Credit Suisse Tax Evasion Fine is Just That: Fine

 Credit Suisse Tax Evasion Fine is Just That: Fine

THE PR VERDICT: “D” (PR Problematic) for the US government, which gave its PR team little to work with.

Credit Suisse pled guilty this week to helping more than 22,000 Americans evade taxes by stashing their cash in Swiss bank accounts — a notable event on several levels, PR included.

The deal represents the first criminal conviction of a major global bank in more than a decade. Criminal charges, it has been widely thought, are a death knell for institutions that cop to them. Credit Suisse agreed to pay $2.6 billion — the largest penalty ever in a US criminal tax case. Prosecutors huffed and puffed about how significant this plea is: US Attorney General Eric Holder warned, “No bank is too big to jail.”

But…nobody’s going to jail, at least nobody at the top. While the conviction generated a lot of media, the general impression is: It’s not so bad. Credit Suisse wasn’t forced to reveal any client names, and it can keep operating in the US. The bank’s CEO told analysts he expects little business impact from the agreement. Indeed, Credit Suisse stock actually rose after the deal was announced.

No doubt the US faced a conundrum: Regulators wanted to inflict serious pain, but too harsh a penalty might be so destabilizing as to spark unintended (and unwelcome) consequences. After all, the threat of banking failures precipitated the last global recession. So they walked a line — and that’s exactly how the media read it.

THE PR VERDICT: “D” (PR Problematic) for the US government, which gave its PR team little to work with.

THE PR TAKEAWAY: Actions speak louder than words. Are we really shocked, shocked, to discover that Swiss banks help people hide money? Yes, the fine is big, but even the general public has become inured to banks paying massive sums. If the US really wanted to send a message to tax evaders and the banks who love them, regulators needed to be more visible: name-and-shame clients, or put some white collars in orange jumpsuits. There’s nothing like a CEO in handcuffs to really command attention.

The PRV Report Card: This Week’s Winners & Losers

 The PRV Report Card: This Weeks Winners & LosersPR WINNER OF THE WEEK: “A” (PR PERFECT) to H&M, the sole clothing retailer set to advertise during the Superbowl. They’re going against heavyweights in the automotive, fast food and alcohol groups, but their $4 million gamble will likely pay off thanks to advance buzz on their commercial. In it, soccer star David Beckham, who has a line of underwear with H&M, will appear either in his briefs or naked (by TV standards) according to fan votes of #covered or #uncovered. This could be the first Superbowl in history with higher female than male ratings.

dimon The PRV Report Card: This Weeks Winners & LosersPR LOSER OF THE WEEK: “F” (Full Fiasco) to Jamie Dimon, CEO of JP Morgan, for telling CNBC that the expensive government legal cases against his bank were “unfair.” In swanky Davos, Switzerland for the World Economic Forum, Dimon said the bank, which paid $13 billion to settle claims over mortgage securities dealings and $7 billion more over hinky derivatives, power trading and overselling of credit card products, faced “two really bad options” between settling or fighting the cases. Going to court “would really hurt this company and that would have been criminal for me to subject our company to those kinds of issues.” Criminal as in, say, fraud? Better not to have picked up this gauntlet.

george zimmerman painting 300x235 The PRV Report Card: This Weeks Winners & LosersTHE PRV “THERE’S NO ‘THERE’ THERE” AWARD to George Zimmerman, acquitted of murder and now trying his hand at  “art.” Last July, Zimmerman was found not guilty of the 2012 murder of Florida teenager Trayvon Martin. With a stack of hefty legal bills and job prospects presumably thin, Zimmerman has miraculously found his inner painter. His first piece, a blue flag with a patriotic verse painted on an 18 x 24-inch canvas, sold for more than $100,000 on eBay. His second work depicts prosecutor Angela Corey holding finger and thumb slightly apart with the caption “I have this much respect for the American judicial system – Angie C.” We fervently hope the art-buying world has even less than that for George.

 

JP Morgan: It May Take Two

 JP Morgan: It May Take Two

THE PR VERDICT: “D” (PR Problematic) for JP Morgan. (Pictured: JP Morgan CEO Jamie Dimon.)

Megabank JP Morgan hit the headlines over the weekend with news that it was mobilizing its senior management to defeat a shareholder vote on corporate governance. In advance of a vote at next month’s annual meeting, board members are planning to sit down with some of the bank’s biggest shareholders, encouraging them to block a motion to separate the role of CEO and Chairman.

Momentum for the proposal has gathered steam following the losses from the London Whale trading episode and JPM’s nearly $6 billion in losses. Fairly or unfairly, questions about the CEO have been raised, and whether or not it is possible to manage a firm of JP Morgan’s size. Following some recent ugly congressional hearings, the new catch cry is not only too big to fail abut also too big to manage. This recent suggestion, to split the current Chairman/CEO role into two is an attempt, so say its proponents, to get another set of eyes overseeing day-to-day management.

The Board of JP Morgan isn’t in favor of the change, while press reports have CEO Jamie Dimon being alternatively sanguine about the proposal or threatening to leave, if the motion is approved. To avoid ongoing external scrutiny and to appease fierce critics in Washington and elsewhere, this may be one battle not worth fighting.

THE PR VERDICT: “D” (PR Problematic) for JP Morgan and its decision to oppose suggested governance reforms.

THE PR TAKEAWAY: Give an inch to keep a mile. It’s not really clear what JP Morgan’s objections are to splitting the role of CEO and Chairman. It is, after all, a structure that is already in place in many companies around the world, and splitting the roles is generally perceived as a desirable safeguard. For a firm that has been dragged through acres of tough media coverage about its internal management controls, this might have been one relatively painless and not unreasonable concession to make. Another financial loss or management failure around the corner, and JP Morgan may rue the day it so vociferously opposed such a modest reform.

SAC May Be Too Calm As It Carries On

 SAC May Be Too Calm As It Carries On

THE PR VERDICT: “C” (Distinctly OK) for SAC capital and its business as usual PR tactic.

Keep calm and carry on. In the world of crisis PR, that British wartime slogan is the standard mantra, but Steve Cohen, founder of beleaguered hedge fund SAC Capital, seems to be taking it to heart. The hedge fund, center of a long-running investigation into insider-trading, was in the headlines again last week when one of Cohen’s key lieutenants was arrested. The news capped a week of astonishing headlines.

As arrests mount and a $600 million penalty to settle some civil claims is in the works, founder Cohen’s PR response has been to carry on as normal. But what is normal for one of the world’s largest and most successful hedge funds? A spending spree to change the mood.

Three items made the news: the purchases of a Picasso painting for a cool $155 million, and of oceanfront property in East Hampton for $60 Million. Then throw in the sale of a Manhattan condo for $115 million and it’s clear that at SAC, the recent headlines are not putting the firm into crisis. They’re distracting, yes, but apparently, the show must go on.

THE PR VERDICT: “C” (Distinctly OK) for SAC capital and its business-as-usual PR tactic.

THE PR TAKEAWAY: Chutzpah has its merits – until it strays into willful arrogance. There is some wisdom in brazenly continuing with a business-as-usual approach while others might describe the sky as falling. Keeping calm and carrying on reassures investors, clients, and above all employees that this too will pass. In this case, however, SAC’s actions seem akin to thumbing their proverbial nose at authority. In a fight over potentially criminal allegations, SAC has less leverage than it thinks. This might be the moment to lay a little lower and not inflame prosecutors wanting their day in the sun.

JP Morgan’s Whale of a Hangover

 JP Morgans Whale of a Hangover

THE PR VERDICT: “C” (Distinctly OK) for JP Morgan. (Pictured: JPM chief Jamie Dimon.)

Stiff drinks for the staff at JP Morgan? A martini or two might have helped ease the pain from Friday’s Congressional hearing in Washington, which examined the firm’s now infamous $6 billion loss known as the “London Whale.” The trade generated not only steep losses but a level of scrutiny from regulators and the media that has had JP Morgan’s management on the hoof for months.

Friday’s hearing was brutal for JPM’s top brass. The list of accusations by the Senate’s Permanent Sub Committee on Investigations was simple enough: a risky proprietary trading strategy, concealing losses, manipulating pricing models, and lying to investors and regulators. Anything else? Actually, yes; the fallout continues as Senate aides are now pondering referrals to regulators and the Justice Department. This was a bad day for JP Morgan, and a very good day for the Senate’s PR machine.

Despite a parade of embarrassing and contradictory testimony, the thrust of JP Morgan’s response remains unchanged: “Management always said what they believed to be true at the time, period. In hindsight we discovered some of the information they had was wrong.” Fair enough, but unlikely to break the momentum on a train wreck of an issue that continues to gain momentum.

THE PR VERDICT: “C” (Distinctly OK) for JP Morgan. A straightforward and expected defense, though it’s unlikely to make much of a difference.

THE PR TAKEAWAY: Life is not always fair. Despite its clout, JP Morgan was always going to be outgunned in a public hearing concerning its embarrassing  losses. The bad news for the firm is that there is little that can be said to disrupt the forward movement on this issue, apart from what they’ve already said. Admitting you got it wrong may not be enough in an environment that continues to be out of love with banks. It will take more critical and remedial changes in management and strategy before the heat is turned down. Until then, another round, please…

Dept. of Financial Services to Standard Chartered: “J’accuse!”

 Dept. of Financial Services to Standard Chartered: Jaccuse!

The PR Verdict: “C” (Distinctly OK) for New York’s Dept. of Financial Services. Great splash, but now what?

What’s the fastest way to generate a headline and claim your PR moment in the sun? How about a surprise PR missile in the middle of a sleepy summer? Announce to the media that colossal wrongdoing has been uncovered, and presto; you now have more publicity than TomKat’s divorce.

Top marks, then, to New York State’s Department of Financial Services (DFS), who late on Monday stunned the markets with an accusation that venerable British bank Standard Chartered was hiding some $250 billion worth of transactions with the Iranian government. Benjamin Lawsky, superintendent of the DFS, gave the media a summer gift by calling Standard Chartered a “rogue institution.” He said the firm “carefully planned its deception” of US authorities using “fraudulent” procedures and “forging business records” to stage a “staggering cover-up.” Markets were stunned. Shares in Standard Chartered fell more than 16 percent, and the bank’s executives – as well as other bigwig US regulators, were caught unaware by the revelations.

Eight long hours after the headlines had been screaming of criminal activity, Standard Chartered limped out with a statement. The firm rejected the accusations and said “well over 99.9 per cent” of Iranian transactions complied with US regulations. The sums of money were nothing like $250 billion, more like  $14 million, said one source, a result of  “small clerical errors,” nothing more.

The PR Verdict: “C” (Distinctly OK) for New York’s DFS. Great splash, but now what? Where is the chorus of other regulators outraged at this alleged wrongdoing?

The PR Takeaway: Be careful what you wish for. Great job in getting the headlines, but now comes the tough part! Despite the nicely packaged and damning sound bites, it could be lonely out there for NY’s accuser as UK politicians begin to comment that this issue seems more about undermining foreign banking firms than substantive wrongdoing. This story may no longer turn on straightforward “did they or didn’t they” facts, and instead become a wider issue regarding PR grandstanding and regulatory overreach. If that’s the case, the splashy headlines might have been better delayed until all the other regulators were in the pool.

UPDATE: OUCH! Since publication, Standard Chartered have now agreed to a puzzling $340 million penalty. Rather embarrassing for the bank that was so outraged over being publicly shamed for what it said was only $14 million dollars of faulty transactions.  Now the firm has agreed to pay $340 million in penalties… hmm… does this math add up?

Should the DFS have waited until they had backup, or were they right to go ahead and shout “J’accuse!”? Give us your PR Verdict!

Being a Libor-Tease with the New York Times

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The PR Verdict: “D” (It’s a Dud) for the Department of Justice.

Don’t you hate a tease? The New York Times set the tone for this week’s Libor coverage with its weekend story that the Justice Department (and other regulators) is thinking about filing criminal charges against banks and individuals involved in Liborgate. “It’s hard to imagine a bigger case than Libor,” said one of the unnamed government officials. Golly! What’s next?

The news presumably sent a chill through banks and their senior management. We all know what happens when a firm faces criminal indictments: If true, things could get very ugly, and it’s normally over in a matter of hours. Just talk to Enron’s former auditors Arthur Andersen.

The Times article reported that the DoJ is building its case, though they hedged by saying this could take time. But since publication two days ago, the Libor waters have been further muddied. Did the Bank of England knowingly overlook rate fixing? And what did the US Federal Reserve know? Talking about a criminal prosecution, even unofficially to The New York Times, might have been a little premature. The facts are not so simple and there is enough blame to go around, including even possibly some regulators. In the end, the Justice Department may not be able to prosecute. That’s one story that won’t help the weakened PR image of law enforcement.

The PR Verdict:  “D” (It’s a Dud) for the Department of Justice. This might do more PR damage than good, if not followed through.

The PR Takeaway: Crying wolf messes with your PR. With a public increasingly incredulous that no big name is behind bars following the financial crisis, there is certainly PR mileage in saying”This time around, someone is going to stand trial.” But unless it’s a certainty, this is one headline that should have been delayed until a criminal prosecution was given the all clear. A disgruntled public, suspicious of the cozy relationship between regulators and Wall Street, might find yet again that hefty fines and civil charges are they only penatlies ultimately on offer. Failing to press charges won’t help the PR image of independent enforcement and regulation. Next time, why not pause before making the splashy unofficial announcement?

Is the Department of Justice being a big Libor-tease? Give us your PR Verdict!

How Sorry Are You, Barclays?

 How Sorry Are You, Barclays?

The PR Verdict: “D” (It’s a Dud) for Barclays. (Pictured: Barclays CEO Bob Diamond)

Isn’t it nice to know that Barclays PLC and its subsidiaries have agreed to pay more than $450 million to settle charges that it attempted to manipulate key global interest rates? The announcement of the largest-ever fine was accompanied by much huffing and puffing about market integrity. Everyone agrees; terrible business. Why, even Bob Diamond, Barclays CEO, and his three chief lieutenants waived their bonuses in recognition of the seriousness of the issue.

Barclays said all the right things on the day. It humbly acknowledged the actions “fell well short of the standards to which Barclays aspires.” This was a mea culpa, albeit somewhat measured, given that the Department of Justice is continuing with its criminal probe. This could get uglier, no doubt.

But was that it? Was there a lost paragraph to the announcement? Yes, investigations are continuing, yes other firms are involved, and yes, Barclays has been assisting every regulator it possibly can. Fair enough, but the key question remained unanswered in Barclays’ formal statement. Has ANYONE lost their job or been suspended? Has there been a clearing of the decks?

The PR Verdict: “D” (It’s a Dud) for Barclays for avoiding disclosure of the most important piece of news: Is anyone’s head going to roll?

PR Takeaway: One way to draw a line over bad behavior is to draw a line over bad employees. If the bank is committed to turning a new page in ethics, why not update stakeholders about who was, or will be, fired? Even if previously disclosed, say it again. Waiving a bonus counts for something, but making it clear to inside and outside stakeholders that certain behaviors will not be tolerated goes further. This was an odd omission in a statement that went to lengths to make it clear that these issues won’t happen again.

Did Barclays go far enough by apologising and waiving bonuses, or should heads have rolled? Give us your PR Verdict, below.

When will the Greeks develop their own propaganda plan?

greece2 When will the Greeks develop their own propaganda plan?

The PR Verdict: “D” for Greece’s political class on selling austerity.

A collective sigh of relief reverberated across financial markets this weekend, as Greece approved its latest round of austerity measures. The measures are tough and include savage cuts in wages, pensions and a radical restructuring of outdated work practices.

While financial markets gave the changes a “thumbs-up” Greeks have given them a resounding “thumbs-down”.  Protestors in the capital have been rioting, with violent clashes reported throughout the country. Greeks are enraged about the level of sacrifice required and are pointing to Germany, the IMF and banks as the chief culprits.

The PR Verdict: “D” for Greece’s political class on selling these measures. It’s time Greece’s political class activated an educative PR plan.

A national campaign is needed where mutual sacrifice and the sharing of burdens are the order of the day. Start by enlisting the support of Greek intellectuals, celebrities and thought leaders to explain and personally describe, the sacrifices they are making for the greater good. For some pointers why not look at previous national propaganda programs that demanded sacrifices of their citizenry? History tells us it has been done before.

How would you convince the Greek population that sacrifice is for the long-term good?  Leave a comment and share your idea.