IRS’s Reputation Taxed by Scandal

 IRSs Reputation Taxed by Scandal

The PR Verdict: “F” (Full Fiasco) for the IRS.

The United States Internal Revenue Service has never been the most popular government entity, but lately its reputation has taken a severe shellacking. The first problem came to light a few months ago, when it was revealed that the IRS had been targeting the Tea Party and other conservative political groups, putting their finances under close scrutiny. But on the PR embarrassment scale, that was nothing compared to the Star Trek video.

As the IRS finds itself under close scrutiny, a series of mortifying gaffes are now on public display. An astounding $50 million, all taxpayer money, was spent during 2010 and 2012 on 225 IRS conferences. The expenditures included training – or, rather, a rah-rah ha-ha training video with a Star Trek theme. And line dancing classes at the conferences. And baseball tickets, and stays in presidential suites for conference attendees, and a “happiness expert” who cost over $11,000. The list goes on and, unfortunately, on.

The congressional hearings investigating the conservative targeting are the equivalent of an audit for the IRS, and as with anyone else, the unpleasant receipts are being discovered. Daniel Werfel, the new IRS head, said he took the job because he thought he could be helpful. “The IRS is an agency in need right now,” he said in an understatement, in between apologies and explanations that can’t begin to defray the damage.

THE PR VERDICT: “F” (Full Fiasco) for the IRS. The government entity will have a long road of recovery after shooting itself in the foot.

THE PR TAKEAWAY: Think before you line dance – or make a video of it. The scrutiny of conservative groups is now being blamed on orders “from Washington”; if true, the resulting issues were unavoidable. But the silly, expensive training videos, the line dancing, the happiness expert? Someone along the way must have asked what this would look like to the outside world, or should have. In PR, an ounce of prevention is far more effective than ten pounds of damage control. At this point, confession and sincere apologies won’t make a dent in the IRS’s accounts.

To see the IRS Star Trek video, click here.

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…