WE DON'T NEED THIS KIND OF PUBLICITY:
THE OTHER PROSECUTORS

By James E. Lukaszewski, APR, Fellow PRSA

As Published in Across the Board, October 1997

Copyright © 1997, James E. Lukaszewski.  All rights reserved.

If typical business cocktail conversation is any indication, corporate America is generally oblivious to, or ignorant of, just how pervasive criminal action against U.S. corporations is.  For large and small U.S. corporations, one of the more unpleasant lessons of our time is that if you have a regulatory problem or make a corporate mistake and there's the slightest hesitancy or reluctance on your part to report, cooperate, and correct, you easily can be hit with the full force of the criminal justice system.  It's not pleasant.  It will change you, the culture of your organization, and your personal life - forever.

Statistics are hard to come by (no one likes to publicize their legal troubles).  But Jeffrey M. Kaplan, partner at New York-based law firm Arkin, Schaffer, and Kaplan LLP, notes that "There are so many things, big and small, that you can be sued for, that I'd be surprised if five percent of Fortune 500 companies hadn't been the target of some state or federal investigation, lawsuit, infringement action, or prosecution."

The business perception seems to be that there has been a lessening in the government's intent to prosecute companies and aggressively regulate industry.  Nothing is further from the truth.  Despite the talk by President Clinton and others in the Administration about the reduction of the size of the federal government, what's going largely unnoticed is the growth in staff and prosecutorial activities at the Department of Justice.  Even if the business perception was true, years of regulatory restructuring at the federal level directed towards aggressive management and prosecution of corporate offenders has been fully transferred to the state and county levels.  Stated simply, the government is more committed than ever to relentlessly prosecuting business.  And, the notion that "you're innocent until actually proven guilty" is simply false.

Why the focus on prosecution?  The public strongly endorses punishing bad companies and those who run them, and the government is using prosecution to send powerful messages to the corporate community on behalf of the public.  The bigger the company, the bigger the message. 

Well, what if the government has no grounds to prosecute?  This can happen, but, in my experience, it's more a question of lack of conclusive evidence than having grounds to pursue a company.  The bigger the target organization, the more likely there are to be prosecutable problems.  Recent pleas and prosecutions involve some of the finest and biggest names in American industry - General Electric, Johnson & Johnson, Kodak, and United Technologies.  The prospect of prosecution should trigger very sobering thoughts for corporate executives.

The "Other Prosecutor"

There's always another prosecutor at work on your case as well.  That other prosecutor lurks about with even more power than the government, plays by virtually no rules, and provides the defendant no right of appeal.  This other prosecutor is, of course, the news media - or often the even more aggressive trade press.

Criminal matters are public matters.  While reporters don't know much about business generally, they do know about crime.  They learn about it in journalism school and probably do a little crime reporting when they first get started.  Prosecution of a corporation is a good story anytime, because the media distrusts - often actually hates _ businesses and (in its opinion) the rich, arrogant, exploitive people who run them.  The bottom line:  A criminal prosecution by the government inevitably leads to a highly visible, often inaccurate, biased, and prolonged prosecution by the media.

The journalist and the government prosecutor have a great deal in common.  The journalist gets up every morning, looks in the mirror, and says, "Today I'm going to save the world from something evil."  The prosecutor gets up, looks in the mirror, and says, "Today I'm going to take someone down, put some evil corporation or people away, and make an example of them."

The prosecutor works on allegations, speculations, legal interpretations, and patterns of behavior, which must be turned into evidence that can stand the scrutiny of judge or jury. 

A journalistic prosecutor need only please two people - the editor (the person who assigned the reporter to go after you); and the medium's legal department (which makes a risk assessment of just how exposed they are if you choose to sue).

One clear lesson about prosecutors is that they undertake their task with an aggressive zeal that should be the envy of any corporate manager or motivator.  And when they go after a company, they are relying on assumptions and indicators that, in my experience, have substantial validity.  True, the government has to prove its case based on evidence, and it doesn't always succeed.  However, I've yet to see a corporate situation in which, if adequate time and resources were applied to a case, the government couldn't prove something.  The government rarely goes after innocent companies by mistake.

Naturally, when journalists get to work, they automatically assume guilt, illustrate it as if it were fact, and then put the company in a position where it has to prove its innocence before the case ever comes before a judge.  If the target company refuses to defend itself or defers questions, the "media jury" offers its partial verdict day by day. 

Government relies on this kind of pressure to force companies to get to a plea.  The alternative _ days, week, months, even years of being unable to truly defend against the journalistic prosecution - is incredibly costly, embarrassing, and immobilizing.  Besides, good people don't want to work for criminal companies.

Should the target company achieve some favorable coverage or should some executive be foolish enough to publicly utter a disparaging remark about the prosecution or the company's situation, the prosecutor uses the old-fashioned cop-house reporter connection to tip the journalist with some new piece of red meat from "reliable sources."  The company finds itself in even deeper trouble than before.  This new information, "according to reliable anonymous sources," will ensure that the target company "takes the government's case more seriously."

The Reality of Criminal Prosecution

The day-to-day atmosphere inside a company changes once a criminal prosecution process begins.  Everyone seems to have an attorney _ a criminal attorney.  Verbal and legal walls are erected virtually everywhere.  Many things can no longer be talked about among people who talk about almost everything every day.  Because normal communication among senior executives becomes difficult and guarded, a sense of paranoia sets in.

This is the environment the prosecutor seeks to create.  It keeps people on edge, wary, and less likely to orchestrate their story with others.  It's also the ideal circumstance for the journalist whose instincts about a wounded company become even more prosecutorial as it becomes difficult, even impossible, to get the simplest information.  Almost every answer creates intriguing new questions.

Employees clump into small chat groups.  More doors are closed more frequently.  There are outbursts of "testosterosis" behind some of those doors - the emotional verbalization of angry feelings among managers, male and female, that their personhood is being unjustly assaulted.  "By God, we're going to fight.  We're going to win.  We're going to beat the bastards."  But a sense of dread is ever present, especially as friends and colleagues are interviewed by the FBI, prosecutors, and grand jury.  And the media call frequently _ chipping away, telling the story, spreading alarm, frightening employees, forecasting doom, and raising questions, questions, questions.

The grapevine, always the most efficient of corporate communications devices, goes into hyperdrive - the more inflammatory the information, the faster it blasts through the grapevine.  Everyone seems to know something or at least looks as though they know something.  Yet, no one at the top is available to answer the endless questions or clarify what's going on.

Other complicating factors are at work as well:

• The talk is generally wrong.  Surprisingly informed, but wrong, largely because employees don't understand the scary legal vocabulary of prosecution _ words like culpability, obstruction, compliance, detection, prevention, deterrence, conduct codes, defendant, target, witness, and victim.
• Key decision making slows to a crawl.  Management's first reaction is shock, then paralysis, and then daze, so much so that internal attempts to keep constituencies informed are blocked. 
• Wall Street remains generally unconcerned.  Often criminal prosecution is viewed as a means to end - a way to contain potentially costly and protracted litigation in a relatively short period of time.  Criminal prosecution is very expeditious as compared to civil litigation.  Financial analysts also know that in today's world, if there's value in a company, that value will be preserved even though an entire management team is removed, prosecuted, or acquitted.
• Selfishness and victim confusion sets in.  Almost immediately management feels that, "we are the real victims."   Management's angry whining, sour attitude, and bad behavior shape the attitudes and behaviors of the rest of the organization.  The prosecutors and journalists notice.

Talk Is Valuable

Internal communication, within strict limits set by your counsel, is crucial to managing the damage the prosecutorial process relentlessly inflicts.  There are important internal communication actions that can maintain internal confidence, perhaps even some sanity, while the process proceeds:

• Arrange to brief key corporate leaders and managers on the legal process.  Not on the case _ simply on the criminal prosecution process and how it works, who the players are, what the vocabulary is, and what it all tends to mean;  the steps in the process.  With counsel's guidance, outline to these executives the areas of concern and sensitivity so they are better able to help employees understand what's going on in the process without getting into specifics.
• Stupid comments can cause enormous additional problems.  Prepare everyone, but particularly supervisors, for the level of humility and candor necessary to avoid attracting additional prosecutorial attention simply because of a comment made during a meeting or in a locker room _ something like, "This investigation is a bunch of crap.  It doesn't mean a thing . . .  They'll never figure it out."

Be Prepared There are no new questions the media will ask, but the same questions will be asked again and again.  Here are some of the killer questions reporters always ask: Who knew what?  When did they know it? Who did what?  When did they do it?  Who was in charge?  What did they do and say? Can the company survive this situation? Who will be held accountable in the organization?  The CEO?  Even if he/she is not indicted? How will the victims be compensated? How did a company of your reputation and stature get caught up in something of a criminal nature?  Can the same people who allowed the company to get into this mess competently get the company out of the situation. Is this an industry-wide problem or issue? Will executives have their legal costs paid by the company? If people go to jail, will they have to reimburse the company for legal costs?

There's a lot about the process that's predictable.  Media coverage is predictable.  Media cover is predictable; employee reaction is predictable; executive behavior follows recognizable patterns.  This predictability enables the company to plan ways to take as much control of its destiny as seems comfortable, consistent with what the facts will ultimately turn out to be.  These control steps are often counter-intuitive.  For example:

• In criminal legal matters, consider the use of an attorney-spokesperson.  If you're involved in a criminal prosecution, the conventional PR wisdom is to trot out the VP of communications.  Wrong.  There are important reasons why an attorney-as-spokesperson may be a very good decision.  The attorney-spokesman has no attachment to the media.   Most PR people do; often they worry too much worry about "relationships with reporters."  What the press says and does is virtually irrelevant when compared with the reality of being prosecuted.  The attorney-spokesman has respect of legal colleagues, respect that communicators and PR people don't have.  The attorney-spokesman will stick to the script.  A lawyer is less likely to become bored with the message and want to change it. 

  Though ranking low in the public-opinion polls, attorneys are considered credible sources.  Attorneys are among the few professionals who can intimidate and thereby be on a more equal emotional and professional footing with reporters.  This is crucial to forcing reporters and their editors to more carefully question their assumptions, their sense of the story, and what is really true.

• Carefully structure the communications process.  Like it or not, the lawyers will drive public or in-house communication.  Their advice must be followed.
• Stay focused!  Litigation proceeds with many stops and starts.  Communication often becomes sloppy and careless during the lengthy periods of inactivity in the process.  Adopt a scripted approach; then stick to the script.  In one of the longer criminal cases on which we've worked in recent years, the company ultimately signed a plea agreement, three executives were convicted, three (including the chairman) were acquitted, and throughout the entire length of the trial the total communication added up to fewer than 2,000 words.  Virtually every reporter who dealt with the story will tell you they felt the company was responsive under the circumstances and always had someone available to respond the issues reporters raised.  But the script was very definitely driving corporate communication.

Internal and external spokesperson should be trained, coached, and rehearsed.  Share the scripts widely, especially with other sources inside the organization.  Everyone is a spokesperson to some constituency.  If they have the script, they have something better to say.  The attorney-spokesperson can also be the source for answers to questions from any employee, shareholder, or other constituency.  Communication causes questions; keeping track of these questions and the answers provides some insight into where the people you care about are as the process proceeds.  Many questions may require answers beyond the ability or willingness to respond.  Those simply won't be answered.  But answering some questions is better than answering no questions.

You must assume that every question you answer will show up in the press and with the prosecutor.  That's simply a fact of life when prosecution occurs.

Patterns of Media Coverage

Once public coverage in the press begins, you can expect a fairly predictable pattern of response and communication both inside and outside the organization:

• The press seems to know an awful lot, and it often does.  If the government has an interest in turning the problem into what's called a "message case," prosecutors will often "help" the media even during the most sensitive parts of the investigation.  Media questions can actually trigger new areas of prosecutorial interest. 
• Reporters get educated quickly.  Unlike other kinds of media investigations and analysis of corporate activities, because reporters genuinely know something about crime, they will infer or make assumptions about important aspects of your alleged criminal behavior. The questions are tough, the intensity heavy, and the feeling is one of having already been convicted.
• Employees will talk; reporters will listen.  The explanation is often very simple.  The reporter easily obtains an internal company telephone directory and is able to call employees number-by-number.  Yes, the reporter may ask an employee not to disclose the conversation.  Employees will talk if asked.  It's flattering, and they won't tell you about it.  If the company is not responding in a convincing way, employees often feel they "can help" by spilling their guts.  Whistleblowers and former employees with an axe to grind won't wait. 

And, there's Lukaszewski's Law of Inverse Credibility.  When the news is bad, the normally legitimate and knowledgeable sources of information have the lowest credibility, while the lowest-level employee or angry neighbor has the highest.  In other words, from the reporter's perspective, a disgruntled former shipping clerk is more credible than the most senior manager or available expert.

• Allegations are facts to the journalist.  Every morsel of information is exploited to its fullest.  No exculpatory facts seem to surface, especially in the early stories.  There's no interest initially in trying to prove that anything is okay.  Companies learn quickly that attempts to correct errors create defensive stories, e.g., "weak excuses," "forgave itself today," "tries to find alibi," "denies allegations."
• Relationships are examined and questioned.  While the financial analysts who regularly follow the company may not seem to care, the crime reporter takes great joy in examining the impact of the company's alleged behavior on customers, vendors, employees, and other business relationships by interviewing all of them in an accusatory manner.  "How does it feel to do business with, supply, work for, live near, or own stock in an allegedly criminal company?"
• To a journalist, saying nothing is saying something, and saying something is often saying nothing.  One of the most commonly asked questions is, "If you're not guilty, why not simply tell your side of the story?  After all, the public deserves to hear it."  The journalist knows the company can't tell its side of the story but asks anyway. 

Sometimes talking to anyone, even to say the very same things the prosecutors are being told, can be viewed as obstruction of justice.  It's obstruction because giving information publicly may help perpetrators or conspirators orchestrate their information, thereby hindering the prosecution's ability to get at the truth.

The truth will ultimately come out through the legal system where real evidence is required.  It just won't happen in time for today's network- or local-news deadline.

Manage the Predictable

All these image and reputational eventualities can be planned for and anticipated the moment the criminal prosecution process begins.  The last time you want to be working on any of this for the first time is the day your CEO stands in front of the judge and explains the plea. 

• If there's a plea, there will be an agreement and substantial penalties and fines. There will be coverage that rehashes everything and the underlying perception that the company is guilty.  The prosecutor writes his or her news release day by day as the process proceeds.
• If there's an agreement, there will be a self-imposed compliance program, which your own lawyers will design.  There will be coverage that rehashes everything.
• If there's a compliance program, there will be an integrity and standards-of-conduct component.  There will be coverage that rehashes everything.
• Collateral damage is also likely - civil litigation, debarrment, additional criminal prosecution, the defection of key executives, government-imposed supervision on certain operations for a number of years, perhaps even negative legislation at various levels of government.  There will be coverage that rehashes everything.

Plan to Live With the Result

When it's over and there's a plea or conviction, employees, friends, and associates _ even after a highly visible case or prosecution - still believe that, "It can't be true; there must be another version or explanation of this story."  If the company pleads it out, that's their story forever.  And further, everyone in your company has to tell the story the same way.  There are numerous examples of executives who in private conversations verbally denied what was agreed to in the Plea Agreement and had their words come back later to cause additional sanctions, prosecution, or monitoring.

Focus on the goal - getting through the situation of multiple, simultaneous prosecutions with as much dignity, control, and candor as possible, as quickly as possible.  In other words, be responsive, but humble; be reticent to comment, but scripted in your approach; be brief and positive.

One final thought:  At least in the community where your corporation is headquartered, prosecution by the media will continue long after you are out of the courtroom.   Plan for the predictable follow-up coverage, generally on the first, second, and fifth anniversaries of the plea agreement or conviction.  Everything will be raised again and rehashed.  Be ready.

Copyright © 2000, James E. Lukaszewski. Permission granted to reprint with attribution.