obvious but not everyone gets it. Here’s Henry Blodget on his Internet Outsider blog arguing the indictment of Pattie Dunn is wrong.
What is wrong is that Patricia Dunn has been charged with four felonies. Unless the California attorney general knows something that the rest of us don't (possible), Dunn neither intended to commit a crime nor knew one was being committed. On the contrary, she took repeated, active steps to assure herself that the investigation was legal. She sought and received assurances from, among others, HP's general counsel, Ann Baskins--a legal expert far better qualified to know (and who, for some reason, has not been charged with the same crimes). Baskins reportedly concluded and still believes that the investigation was legal. Wilson Sonsini, HP's outside law firm, concluded and still believes that the investigation was legal. As do many other legal experts.
So what more could Patricia Dunn have done? Used her own legal spidey sense to say, "Hey, my lawyers tell me it's fine, but I think they're wrong"? Again, the issue here is not whether the investigation was smart or ethical--it wasn't--but whether it was criminal. And it seems a more-than-fair defense for Dunn to say, "I consulted legal experts--not hacks, mind you, lawyers at the top of their field--and they assured me it was legal." Dunn will have an opportunity to make this defense, of course, but she will have to do it in court, after sacrificing her board seats, reputation, more than a year of her life, and tens of millions of dollars in legal fees. And given that hindsight is always 20/20 and juries aren't omniscient, she might still go to jail.
The answer is “yes.” She should have used her legal spidey sense to figure out that authorizing her operatives to lie their way into the private phone records of her directors might be illegal.
[Editor's Note: By popular demand, we've replaced our Pattie Dunn picture with a new one. It's not exactly a picture of her in something "slinky" but we hope you'll like it better.]
HP's Patricia Dunn...Felon? [Internet Outsider]