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.

Ask (and Pay) An Expert

 Ask (and Pay) An Expert

The PR Verdict: “D” (PR Problematic) for the “expert network” industry.

When in doubt, consult an expert, goes the familiar refrain. But in the case of hedge fund SAC Capital Advisers, seeking the advice of experts is proving to complicate matters, particularly when it comes to allegations of insider trading. The infamous hedge fund run by the notorious Stevie Cohen is under the media and regulatory glare as prosecutors claim to be “closing in” on a multi-year investigation.

At the heart of the current case filed last week is the role of “expert network” firms, i.e. consultancies that match money managers like SAC with experts in particular industries for research and information gathering purposes. Two former SAC employees have already admitted to insider trading, citing information gleaned from expert network firms. In SAC’s most recent woes, a professor of neurology, overseeing clinical trials for a new Alzheimer’s drug, was also contracted by an expert network firm to give SAC his professional insights.

As the case goes to trial, the PR dilemma will be how to characterize what was being paid for. Given that the retained fees were high (in this case, over $100K), the understandable assumption will be that the information flow amounted to more than just general insights. Expert firms are going to have a tough time explaining to a skeptical public what sort of advice their fees provide.

The PR Verdict: “D” (PR Problematic) for the “expert network” industry. There’s trouble ahead.

The PR Takeaway: Money and freely-available public information don’t mix. The PR dilemma is how to explain why hedge funds are paying substantial fees for insights that the experts claims are non–privileged and already publicly available. When in-house experts are moonlighting from the public companies that they work for, then the suggestion of insider information inevitably raises its head. So far, the traditional PR answer has been to characterize the information flow as insights, not hard information. But as insider trading cases continue to mount, that distinction is going to seem less and less believable. In this case, clever wording won’t be enough to save the day.

Martha Stewart Cooks Up a New Image

 Martha Stewart Cooks Up a New Image

The PR Verdict: “A” (Gold Star!) for Martha Stewart.

Martha Stewart was very busy over the Thanksgiving – and not just cooking up a feast. The guru of home entertaining was featured in both The New York Times and The Financial Times. Both  articles were presumably designed to calm investor nerves about her company, Martha Stewart Living Omnimedia, which recently announced layoffs and financial losses.

The NYT glowingly described Martha as the new “patron saint” of the hipster entrepreneurial class while the FT gave Ms. Stewart multiple opportunities to talk about planned and current business initiatives (good for the stock price). And neither failed to mention her time in the clink.

Martha gave the FT passing acknowledgment of her prison sentence for lying to prosecutors about a stock sale, while the NYT asked her fan base for its opinion. Luckily, the responses were consistently positive. One fan, who referred to Martha as “The Jesus of the craft world,” said, “I heard that she just took some bad advice. Anybody can make mistakes.” Martha, from what she told the FT, takes a similar view.

The PR Verdict: “A” (Gold Star!) to Martha Stewart for putting a tough period behind her. It’s even given her street cred!

The PR Takeaway: Set the tone, and others will follow. While prison time might have theoretically ruined the image of the perfect homemaker, Martha Stewart has been able to successfully move on. Parting with the traditional PR strategy of public atonement, Martha instead describes her prison time as “a hole I fell into; luckily it wasn’t a very deep hole,” while adding that the experience didn’t teach her much. From the outset she has been unrepentant, and now her new followers are taking the same line of indifference. In the age of labored public apologies, this is one strategy that  is breaking the mold. And Martha’s expanded fan base seems to like it.

Click here for Martha’s FT interview and New York TImes feature.

What’s your opinion of Martha Stewart’s strategy? Give us your PR Verdict!

Is Gordon Gekko The Right Man For The Job?

gordongekko3 Is Gordon Gekko The Right Man For The Job?

The PR Verdict: “A” for a launch that wouldn’t normally generate this much attention.

The FBI isn’t normally associated with successful product launches but it seems to have outdone itself with the use of the classic PR strategy: the celebrity spokesman.

Yesterday’s media was saturated with the news that actor Michael Douglas has been enlisted to deter securities fraud and step up snitching on insider trading. The campaign, including public service announcements, has the former Wall Street Gordon Gekko, warning that “the movie was fiction but the problem is real.”

The FBI got the placement they needed. Front page of the WSJ, extensive coverage in the financial media and saturation in the social media space. The launch was topped off with an announcement that the FBI is actively building cases against 120 individuals.  It seems the snitch hotline is working.

The PR Verdict: “A” for a launch that wouldn’t normally generate this much attention.  From content, to placement, to the call-to-action (snitch on insider traders), the message was clear and unequivocal.

There is something compellingly ironic about Michael Douglas being the key spokesperson against Wall Street foul play.  In press interviews around the launch, Douglas mentioned that since the film originally came out, bankers and traders continue to walk up to him in Manhattan and congratulate him as Gordon Gekko, like a modern day hero. Douglas said he is still surprised by their reaction. Don’t they realise Gekko was the villain in the movie? The campaign couldn’t be coming at a better time.

To read more about the FBI program click here and to see Michael Douglas in public service click here.