Best Buy Co. (BBY:US)’s board hired Washington law firm WilmerHale for its investigation of former Chief Executive Officer Brian Dunn’s personal conduct, with two former federal officials involved in the probe.
Former U.S. Securities and Exchange Commission Director of Enforcement William R. McLucas and former U.S. Attorney for the District of Colorado Thomas Strickland are assigned to the case, Greg Hitt, a spokesman for Best Buy’s board, confirmed in an e- mail today. McLucas declined to comment today in an e-mail, and Strickland didn’t immediately return a phone call and e-mail seeking comment.
WilmerHale, born out of a 2004 merger between Washington- based Wilmer Cutler & Pickering and Boston-based Hale and Dorr, has about 1,000 lawyers in 12 offices worldwide, according to its website. The firm ranks 18th among the top 100 U.S. law firms, according to the American Lawyer, a trade publication. Gross revenue for the firm rose 3 percent last year to $994 million, the publication said.
The firm is known for its roster of Washington lawyers including Seth Waxman, the Clinton administration’s top Supreme Court lawyer, and former deputy attorneys general David W. Ogden and Jamie Gorelick. One of the firm’s founders, the late Lloyd Cutler, was counsel to Presidents Jimmy Carter and Bill Clinton.
Sending a Signal
Best Buy is sending a signal by hiring a firm “that has a reputation for knowing how to deal with Washington and a very complex public environment,” said James Post, a professor at Boston University’s School of Management who has written about governance and business ethics.
“They could have gone with lots of local counsel in the Twin Cities,” Post said. “This move is intended to send a public signal of independence that the company and investigators will be independent.”
Best Buy fell 0.58 percent to $22.11 at 2:38 p.m. in New York. The shares (BBY:US) declined 4.8 percent this year through yesterday.
The Star Tribune in Minneapolis and the Wall Street Journal reported the firm’s hiring earlier.
Best Buy announced Dunn’s resignation earlier this week, saying that the change was part of a “mutual agreement” that new leadership was needed. The company later said that a board committee was probing Dunn’s “personal conduct, unrelated to the company’s operations or financial control.”
That investigation centers on Dunn’s relationship with a female employee, people familiar with the matter said yesterday. The probe is continuing and the board’s findings will be made public, said Ron Hutcheson, a Best Buy spokesman who works for Hill & Knowlton Strategies in Washington.
Dunn’s severance package hasn’t been decided, Hutcheson said.
The situation in which Best Buy finds itself is drawing parallels to former Hewlett-Packard Co. Chief Executive Mark Hurd’s departure from that company over a romantic dalliance.
HP asked for Hurd’s resignation after an internal investigation by Covington & Burling LLP found he tried to conceal a relationship with a woman who accused him of sexual harassment. Dechert LLP (1154L:US) conducted a later investigation on Hurd’s departure to help resolve claims made in related shareholder lawsuits.
“When you say personal conduct issues it means one of two things: sex or money,” Post said. “The response of the board in both cases is similar in that they knew the allegations were serious enough that they had to take action to remove the CEO.”
‘After the Fact’
“WilmerHale’s investigation like the Dechert investigation at HP comes after the fact. In some respects, boards look at these investigations to confirm the wisdom of their decisions,” Post said.
Best Buy’s speed in hiring WilmerHale may help the company do damage control on its image but won’t necessarily insulate it from litigation, said Larry Hamermesh, a professor at Widener University (78130MF:US)’s law school in Wilmington, Delaware, who specializes in corporate law.
“It’s a healthy and beneficial response for the company,” Hamermesh said. “You want to come clean but you also don’t want to expose the company any more than necessary. I don’t believe this action would inoculate the company. What’s done is done.”
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