Computer Associates hired Kaye Scholer to represent Irene Salvatore, the vice president of the company. Computer Associates was under investigation for numerous criminal violations, and ultimately, several executives were indicted. Acting on the advice of counsel, Ms. Salvatore fully cooperated with the investigation. She was ultimately fired, though fortunately was never indicted.
Ms. Salvatore sued Kaye Scholer lawyers, arguing they had a conflict-of-interest when representing her. Her claim is interesting - and if what she alleges is true - it is also meritorious.
First off, there's nothing unusual about a company paying its executives' legal fees for business-related investigations: many executive compensation packages require the company to do so. The lawyer, though paid by the company, still owes her loyalty to the executive. So long as the lawyer remembers that these situations are an exception to the he-who-pays-the-piper rule, there is nothing problematic with such an arragement.
However, according to Salvatore's complaint, Kaye Scholer lawyers only advised her of one option, and it just so happens that the one piece of advice they gave her, was the piece of advice favorable to Computer Associates. If this is true, then it indeed seems like the lawyers were not looking out for Ms. Salvatore.
Good lawyers would have (and, indeed, the Kaye Scholer lawyers might have) told Ms. Salvatore that she need not cooperate with the internal investigation, but that failure to cooperate with the investigation would likely mean she would be fired. An off-the-cuff advisement go like this:
Irene, you don't have to cooperate with the investigation. But since you're an at-will employee, you will likely be fired if you don't cooperate. However, if you have done anything wrong, cooperating will not only get fired, but might also get you indicted. And even if you did nothing wrong, you still might be fired as companies under investigation often scape-goat executives.
The choice is yours, of course, but if you did anything even remotely against the rules, I would advise against cooperation.
Ms. Salvatore might have nonetheless cooperated after being advised of her options. But according to her complaint, she was not given those options. If that is true (and her claims have not been tested at trial, so there's no reason to presume they're true), then it would seems that her lawyers did have a conflict-of-interest. After all, why would a lawyer not fully advise his client?
It will be interesting to see what happens with this case. I'm no expert on legal malpractice actions, so I wonder what her measure of damages will be. She was fired, after all, but she should have been fired if she had received a full advisement. Anyhow, I expect this case to settle quickly. It's bad enough that Kaye Scholer has already had it's name in the New York Law Journal. Continuing fighting the case would likely lead to more publicity. When it comes to ethical issues and lawyers, it's untrue that all publicity is good publicity.