Legal News

U.S. Companies Taking Lessons From Renault Snafu

By Ashby Jones

LBers, have you paid attention to this crazy corporate-espionage situation across the pond involving French car maker Renault?

The quick overview: the company fired three executives after an anonymous whistleblower letter accused one of them of negotiating a bribe. But several months later, the company is admitting it may have been tricked; Renault is now preparing to exonerate the trio.

Quelle horreur, no?!

Mais oui, but the silver lining , if there’s any at all: the imbroglio is serving as a cautionary tale for U.S. companies under pressure from regulators to aggressively pursue anonymous tips from whistleblowers. Click here for the story in Monday’s WSJ, from me and Joann Lublin. Click here, here and here for recent WSJ stories on L’Affaire Renault.

Among the lessons imparted by the situation: Don’t rush through internal investigations, and don’t be afraid to hire independent lawyers to help.

“Renault is the poster child for why you want to approach these situations with a sense of balance, and not have people rush to judgment,” said Robert Fatovic, the chief legal officer at Ryder System, the Miami-based transportation and logistics provider.

Over the past decade, due largely to Sarbanes-Oxley and now Dodd-Frank, corporate America has paid an increasing amount of attention to corporate whistleblowers.

But some lawyers and other governance experts say that, in some circumstances, the pendulum can swing too far. “Companies are getting paranoid,” said Steven Pearlman, an employment lawyer with Seyfarth Shaw in Chicago. Pearlman said he recently had a client who received an anonymous tip on some alleged wrongdoing and wanted to act before the investigation was done. “I told them, ‘You’ve got to take a deep breath, don’t overreact,’ ” he recalled.

According to Edwin Stier, a partner at Thacher Associates in Skillman, N.J., Renault’s botched probe “is a reminder to do it the right way”-such as using an outside law firm that never advised a company’s board or executives.

Stier emphasized that, among other things, a board’s outside law firm must create strict investigatory standards at the outset. “Internal audit departments don’t have the experience and training to put an investigation together that will withstand attacks in [subsequent] litigation.”

Full post as published by Law Blog - WSJ.com on March 14, 2011 (boomark / email).