Balch’s Doomsday Machine: Third-Party Risk

In October, days after two Balch & Bingham partners were indicted in a bribery scheme, half of Balch’s paying lobbying clients in D.C. dumped the firm. In January, after annual checks were cut for Balch partners, 10 money-making Balch partners left the firm, a major exodus.

Why?

They saw risk, third-party risk.

An anonymous source, allegedly familiar with the Balch & Bingham exodus,  told us in January that some of the partners who left Balch had done so because they were public finance lawyers.

Public finance lawyers represent issuers, underwriters, borrowers, bondholders, and trustees, in connection with the issuance and holding of  bonds. If the two Balch partners are convicted this summer, it would have killed their practice area, our source alleged.

More and more observers appear to agree that the third-party risk of Balch & Bingham looks like it will now impact some of their largest clients that are heavily regulated.

Shareholders and institutional investors are demanding the highest adherence to legal compliance and social responsibility, while frowning on any kind of third-party risk.

We have been looking closely at the compliance policies of Balch & Bingham clients and comparing it to the alleged behavior that Balch has accused to have been involved in.

Balch appears to not meet and falls short of those compliance requirements.

Marathon Petroleum’s Code of Business Conduct clearly states:

We believe in doing business with those who embrace and demonstrate high standards of business conduct. We will not look favorably on suppliers that have a history of violating the law, including environmental, safety and employment laws.

Southern Company compliance rules state:

We also expect our suppliers/contractors, in their work with us, to conduct themselves with honesty, integrity, fairness and a commitment to legal compliance. Suppliers/contractors are expected to comply with all applicable laws and regulations and certain Southern Company policies….

If the two Balch partners are eventually convicted this summer, Balch’s doomsday machine may activate.

How can Balch turn the tide?

In January, we wrote to Balch’s managing partner:

Our goal is to see changes that will resurrect your reputation, adhere to the highest legal practices, and improve your community standing.  We recently applauded your appointment of Steve Feaga, your first-ever Chief Compliance Officer. Frankly speaking, we know there are many outstanding partners, attorneys and staff at Balch. Obviously there are some matters like the Oliver Robinson Bribery Scandal and the Newsome Conspiracy Case that may need to be handled directly between you and the parties’ legal teams since we are not a party in either matter.  Our goal is to work with you on resolving the matters at hand, and drafting a “Commitment to Our Clients and the Community” that encompasses your entire footprint and re-commits to the highest standards of professional conduct.

He never replied.