OpenAI Probe Is WilmerHale Test After College President Debacle

WilmerHale’s investigation into Sam Altman’s ouster at OpenAI has dual aims — help the company restore credibility and assist the law firm in moving beyond a congressional hearing debacle where it coached two university presidents.

The firm, by shedding light on what led to Altman’s firing at the Microsoft-backed startup, will help OpenAI’s new board make credible decisions, said James Park, a UCLA law professor who teaches corporate governance. “Corporate reputation is going to matter for a company like this,” he said.

Investigations such as WilmerHale’s also can be a device to rebuild employee and investor faith in a company, said Simon Gaugush, a Carlton Fields partner and former federal prosecutor. The probe “feels more like a showpiece” to restore confidence for investors as well as for employees, “who feel like Altman’s ouster was disruptive,” he said.

For WilmerHale, the assignment offers another chance to counsel behind the scenes on a major corporate or political controversy. The firm built a reputation on high-profile crises and investigations, advising clients such as Meta Platforms Inc., Oxycontin maker PurduePharma and large banks facing heat from Congress and law enforcement. The firm is representing New York Mayor Eric Adams in an FBI probe over his campaign fundraising.

But WilmerHale’s reputation for delivering in a crisis took a hit early this month when it coached Harvard University President Claudine Gay and University of Pennsylvania President Liz Magill before a congressional hearing about antisemitism on college campuses.

Alyssa DaCunha, a chair of the firm’s congressional investigations practice who in November became a leader in its crisis management and strategic response group, and Felicia Ellsworth, a chair of its litigation group, sat behind the presidents, who gave narrow, legalistic answers to questions about whether calling for the genocide of Jews violates campus conduct codes. Magill resigned days later.

“It’s fair to say that in the limelight of the moment, people questioned the advice they gave,” Peter Zeughauser, a law firm management adviser, said of WilmerHale’s role counseling the presidents.

But a reconstituted board at Open AI announced the hiring of WilmerHale three days after the congressional hearing, showing that “clients know the spotlight is not always going to be favorable,” Zeughauser said. “The firm has so much experience with this stuff, and that’s worth a lot.”

WilmerHale declined to comment.

Choosing WilmerHale

Altman, the face of OpenAI, was abruptly sacked in November for not being “consistently candid” in his communications with the board, it said.

That spawned a flurry of events that ended with Altman back as CEO within days after pressure from employees and investors. A leadership shakeup ensued, with every original board member, except for one, booted.

OpenAI also gave Microsoft Corp., which has a minority stake stemming from its $13 billion in investments, a non-voting, observing position on the three-person board.

The board’s chair, Bret Taylor, said in a Dec. 8 statement that he and fellow board member Larry Summers interviewed “several leading law firms” about conducting an investigation of the events before landing on WilmerHale. A Taylor spokeswoman said “we don’t have anything for you at this point” about WilmerHale’s investigation.

Leading the probe are Hallie Levin and Anjan Sahni, two senior partners in WilmerHale’s New York office.

A former assistant US attorney in Manhattan, Sahni is set to become the firm’s managing partner in January. His clients this year include Caroline Ellison, a top deputy of Sam Bankman-Fried who cooperated with prosecutors in their successful fraud case against the FTX crypto exchange leader.

Sahni and Levin are part of a large group in the investigations and crisis response practices at the firm. Others include former Southern District of New York chief prosecutor Preet Bharara, Clinton-era deputy attorney general Jamie Gorelick and Stephanie Avakian, a former director of enforcement at the Securities and Exchange Commission.

Internal Probes

Corporate boards favor law firm investigations because the probes identify internal problems that are protected by attorney-client privilege, said Jason de Bretteville, a partner at Stradling who advises boards. The investigations generally are designed to pinpoint compliance failures and preempt any stakeholder challenges over possible inaction, he said.

A key question in the OpenAI probe is whether the firm will generate a written report and further scrutinize the company’s corporate structure. Generally, it’s not in a company’s best interests to publicize an internal investigation’s findings, de Bretteville said.

WilmerHale is regularly hired by corporations to handle internal investigations, which have multiplied in recent years as companies face increased scrutiny over sexual harassment and diversity. Other firms also have been enlisted for high-profile internal investigations include Covington & Burling, which published a civil rights audit of Starbucks Corp. after the coffee chain faced accusations of race bias.

“It’s big business in the legal industry,” Gaugush said.

Video game maker Activision Blizzard Inc. in 2021 hired WilmerHale‘s Avakian to lead a probe of its culture as it faced accusations of sexual harassment. A California state agency Dec. 15 withdrew its allegations as part of a $54 million settlement.

While companies typically favor secrecy with regard to internal probes, the regulatory scrutiny OpenAI is facing over its partnership with Microsoft could change that calculus.

“If they were to be secretive, that could send a negative message,” said UCLA’s Park. “It would seem like they have something to hide.”