Archive for August 2nd, 2006

Reyes, Brocade and my Mercury News Interview

August 2, 2006

Yesterday, I had the pleasure of discussing crisis communications with the technology columnist for the San Jose Mercury-News. The subject was Gregory Reyes and his indictment for stock option fraud. Here’s one story of the San Jose coverage. The column that Langsberg is writing will appear in tomorrow’s (Thursday, August 3) edition.

I’m curious to see how my random thoughts about the issue of PR in white collar crime situations will be covered. (By the way, thanks Jonathan Bernstein for the referral!) The question was: “Why are people like Reyes hiring PR firms? Isn’t it normal for clients to defer to their attorneys and simply say ‘no comment’ when criminal penalties are involved?” Great question. The short answer is, no it isn’t normal any more. Because there is a growing realization that we live in a world in which there are two courts. The court of public opinion and the court of law.

Arthur Andersen demonstrated that you can win in one court (yess, they did win their court case) and lose in the other. After they went out of business because of the judgment in the court of public opinion, what does it matter? I asked the question of how Martha Stewart would have fared if instead of protesting her innocent vigorously all the way to jail she had said, yes, I screwed up, I should have known better, I am very sorry, I broke the law, I should pay the penalty. I don’t think she would have gone to jail or have experienced the huge drop in stock value.

CEOs and celebrities and those accused of white collar crime have an important judgment to make. What will hurt them the most ultimately? The complete loss of reputation and credibility when the public judges you guilty? Or the penalties to be meted out if you lose in the court of law?

It is vitally important to understand that these two courts operate very differently. The rules of evidence of very different. And things may not be very fair. As I pointed out to Mr Langsberg, if Mr Reyes is found innocent in a year or two in a court of law, will there be banner headlines to match the size of the ones announcing his indictment? Of course not. It may not be fair, but it is the way the game is played. And that’s why people in Mr Reyes’ position need qualified counselors to assist them in the court of public opinion.