Penn State whistleblower lessons: Beware of inhouse counsel!

by Kurt Schulzke

The Penn State sex abuse story grows more complicated by the day.*  The latest — involving the reportedly confused relationship between Penn State officers Tim Curley, Gary Schultz and former inhouse counsel Cynthia Baldwin — appeared yesterday at Pennlive.com and today at Law.com:

When Tim Curley and Gary Schultz testified in the Jerry Sandusky child sex abuse investigation on January 12, [2010] they thought PSU’s then-GC Cynthia Baldwin was their counsel. The men said as much in their testimony, and Baldwin—seated right beside them—did not correct what she later called a misinterpretation.

The grand jury transcript, as reported by Pennlive, includes this snippet:

“Good morning, my name is Tim Curley.”
“Do you have counsel with you?”
“Yes I do. … My counsel is Cynthia Baldwin.”
Schultz was asked: “You are accompanied today by counsel, Cynthia Baldwin. Is that correct?”
“That is correct.”

Baldwin, who while representing the University drove both Curley and Schultz to the grand jury session, reportedly made no effort to correct this misstatement before the jury. Ouch!

While Curley and Schultz can hardly be described as “whistleblowers,” the dilemma these gentlemen face is one every insider-whistleblower also encounters.  All lawyers are ethically bound to represent their clients, according to bar rules that vary in details by state.  Generally, the client of an inhouse lawyer is the organization as set forth in Comment a to ABA Rule 1.13:

(a) A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.

Hence, if the interests of the company and the employee-whistleblower diverge, the inhouse lawyer must pursue the interests of the company to the whistleblower’s disadvantage.  In such circumstances, Rule 1.13 requires the inhouse lawyer to disclose the conflict to the affected employee:

(f) In dealing with an organization’s directors, officers, employees, members, shareholders or other constituents, a lawyer shall explain the identity of the client when the lawyer knows or reasonably should know that the organization’s interests are adverse to those of the constituents with whom the lawyer is dealing.

This warning, however, often comes too late to prevent the whistleblower from placing him or herself at a significant legal disadvantage.  Inhouse lawyers are reluctant to issue this so-called “corporate Miranda” disclosure.  It is not clear to what extent Ms. Baldwin provided such a warning to Curley, Schultz or Paterno.  Practically speaking, whistleblowers should make themselves aware of the conflicted position of inhouse lawyers and plan their behavior accordingly.

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* Nice to see major commentators (like Michael Novak) jumping on board with rationale previously expressed here and here supporting the assertion that the late Joe Paterno acted in this case just as he should have.

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