Return to BTJ Online

Seller Beware

by Ailish M. Nic Phaidin
Brevard Technical Journal

Back to Ken Lay - well, almost back to Ken Lay. Andrew Weissmann, head of the Justice Department's Enron Task Force recently said, "Your constituents are owed complete candor, and if you violate that trust you will be brought to account. No one is too powerful." Tough words, tough talk, tough stance, and tough enforcement, or as someone in Texas was recently overheard to say, "Them's tough times."

I believe even tougher times are ahead, particularly for our exporters in the marketing and public relations departments. Several nations in the European Union and the Far East have recently seen an upsurge of anti-U.S. demonstrations outside such mega U.S. luminaries in the corporate world as McDonalds and Burger King. "Food outlets", I can hear you grumbling, and you're right. These demonstrations are nothing new at such venues for a myriad of spurious reasons; however, demonstrations at such companies as overseas outlets of GM are fairly unheard of and fairly recent.

Linda Chatham Thomsen, Deputy Director of Enforcement for the Securities and Exchange Commission recently made the statement, "It is our sincere hope that others who might someday be tempted to dissemble to the investing public, and improperly place their personal interests ahead of those of their shareholders, will be deterred by the specter of a determined and multifaceted prosecution. We need only remember the settlement through the Justice Department's Enron Task Force with Merrill Lynch & Company because of its misleading statements to investors about Enron's financial condition.

OK, back to Ken Lay. On September 26th, 2001, Ken Lay told his employees that it was his "personal belief that Enron stock is an incredible bargain at current prices." Later, in October 2001, again to his employees, Lay reportedly said, "our liquidity is fine", and as late as mid-November 2001 in a quarterly telephone call to a securities analyst, Lay was quoted as saying, "I don't have anything we're trying to hide."

As we all know, Enron's liquidity was not fine; and the company was hiding its worthlessness. I think that Lay, who still must receive due process of law, should hope that Eliot Spitzer will quickly resign as the New York State Attorney General and hire himself out as a corporate defense attorney.

The quarterly telephone calls between corporate executives and securities analysts should realize a delicate balance between the truth, the whole truth, and nothing but the truth; and the puffery that sometimes borders on recklessness in relation to statements on corporate performances.

We should remember that juries, whilst laypeople, have had upwards of three years to sift through a mountain of media coverage on corporate malfeasance, and many potential jurors are well aware of the shenanigans and are open to favoring prosecutorial arguments.

Bringing corporate accountability, whether through governmental enforcement or through high standards in corporate ethics, is even more important now than in 2001. Corporate malfeasance, whilst not simply a U.S. malady, coupled with the ongoing and mangled geopolitical situation has made us vulnerable in many ways when we are endeavoring to gain, regain or enter overseas markets. Our accountability to investors, our staff, clients, accountants and ourselves is a vital element in our success. Success is also our accountability to our overseas representatives and agents. All too often companies do not properly train representatives in the cultural and social mores of the nations they are visiting.

Their job is substantially tougher today than three years ago because many of the clients and potential clients want to discuss politics and, I think, the day is long gone when it is shrewd to say, "I don't discuss politics." Many overseas contacts want to discuss politics, often as a means of gaining personal insights into a nation's psyche, and avoiding the subject can be viewed in many different ways - not all positive.

I firmly believe that corporations, irrespective of their size, should have their representatives and agents retrained as to how to deal with such situations. The social cum business luncheon or dinner is fraught with many pitfalls, and many people fall into the pit.

Our stock market crash of 2001 was largely brought about by the technology crash, however, in the minds of many people overseas, the rash of corporate malfeasance scandals brought it about. They will readily point to the lack of investors on an individual basis in the U.S. and the rush into the property market, particularly whilst interest rates were, and are, low. Some seriously irrational and illogical people overseas may even rush to judgment on the recent spate of devastating hurricanes as Montezuma's Revenge on a perceived extravagant and arrogant nation.

If you've forgotten everything else your public relations director has ever said and you only remember two things, they should be that a policy of the truth, the whole truth, and nothing but the truth; and a rigorous policy of consistent ethical communications training will make for good bedfellows. Now may well be the time to seek outside expertise. Should Eliot Spitzer ever resign his current position, I hope your company will never need his services as a defense attorney. Solid preparation, training and research are still as solid as they were in the 1900s. As a seller, you should beware of the ghosts of being economic with the truth.