CEOs in the Slammer or What to Do While Your Boss Does Time

By Taylor, Anne Marie | Communication World, May-June 1990 | Go to article overview

CEOs in the Slammer or What to Do While Your Boss Does Time


Taylor, Anne Marie, Communication World


CRISIS PR has become second nature to Mary McGeachy. Not only has she been involved as Business Week's director of public relations during the three-year insider trading scandal that continues to haunt the US financial news magazine, but she's also been entrenched in publishing a "clear and unbiased" picture of America's eroding business ethic.

"When crisis calls, the corporate communicator's performance can make or break the company," admits McGeachy. "Every modern business must be prepared for the worst, even in the best of times.

The relationship you have with members of the press never goes back to the way it was after the crisis becomes yesterday's news."

More than three years ago, the first of several Business Week employees was accused of selling hot copies of the weekly magazine to a Connecticut securities dealer before the publication hit the newsstands. "He was immediately fired and eventually served time, but that was just the beginning," McGeachy explains.

Recently, the US Securities and Exchange Commission accused Business Week's typesetting company of insider trading, the fourth in a string of criminal charges filed against magazine employees and contractors. A production supervisor at an Applied Graphics Technology plant allegedly tipped off a group of investors to the profitable tune of US $50,000. Business Week is a McGraw-Hill publication.

"It's been tough to remain neutral and cover our own story, but these episodes at Business Week are just part of what's happening in corporate America," she adds. "We're not alone in the muck and mire."

Wall Street Journal Reads Like Police Gazette

Business Week's saga of white-collar crime is one of the corporate scandals that has made headlines during the past few years. Front-page columns of The Wall Street journal have read more like the Police GaZette with unrelenting tales of rascally characters and dirty-dealing. The stench of decaying ethics rose high into executive suites at the end of the eighties when prominent executives at prestigious investment banking firms were snared and handcuffed.

America's historic insider-trading crackdown began with the arrest of Drexel Bumham Lambert's former investment banker, Dennis Levine, who served a two-year sentence in the federal penitentiary in Lewisburg, Pa. Apparently the threat of ending up in the slammer, even one with a tennis court and extended visiting hours, had spurred accused insiders into squealing on their colleague. Levine sat in prison for a relatively short time in exchange for his cooperation in bringing down Ivan Boesky, arbitrage scoundrel who was once known as Wall Street's most powerful speculator. He received a three-year sentence in a California prison and settled civil charges by paying the government $100 million.

Since Boesky was nabbed late in 1986 and began cooperating with authorities, the Securities and Exchange Commission (SEC) has come down hard and fingered other top executives such as Martin Siegel, Drexel's former merger guru who pleaded guilty to felony charges. Michael Milken, another tumbled Drexel executive, has also been indicted and prosecuted for insider trading.

Drexel Struggles to Keep Face, and Loses

"Keeping face with the public has been our first priority," says Steven Anreder, spokesperson for the now defunct Drexel, who presents a brave front despite these government suits. Prior to February when the nation's sixth-largest securities firm filed for bankruptcy, Drexel counted such entrepreneurs as cable-TV pioneer Ted Turner, TWA chief Carl Icahn and oilman T. Boone Pickens as clients.

Drexel's last-ditch PR strategy, explains Anreder, had been to maintain a policy of "being accessible" to big players in the junk bond market as well as to the press. But, even now, with only a handful of employees left to sift through liquidation details, Anreder says it's difficult to "coordinate efforts and funnel information through a single spokesperson. …

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