The Epstein files and what they mean for law firm governance

Two senior lawyers have stepped back following the release of the US Department of Justice files, and the fallout is a lesson in how firms manage reputational risk.

What happened

• Goldman Sachs general counsel Kathy Ruemmler is reported to be resigning this summer after documents released by the US Department of Justice set out the extent of her contact with Jeffrey Epstein.
• Reporting on the released documents describes gifts from Epstein to Ruemmler, including a handbag, Apple products, spa appointments, haircuts and plane tickets.
• It follows Brad Karp stepping down a week earlier as chair of the US law firm Paul Weiss, after reporting on his own relationship with Epstein.
• Both departures came from disclosure rather than from any finding by a court or regulator, which is precisely what makes them a governance story rather than a legal one.

How to use this in applications and interviews

• Check the firm first. Before you use this anywhere, make sure the firm you are applying to has no connection to the story. This is not one to raise in a Paul Weiss interview.
• Use it to show you understand reputational risk and why firms invest in governance. The practical point is that firms vet lateral hires and clients for reputational exposure before they hire or take them on, not after a story breaks.
• The gifts are the sharp end of it. Ruemmler was a general counsel rather than a partner, but the principle carries across: most firms run mandatory gift disclosure thresholds, hospitality registers, and pre-approval for travel and entertainment.
• The commercially interesting point is what those policies are actually for. They protect the firm. If a lawyer ignores a policy that exists and is enforced, the failure sits with the individual rather than the institution.
• Nuance it well and you will stand out: a firm reading this story should be checking that its policies are being complied with in practice, and asking whether the policies themselves are still the right ones.

Key terms

• Reputational risk is the risk that association with a client, hire or matter damages a firm's standing with other clients, regulators and recruits, even where nothing unlawful has occurred.
• Lateral hire is an experienced lawyer joining from another firm, usually with a client following, which is why the vetting question matters commercially as well as ethically.