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Paul Weiss Probe Exonerates NBPA Head, Details Legal Ties
The Am Law Daily
An internal investigation of the National Basketball Players Association's business practices under executive director G. William Hunter conducted by Paul, Weiss, Rifkind, Wharton & Garrison has cleared the former federal prosecutor of illegal activity, but recommends potential changes to the union's leadership and policies.
The Paul Weiss probe began nine months ago amid a power struggle for control of the NBPA, following a five-month lockout of players by league management during collective bargaining negotiations. A six-member committee of players retained Paul Weiss litigation cochair Theodore "Ted" Wells Jr., partner David Brown, and associate Amy Gold after the U.S. attorney's office in Manhattan began an investigation of its own into how the union conducted its affairs under Hunter's stewardship.
The report released late Thursday afternoon by Paul Weissthe firm has set up a website to download the 229-page report and a 38-page executive summaryis the result of reviewing thousands of documents, emails, and financial records, as well as interviews with three dozen individuals. The firm's findings, which cites previous stories from The Am Law Daily about the union's ties to outside counsel at Dewey & LeBoeuf, Howrey, and Steptoe & Johnson, concludes that at times Hunter put his own interests ahead of the unions' rank-and-file.
Hunter, pictured here with the union's longtime outside counsel Jeffrey Kessler (who took a team of lawyers from now-defunct Dewey to Winston & Strawn last year), said in a statement late Thursday that while he disagreed with some of the report's conclusions, he was pleased that "it recognized that I have not engaged in criminal acts nor was I involved in the misappropriation of union funds."
Hunter has been criticized for hiring relatives and sending NBPA business to a financial advisory firm called Prim Capital that employed his son Todd Hunter as a principal. As previously noted by The Am Law Daily, Hunter's daughter-in-law and attorney Megan Natsuko Inaba was also hired by the union to serve as its director of special events and partnerships. One of Hunter's daughters, Robyn Hunter, serves as director of player benefits and services at the NBPA. Records filed last year with the U.S. Department of Labor show they received annual compensation of $174,500 and $97,298, respectively, while the now 70-year-old Hunter took home more than $3.1 million.
Another daughter, Steptoe & Johnson special litigation counsel Alexis Hunter, was part of a team of lawyers from the firm representing the union in lockout-related litigation with the league in 2011. Labor Department records show that Steptoe was paid nearly $1.4 million in legal fees by the union during the period between July 1, 2011, and June 30, 2012. Alexis Hunter previously worked at now defunct Howrey, which had received more than $300,000 for its services to the NBPA between 2007 and 2010, according to our previous reports.
While the Paul Weiss report released Thursday includes those fees, it also delves into the circumstances that led to Alexis Hunter being hired by Howrey, whose abrupt collapse led her to join Steptoe in April 2011. The firm's investigation also looks at Gary Hall, the union's longtime general counsel who passed away in May 2011. Hall, a former partner at Syracuse's Blitman & King, "shared a close personal relationship" with Hunter for "more than 30 years," according to the Paul Weiss report.
The firm's internal inquiry found that Hunter's decision to hire his best friend in Hall to be the union's top in-house lawyer effectively "perpetuated an atmosphere at the NBPA that made it difficult for Player Representatives, Executive Committee members, and employees to challenge his decisions."
According to the Paul Weiss report, the evidence suggests that Hall was "not viewed as an independent figure who would be responsive to concerns about Hunter's management of the Union." The firm's probe states that Hall actively helped Hunter in "squelching dissent," and that his actions as general counsel bear "at least some responsibility for the NBPA's failures to comply with its by-laws and adhere to principles of proper corporate governance."
Hall is cited in the report as supporting the hire of Robyn Hunter, as well as furthering the union's relationship with Howrey and then Steptoe, both of which were paid "a combined total of more than $1.75 million to date," according to an analysis by Paul Weiss. The firm notes that "Hunter's decision to give legal work to these firms created conflicts of interest that he failed to properly disclose or manage, and which have hurt the Union, including by fueling the public perception that he runs the NBPA for the benefit of his family."
Alexis Hunter, who like her father once worked in the U.S. attorney's office for the Northern District of California, left public service in 2006 and began looking for a job in the private sector in New York so she could be closer to her family, according to the report. Despite the fact that her father's legal connections were mostly in California, she received a call from Hall, who helped set up an interview with his close friend James Hibey, then a litigation partner with Howrey in Washington, D.C.
The Paul Weiss report notes that at the time Howrey had just expanded into New York by acquiring litigation boutique Engel, McCarney & Kenney. Alexis Hunter, who along with Hibey agreed to be interviewed by Paul Weiss investigators, says in the report that although she received virtually no other job offers from New York firms, it was Howrey that eventually agreed to hire her as a fourth-year associate.
In 2007, Howrey was hired by the NBPA to advise the union on IP and trademark issues pertaining to a transaction with a Chinese conglomerate. While federal filings by the NBPA disclosed more than $300,000 in fees paid to Howrey for work on the "Beijing Project," according to our previous reports, what was not mentioned was the fact that Alexis Hunter had served as a liaison between her father and Howrey. Her work on the assignment was also not disclosed to the union's executive committee, according to Paul Weiss.
The firm's report ultimately finds no direct evidence of inappropriate conduct in Howrey's hiring of Alexis Hunter, and Hibey told Paul Weiss that he won the NBPA's business as a result of his prior relationship with Hall. Paul Weiss states that during a three-hour interview with Hibey, he appeared "believable and sincere."
Hibey did not respond to a request for comment on the report and a Steptoe spokeswoman was unavailable for immediate comment on the findings by Paul Weiss. Hibey himself joined Steptoe in March 2011 as Howrey imploded. A few weeks later Alexis Hunter joined him at Steptoe.
It was Steptoe's work for the union during the NBA lockout in 2011 that Paul Weiss states led to rumors of "nepotism and conflicts of interest" being lobbed against Hunter as a result of his retention of a firm that employed one of his daughters.
Paul Weiss notes that while it was not hired by the union to determine whether Hunter should have chosen a different legal strategy during the lockout, the unfair labor practices charge filed by Steptoe with the National Labor Relations Board was another path on which to attack the league and its owners in lieu of pursuing an antitrust suit sought by Dewey's Kessler, a veteran of the process who has handled similar matters for players in the National Football League.
Hunter believed that an antitrust suit could take years to go to trial while costing the union up to $25 million in legal fees with no assurance of success, according to Paul Weiss, which notes that the union's executive director considered adding other firms to its legal team to assist Kessler and Dewey. At the time, Steptoe's work for the NBPA was already underway, and Paul Weiss concludes that Hunter was within his right to retain the firm during the lockout. (Kessler, now Winston's antitrust chair and the cochair of the firm's sports practices, did not respond to a request for comment on the report.)
Alexis Hunter's billable hours eventually accounted for roughly 18 percent of the total attorneys fees billed by Steptoe for the union between May 2011 and October 2012, according to Paul Weiss. The firm's report adds that Hunter initially did not want Alexis Hunter to file an appearance in litigation with the league in federal court in Manhattan, lest it attract unwanted attention, but he eventually acquiesced.
Besides Alexis Hunter and Hibey of Steptoe, Paul Weiss investigators also interviewed several other attorneys with ties to the NBPA, including Blitman & King name partner Bernard King, Groom Law Group employee benefits partner David Levine, and in-house counsel Sean Brandveen. Paul Weiss also interviewed one of its own employees, head of diversity Danyale Price, who worked at the NBPA until 2006. (Price played no role in the firm's investigation.)
In the end, Paul Weiss reserves its harshest criticism for Hall, who the firm's investigators feel could have done a better job to "guard against conflicts of interest in areas such as hiring, choice of vendors, and transactions with third parties."
"Although Hunter claimed that Hall helped him to be conservative in his decision-making, Hunter did not report that Hall advised him to avoid or disclose the conflicts of interest on which this Report focuses," states Paul Weiss. On the contrary, Hunter claimed that Hall endorsed actions thatin the view of Paul Weiss investigators"created conflicts of interest."
The Paul Weiss report does call for the NBPA to change certain policies, such as installing antinepotism rules to preclude the hiring of family members, and the institution of a ban on the retention of vendors who employ relatives of union employees.
The report also provides a path for Hunter's dismissal by concluding that he failed to obtain proper union approval of his five-year, $15 million contract extension in 2010. It remains to be seen whether or not NBA players will push for a change of union leadership. It also remains unclear how much Paul Weiss was paid for its services compiling the report.
A spokesman for the firm did not immediately respond to a request for comment on the matter and a union representative says that such information has not been disclosed.
The U.S. attorney's office in Manhattan is conducting a parallel investigation of Hunter's activities and leadership of the NBPA, but has not yet released its findings. Last summer, The Am Law Daily reported on the death of Simon Gourdine, a well-regarded lawyer who headed the NBPA before Hunter and served as the league's first-ever deputy commissioner during the 1970s.