Keeping Their Own Counsel

[September 17th, 2003] While former Lewis & Clark College president Michael Mooney has taken the most heat for his ill-fated loan to a now-bankrupt Idaho company, lawyers around town are perplexed at their colleagues' conduct, as well.

At the center of the second guessing is Gersham Goldstein, a Stoel Rives lawyer and Lewis & Clark trustee who knew about the $10.5 million loan well before the final $4.5 million was distributed but did not notify any of his three dozen fellow board members. Other lawyers on the board later failed to demand action against Mooney when they finally learned of the transaction.

Now, in the wake of a blistering Sept. 5 investigative report, Lewis & Clark's trustees have made the puzzling decision of relying on some of those same lawyers about whether to hire independent counsel to evaluate the board's legal options.

The report, written by Tonkon Torp partner George Spencer, excoriated the conduct of Goldstein and Stoel Rives. The firm, Spencer found, "arguably had a duty to finish its probe [into the loan], and breached that duty. The assumption is that the breach caused damages (at least the final College advances of $4.5 million)."

Goldstein disputes the report's findings.

Despite Spencer's report, the board's executive committee decided last week that any action against Mooney and other parties, including Stoel Rives, will "only lead to expensive and protracted litigation with problematic results," according to a statement issued by the college. Board Chairman Fred Fields declined to answer questions about the decision, which was based on the recommendation of four board members who are lawyers.

WW consulted five members of the bar familiar with Spencer's report. All expressed surprise that the college didn't hire counsel to at least evaluate possible claims. Stephen Moore, an ethics and legal malpractice lawyer, was the only one of the five willing to speak on the record. "Logically, you would think that the board would seek an independent opinion," says Moore, who taught at Lewis & Clark Law School for nearly 20 years.

Opinions are mixed about how successful legal action against Stoel Rives and others might be.

While one lawyer familiar with the Spencer report says, "I'd love to take the case against Stoel Rives," Moore cautions that the failure of the college's board to supervise Mooney or take action once it discovered the loan would severely undermine claims, at least against Stoel Rives. "I'm aware of no evidence that board would have done anything differently had they known about the loan earlier," Moore says.

To some alumni, the decision to forgo independent legal advice shows the board's lax governance has not changed. "It's another cover-up," says Gordon Alberti, a Seattle resident and member of the class of '62. "In my opinion they are trying to close the damn door again."