Presentation at the Professional Futures Conference: Challenges and opportunities for 21st century professions, Griffith university, february 2019

1. Drifting to
failure?
Organisational complexity, ethical ‘entropy’
and professional regulation
Professor Julian Webb
Legal Professions Research Network
Melbourne Law School
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2. The downfall of John Gellene
Milton C. Regan, Jr., Eat What You Kill: The Fall of a Wall Street Lawyer
(University of Michigan Press, 2006).
• Established partner and experienced bankruptcy practitioner at Wall St law firm, Millbank Tweed
• Failed to disclose under oath a potential conflict of interest to the bankruptcy court, contrary to court
rules. He was subsequently jailed for knowingly and fraudulently making a false declaration, and for
perjury.
“Our review of the record verifies that the government established Mr. Gellene's
knowledge of his duty to disclose. It set forth Mr. Gellene's expertise in bankruptcy and
the bankruptcy court's statements alerting him to the importance of full disclosures. Mr.
Gellene was fully apprised of the importance of the information that had been
excluded. He had been questioned by his law partner, Toni Lichstein, several times about
whether there might be a conflict of interest and whether all necessary disclosures had
been made. Yet Mr. Gellene continued to withhold the information over a two-year
period; he simultaneously worked on the Bucyrus bankruptcy and represented South
Street, Greycliff and Salovaara without informing his client Bucyrus of the other
representations.” - United States v Gellene (1999) USCA 7th Cir., No 98-2985

3. John Gellene:
unethical indicators?
• Poor ‘hygiene’/ethical fading
• Evidence of previous failure to disclose in a bankruptcy case;
• Practised without a New York law license for nine years, and
misrepresented the fact;
• Routinely failed to file timely timesheets at the firm (to which firm
turned a blind eye/imposed limited sanctions);
• Some evidence of limited willingness to engage in self-reflection +
sense of entitlement(?) ‘rules don’t apply to me’;
• Undesirable(?) working practices
• Tendency to operate as a lone wolf: did not delegate, did not keep
others appraised of his workload;
• Problem of unrelenting standards – described as an “insanely hard
worker” (NB even by corporate law firm standards!), and self-
confessed perfectionist;
• Failed to pay attention to colleagues – eg concerns re potential
conflicts, or to take opportunities to correct the Rule 2014
disclosure at any point in the subsequent proceedings

4. John Gellene:
Environmental effects
• Question marks over management of JG – inattention to or even turning a blind eye to warning signs –
BUT also, more generally:
• Pressure from inter- and intra-firm competition and the ‘tournament’ of merit-based compensation -
especially in larger firms – encourages sense of being only one bad deal away from failure;
• Problems of scale – harder for firms to monitor ethical compliance; increased risk of what Zygmunt
Bauman (1992) describes as ‘responsibility floating between the players’
• ‘Open texture’, localisation and even fungibility of ethical norms – formal rules provide limited
(conscious) constraint in practice; formal rules may be supplemented or supplanted by deviant local
interpretations/norms;
• ‘Client-centred’ or ‘client first’ ideologies and work practices that narrow ethical focus
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5. John Gellene:
Risk and the routine
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“Attorneys rarely have to make statements under penalty of perjury. Since Rule 2014 is one of the few
cases, it should be treated seriously. However, there is a significant temptation not to. The Rule 2014
disclosure is filed toward the beginning of the case. As a result, there is a temptation to get it on file
quickly and to copy the disclosure from the previous case with a few modifications. This would be a
mistake. As I have read 2014 again recently, I was surprised to learn not only that it required
disclosure of connections rather than conflicts, but that it required disclosure of connections to other
attorneys and accountants in the case. Sometimes it is easy to get so familiar with something that you
lose respect for it.”
- Steve Sather, A Texas Bankruptcy Lawyer’s Blog, July 16, 2006,
- http://stevesathersbankruptcynews.blogspot.com/2006/07/sad-case-of-john-gellene-or-what-
it.html

6. The complexity of professional decision-making
From: J. Webb, ‘Regulating the Practise of Practice: On Agency and Entropy in Legal Ethics’, in J. Murray, T. Webb &
S. Wheatley (eds), Complexity Theory & Law: Mapping a New Legal Science, Abingdon UK: Routledge, 2018)

7. Complex – not (just) complicated
• Complex systems are open to their environment –
difficult to frame boundaries
• Complexity itself is an emergent quality of the
system (‘more than the sum of its parts’)
• Complex systems are dynamic, not static – order is
“an effect generated by heterogeneous means”;
entropy (disorder, uncertainty) is built-in
• Components (agents) respond locally without
knowledge of the full effects of their actions on the
system
• Interactions are ‘non-linear’ – causality is often
unpredictable and effects may be amplified in
unexpected ways
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8. Five characteristics of ‘Drift’
Sidney Dekker, Drift into Failure: From hunting broken components to
understanding complex systems, (CRC Press, 2012)
• Competition and resource scarcity – effects of competitive business environment on investment in (eg)
safety systems; workload and workload boundaries
• Small steps – drift is commonly incremental “continuous organisational and operational adaptation
around goal conflicts and uncertainty produces small step-wise normalisations of what was previously
judged as deviant” (2012: 15)
• Sensitive dependence on initial system conditions – ie, initial conditions have long-term consequences –
consider effects of how things are classified by regulation; ability/willingness of regulators to anticipate
the (adaptive) future
• Unruly technology – (using technology in its broad sense) as complexity theory predicts, operational
systems do not operate as designed once ‘in the wild’
• Contributions of the ‘protective structure’ – the extent to which the regulatory and supervisory parts of
the system can be/become part of the problem
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9. Potential for drift in legal practice
• Pressure to be (even more) client-centred – corrosive of legal values?
• Under-investment(?) in firm-level oversight and ‘ethical infrastructure’
Scarcity & competition
• Institutional – eg culture of rounding hours or double-charging; limited encouragement to reflect/de-
brief on transactions (permitting poor practice/not institutionalising good practice)
• Individual – incremental corner-cutting;
Small steps
• Individual and one-size-fits-all orientation of regulation
• Creation of perverse incentives – eg normalisation of hourly billing
• Limited ‘moral leadership’
Initial conditions
• Lack of systematisation – especially in smaller firms
• Routinisation and commodification of services may build-in risk to systems
Unruly technology
• Regulatory ‘capture’ + fungibility of rules – eg incremental relaxation of conflict of interest rules
• Wait and see/reactive approach to innovation (eg legal technology)
Protective structure
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10. “Complexity theory has no answers as to who is
accountable for drift into failure. Just as the Newtonian
view only has oversimplified, extremely limited, and
probably unjust answers. What complexity theory allows us
to do, however, is dispense with the idea that there are easy
answers, supposedly within the reach of the one with the
best method or most objective viewpoint. Complexity
allows us to invite more voices into the conversation, and to
celebrate the diversity of their contributions. Truth, if there
is such a concept, lies in diversity, not singularity.”
(Dekker, 2012: 202)
The solution(s)?
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11. Thank you
Follow us on Twitter
@lprn_mls
@julianinoz
Email: julian.webb@unimelb.edu.au
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