Hello and welcome back to the Fides Weekly Update.
We’re back with the week’s trends, moves and developments in legal compliance. Scroll down to see our regular feature of Movers & Shakers of the week.
1. The curtains are closing on KWM
The story of the European arm of King Wood Mallesons, having dominated the headlines for the past 10 months, today is expected to come to an end as the firm enters into administration.
It has been a rough week for the firm and those who work for it, as on Tuesday Barclays refused to release salary payments for the firm, and proposed administrators AlixPartners withdrew over concerns about funding. This means that staff have effectively worked for free so far this month, and will now have to apply to the firm’s new administrators to attempt to claim back their pay for this period.
Yesterday KWM China managed to strike a deal to retain a small presence of 30-40 lawyers in Europe, although it was announced that all London training contracts would be cancelled effective from today ahead of the administration.
News of partner exits continued throughout the week, with Reed Smith taking a further three KWM partners – including equity capital markets head Delphine Currie – whilst Simmons & Simmons have hired a further two partners, private equity funds partner Cindy Valentine and banking and finance partner Jen Yee Chan to strengthen its financial markets practice.
The firm also dropped a lawsuit against Goodwin Procter which granted the move of a 26 lawyer (5 partner) team to its London office, as it was announced that French international funds co- head Arnaud David is set to join the US firm as part of a five-lawyer team in Paris. It was also announced that former SJ Berwin senior partner Jonathan Blake was joining the global investments funds group at O’Melveny & Myers.
At such a difficult time for those still associated with the firm, we hope that lessons are learned within the industry from this event which has led to the demise of once a well-regarded UK law firm.
Whilst the market and legal press remain awash with the continued news of partner exits and lateral hires from KWM, our thoughts go out to those not represented – the associates, trainee’s and business support staff – whose critical work behind the scenes has made this firm function to the best of its ability in this difficult time.
We hope there is a swift resolution to this situation so those affected find employment and stability as soon as possible.
2. Former VW compliance executive arrested in the aftermath of diesel emissions scandal
The Department of Justice cracked down on Volkswagen (VW) this week, bringing to a close last year’s high profile diesel emissions scandal, with VW agreeing to pay a settlement of $4.3bn to US authorities, and six current and former executives of the corporation charged in relation to the investigation.
Monday brought news of the arrest of Oliver Schmidt who, during the period in which emission tests were rigged, acted as VW’s head of the US compliance team. He has been charged with fraud and conspiracy, after US officials claim he was fully aware that the allegations made when the scandal broke were correct, but continued to conceal the truth about their vehicles. The five other executives charged are based in Germany, but it has been deemed unlikely that they will be extradited.
As the week went on, it resulted in further fallout from the scandal, as the automotive company announced it plans to pay penalties totalling $4.3bn (£3.5bn) and plead guilty to three felonies. These include “participating in a conspiracy to defraud the United States and VW’s U.S. customers”, being “charged with obstruction of justice for destroying documents related to the scheme” and “importing these cars into the U.S. by means of false statements about the vehicles’ compliance with emissions limits”.
Unfortunately for VW the blows don’t stop there. In the UK, 10,000 VW owners filed a class action lawsuit on Monday against the German carmaker, requesting £30m in compensation. Harcus Sinclair, the law firm acting on the suit, has claimed that owners should be compensated because they paid extra for what they thought were clean diesel cars.
The continuous aftermath VW have been faced with after getting caught rigging diesel emissions tests 14 months ago is a clear example set by both US and international regulatory authorities and officials of the severity of the consequences businesses can encounter. Not only have they dealt with harsh financial ramifications and a tarnished brand reputation, but the authorities are also making it known that the rules on individual accountability for wrongdoing will be enforced, which once again reinforces the importance for all corporate institutions in maintaining robust regulatory and compliance systems.
The US authorities are persisting with the approach they have taken with certain financial institutions who have attempted to manipulate markets by handing out much more severe penalties and higher fines on European institutions, in comparison to smaller fines issued by less aggressive EU regulators. However, with the US inauguration of its 45th president Donald Trump taking place next week, his strong views and opinions on global institutions and overregulation of the markets could be a sign of incoming leniency to these rules.
Movers & Shakers of the week
Partners from numerous City law firms, including Freshfields Bruckhaus Deringer, Herbert Smith Freehills, King & Spalding and Skadden, Arps, Slate, Meagher & Flom have been included in this year’s QC appointments.
Eric Nitcher has taken the top legal role at BP, rising from America general counsel to global legal chief as he replaces current head Rupert Bondy, who departs for Reckitt Benckiser
London-based Bruce Embley and NY-based Matthew Herman are both appointed global co-head of M&A for Freshfields Bruckhaus Deringer
Current general counsel for Lucozade Ribena Suntory Mollie Stoker has decided to take on a new position internally, leaving the soft drinks brand to search for a new legal head
Marcel Apfel, former general counsel for Ministry of Sound, has decided to join brand management company Iconix as the vice president for international legal
Nathan Bush departs from O’Melveny & Myers’ Singapore office to join DLA Piper as their Asia head of investigations in Singapore, leaving O’Melveny’s office with two associates.
O’Melveny & Myers’ gains King & Wood Mallesons’ European head of funds Jonathan Blake in London
Five lawyers from King & Wood Mallesons’ Paris office will be joining Goodwin Procter, which will include the firm’s co-head of international funds Arnaud David
Cadwalader Wickersham & Taft’s managing partner for Brussels Alec Burnside is set to join Dechert, taking with him special counsel Anne MacGregor, who joins as a partner, and associates Marjolein De Backer and Adam Kidane
Office openings & closings
Ince & Co launches an office in Marseilles with the hire of lawyers Fabien d’Haussy and Laurianne Ribes, who specialise in shipping and transport
Macfarlanes has opened an office in Brussels after having hired a three partner competition team from King & Wood Mallesons in Cristophe Humpe, Tom Usher and Cameron Firth
Dentons launches its second Mexico office in Monterrey, whilst bolstering its Barbados offering with the hire of partners Charles Gagnon, Rosalind Bynoe and Ruan Martinez
Bircham Dyson Bell have gained a nine lawyer real estate team from King & Wood Mallesons along with the firm’s Cambridge office, led by partner Simon Burson
Herbert Smith Freehills plans an office opening in Malaysia later this year, expected to consist of two partners and four lawyers