Risk Reading — Firm Survives Embezzling Suit DQ Attempt, AI Assistant Risk, Texts Tell Conflicts Story

“Honigman Not Conflicted Out Of $40M Detroit Embezzling Suit” —

• “A Michigan state judge said Friday [9/27] that the law firm that investigated suspected fraud at the Detroit Riverfront Conservancy can also represent the organization in its civil suit against its former chief financial officer, who is accused of embezzling $40 million.”
• “Wayne County Circuit Judge Muriel D. Hughes denied accused co-conspirator Darrell Greer’s motion to disqualify Honigman LLP from representing the Detroit Riverfront Conservancy. The judge found the firm’s involvement in the investigation that supported criminal charges against former CFO William A. Smith is not in conflict with its ability to pursue civil claims against Smith, his family and Greer.”
• “Greer and his construction business, You Services LLC — which is accused of accepting transfers from Smith to shield assets from the conservancy after the theft was discovered — had asked the court to disqualify Honigman from representing the conservancy, alleging the firm will have a conflict because it was involved in the fraud investigation.”
• “Todd Russell Perkins of the Perkins Law Group, one of Greer’s attorneys, told the court Friday that the attorneys involved in the investigation also turned over information to law enforcement, and that they could potentially need to be deposed or called as witnesses at trial.”
• “Perkins said the information Honigman learned has been used to prosecute others and that because his client is accused of being connected to the scheme, the firm’s involvement could prejudice Greer.”
• “Jeremy Lockhart of Honigman said disqualification would be of ‘severe consequence’ to the conservancy. If Honigman were to be disqualified, the nonprofit would have to spend money on catching another firm up to speed and the case would be unnecessarily delayed, he said.”
• “Disqualification would also be unwarranted, Lockhart said. Law firms often conduct pre-lawsuit investigations, and if that were enough of a basis to disqualify a lawyer, courts would see these motions all the time, he said. He referenced Michigan professional conduct rules that allow other lawyers to act as advocates in a trial if another lawyer from the same firm could be called as a witness if no other conflict exists.”

“Jackson Walker Lawyers Spoke of Secret Judge Romance, Texts Show” —

• “Two Jackson Walker LLP attorneys exchanged text messages in 2021 showing they knew about, and discussed the potential fallout of, an undisclosed romantic relationship between a firm lawyer and a former Houston bankruptcy judge.”
• “The texts, which were displayed in records viewed by Bloomberg Law, appeared to be the subject of debate during a bankruptcy court hearing Tuesday over discovery related to the Justice Department bankruptcy unit’s claims that the Texas law firm breached its ethical duties. The bankruptcy monitor, the US Trustee, says Jackson Walker should disgorge at least $18 million because the firm failed to disclose what it says is a clear conflict of interest.”
• “The texts viewed by Bloomberg Law, which indicate the Jackson Walker attorneys who sent them were trying to ‘protect’ Freeman, are notable in light of the firm’s statements that it took appropriate actions when it learned of the relationship. Jones regularly presided over Jackson Walker’s cases in bankruptcy court before he resigned.”
• “‘What the employees did is they came up with a plan, and the plan was to get documents sealed so that it wouldn’t be public,’ [US Trustee attorney] Charboneau said. ‘The evidence is going to show that the employees spoke about this—Freeman and former Judge Jones—in a way that shows that no less than three of the employees of Jackson Walker had knowledge that they were in a relationship.’”
• “Rusty Hardin of Rusty Hardin & Associates LLP, representing Jackson Walker, told Chief Judge Eduardo V. Rodriguez on Tuesday that there’s been no evidence that ‘anyone in management’ at the firm knew about the relationship. He said there’s a “strong disagreement” about the meaning of the texts.”

“AI assistants are blabbing our embarrassing work secrets” —

• “Corporate assistants have long been the keepers of company gossip and secrets. Now artificial intelligence is taking over some of their tasks, but it doesn’t share their sense of discretion.”
• “Researcher and engineer Alex Bilzerian said on X last week that, after a Zoom meeting with some venture capital investors, he got an automated email from Otter.ai, a transcription service with an ‘AI meeting assistant.’ The email contained a transcript of the meeting — including the part that happened after Bilzerian logged off, when the investors discussed their firm’s strategic failures and cooked metrics, he told The Washington Post via direct message on X.”
• “Companies are pumping AI features into work products across the board. Most recently, Salesforce announced an AI offering called Agentforce, which allows customers to build AI-powered virtual agents that help with sales and customer service. Microsoft has been ramping up the capabilities of its AI Copilot across its suite of work products, while Google has been doing the same with Gemini.”
• “Sometimes AI note takers catch moments that weren’t meant for outside ears. Isaac Naor, a software designer in Los Angeles, said he once received an Otter transcript after a Zoom meeting that contained moments where the other participant muted herself to talk about him. She had no idea, and Naor was too uncomfortable to tell her, he said.”
• “Other times, the very presence of an AI tool makes meetings uncomfortable. Rob Bezdjian, who owns a small events business in Salt Lake City, said he had an awkward call with potential investors after they insisted on recording a meeting through Otter. Bezdjian didn’t want his proprietary ideas recorded, so he declined to share some details about his business. The deal didn’t go through.”
• “Too often, the executives who decide to implement companywide AI tools aren’t well versed in the risks, said cybersecurity consultant Will Andre. In his previous career as a marketer, he once stumbled across a video of his bosses deciding who would get cut in an upcoming round of layoffs. The software recording the video meeting had been configured to automatically save a copy to the company’s public server. (He decided to pretend that he never saw it.)”