Publicity Over Firm’s Fraud Verdict Forces Simon to Tend to His Image
Like a corporation or product suddenly blitzed by bad publicity, Bill Simon Jr.’s campaign for governor faces the task of turning his image around--a job that public relations and crisis management experts say has precedents as diverse as the rescue of Tylenol and the remaking of Richard Nixon.
“The basic principle applies, whether it’s a mom-and-pop grocery store, a multimillion-dollar corporation or City Hall,” said Larry Smith, president of the Louisville-based Institute for Crisis Management. “The public will tolerate people making mistakes if they ‘fess up, admit to what they’ve done, and make a commitment to do better. The public will not tolerate people who cover up, stonewall or lie.”
For Simon, the challenge has been raised by the spate of stories about last week’s fraud judgment delivered by a Los Angeles jury against his investment firm. The GOP candidate was not accused of wrongdoing, and has tried to distance himself from the $78-million judgment against William E. Simon & Sons, which he co-founded and manages.
Simon and his firm’s attorneys have maintained that the firm was a victim of a bad investment in Pacific Coin, a pay phone company. However, the jury unanimously upheld the complaint of a former business partner who charged that Simon’s firm had borrowed money to make the company expand too quickly, leading to its demise.
Simon was able to significantly reduce his federal tax bill by writing off the loss.
Simon has noted that he was not named as a defendant and has predicted that the verdict will be overturned on appeal.
But those arguments may not be enough to sway public opinion, especially at a time when corporate malfeasance is being widely condemned.
“That’s what people fully expect anyone to say in that situation,” said Doug Dowie, senior vice president of the public relations firm Fleishman Hillard. “I would make an overt attempt to separate myself from the executives appearing in handcuffs on a daily basis. In this atmosphere, the only thing worse would be if he was accused of being a kidnapper.”
Crisis management professionals said Simon must make it clear that he is disclosing all information and thoroughly answering questions about his role in the failed investment. Otherwise, they say, he could be plagued with stories about the case for the next three months as information trickles out.
“He’s got to get the truth out, no matter how damaging it is,” said Ian Mitroff, a USC business and communications professor who specializes in crisis management. “The No. 1 rule is that there are no secrets in today’s world.”
Several product marketing cases illustrate the importance of confronting negative publicity head-on, according to Peter Sealey, former head of global marketing for Coca-Cola and now an adjunct professor at UC Berkeley.
When seven people died from cyanide-laced Tylenol capsules in 1982, industry observers immediately declared that the brand was dead. But Johnson & Johnson saved the product by quickly withdrawing it from the market until safety measures were put in place.
Perrier took the opposite tack in 1990 when the French company learned that trace amounts of the chemical benzene had been found in its bottled water. The company first issued a limited recall in North America. Then it changed its story about the source of the contamination when benzene was discovered in bottles in other countries. While the amounts found were not life-threatening, the scandal seriously damaged the brand, Sealey said.
“Simon may be in the Perrier situation,” Sealey said. “The clear lesson is, you get out in front of the audience, explain what happened and take responsibility.” If Simon really had little to do with the pay phone investment, as he has said, then he needs to persuade voters that the failed deal does not reflect his management, experts said.
“You say, ‘The fraud conviction happened, our books are open and these are steps we’re taking to make sure it doesn’t happen again,’ ” said David Shank, president of an Indianapolis-based public relations firm.
One way to reduce the effect of a bad verdict is to show people that, even though fault has been found, the company’s actions did not hurt the public, said David Margulies, who runs a Houston firm specializing in litigation support and crisis management.
A company that Margulies represented was found guilty of price-fixing, but contained the fallout by demonstrating that its product was still the least expensive in the United States. “You don’t have to win the argument,” he said. “You just have to get people to say, ‘So what?’ ”
For Simon, however, the turnaround argument is made more difficult by the nature of the product he’s selling--himself--and the context in which he’s selling it, a contested political campaign with election day just three months away.
Already, Gov. Gray Davis is capitalizing on questions about Simon’s business practices, running television commercials statewide that ask, “If he can’t run a business, how can he run the fifth-largest economy in the world?”
“A corporation has time to remake its image and bring people back,” said Joe DePlasco, a public relations executive who advised last year’s unsuccessful New York mayoral candidate Mark Green and other Democratic officials. “In an election, you’re dealing with a limited amount of time.”
Shifting gears at this point in the campaign also has its difficulties, experts added. After selling himself as a successful businessman for the last year, Simon may find it difficult to emphasize a different aspect of his resume as he campaigns for governor.
“You’ve got to be very careful about doing things like that, because it often comes across as a cynical ploy, like the ‘New Nixon,’ ” said Ethan Geto, a public relations consultant in New York who works with public officials.
Given enough time, however, some politicians have made it work. After losing the race for governor in 1962, Nixon retooled his image and was elected president in 1968 and reelected in 1972.
