• Law firm represents two of 20 companies in same case
• Lawyers say firewalls will prevent conflict
• Protest marked by accusations of conflicts of interest, questions about DeVos role
One firm’s lawyers are representing different companies in a contentious Education Department student debt collection bid protest, which has already been marked by conflict-of-interest allegations.
Two of the 20 consolidated plaintiffs in the protest—Williams & Fudge and Central Credit Services—now are represented by Reed Smith attorneys.
The dual Reed Smith representation—and the circumstances surrounding the way the law firm gained one of its clients—have again highlighted the unusual nature of the case, FMS Investment Corp. v. United States, in which a judge has already disqualified a different law firm from participating because of a conflict issue. The protest also has raised questions about Education SecretaryBetsy DeVos‘s investments in a successful bidder.
The Department of Education is attempting to collect almost $5 billion in student loan debts through the procurement.
Reed Smith started representing Williams & Fudge only after another prominent law firm, Hogan Lovells, parted ways with the company. That happened after Hogan Lovells client Performant Recovery Inc., won a $400 million collection contract from the Education Department in January.
None of the parties or the judge in the case have publicly alleged that the law firms have engaged in wrongdoing. And lawyers with Reed Smith say they have followed strict legal protocols to ensure their clients are fully on board with the arrangement and that the company’s respective interests are protected.
Though Holly Roth, Reed Smith’s attorney for Williams & Fudge, and fellow Reed Smith partner Lawrence Sher—Central Credit’s attorney of record in the case—still work together on unrelated cases, both told Bloomberg Government that they obey a strict firewall in the FMS Investment bid protest case. That includes making sure that their respective firm computers are unable to access any information about the other lawyer’s client, including legal strategies, trade secrets and the like, said Roth.
“We made sure to put in place the necessary ethical walls, to make sure that no proprietary information is revealed to a competing company,” said Roth.
The facts surrounding Reed Smith’s dual representation are clearer than those involving Hogan’s onetime representation of Williams & Fudge in the case.
According to Roth, a former Hogan lawyer named Pete Dungan contacted her in February and asked if she would like to represent Williams & Fudge. She declined to say exactly why Williams & Fudge needed to move to another firm. But because Hogan also represented Performant, an award-winner in the Education Department procurement instead of an award protester, a conflict was brewing and it was likely Hogan had decided to head it off.
Dungan left Hogan for another firm, Miles & Stockbridge, in July of last year—without Williams & Fudge as a client, he told Bloomberg Government.
Neither Dungan nor Roth would explain why Dungan was the one to contact Roth even though he had left Hogan, and Williams & Fudge, months earlier—or exactly which firm represented Williams & Fudge between July 2017 and February 2018.
Dungan did say that the reason Williams & Fudge parted ways with Hogan is that of the two, Performant was a Hogan client of longer standing.
“Several of these questions seek attorney client confidential information that we are not at liberty to share,” Mike McGill, the Hogan attorney who represents Performant, told Bloomberg Government in response to a list of emailed questions. “Beyond that, we have no comment other than to state that Hogan Lovells’ relationships with its clients are and have been entirely ‘above board,’ reasonable, and consistent with all of our ethical obligations.”
Chad Echols, Williams & Fudge’s outside general counsel, referred questions to Roth.
‘Troubling’ Loyalty Breach
Law firm conflict-of-interest issues have already been raised in the FMS Investment case—in a major way.
On March 23, Judge Thomas Wheeler of the U.S. Court of Federal Claimsdisqualified the legal team from Pillsbury Winthrop Shaw Pittman, which had represented another plaintiff, Continental Service Group Inc., sometimes known as “ConServe,” in the protest.
Pillsbury also had represented Performant in other matters since 2011, Wheeler found.
Performant was represented by its attorneys from Hogan Lovells in the company’s claims against Pillsbury.
“The Court finds Pillsbury’s apparent lack of attention or concern over the conflict of interest troubling, adding further to its breach of the duty of loyalty,” Wheeler wrote March 29.
DeVos and Performant
The biggest alleged conflict in question in the FMS Investment case doesn’t directly involve a law firm. It is tied instead to DeVos.
DeVos had an indirect investment in Performant through a fund called MCF CLO IV, LLC, a Performant executive told Bloomberg Government after the Washington Post disclosed DeVos’s ties to another Performant-connected investment vehicle.
There is no conflict in play because DeVos no longer is invested in those entities, an Education Department spokeswoman and a DeVos family holding company official have said. Perhaps more importantly, they said, she played no role in Performant’s selection as a contract awardee.
Yet the issue isn’t fully settled. At least one and perhaps several of the protesters have included the alleged DeVos conflict as grounds to restart the Education Department procurement.
And in his ruling last month, Wheeler ordered the government to produce all documents “related to the appearance of a conflict of interest between Secretary of Education Betsy Devos and Performant” and “related to ED officials attempting to influence the award decision.”
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