Communication Tools

Of all the authorities with the power to publicly scrutinize corporations, a state Attorney General is one of the toughest customers. Their investigations have the potential to combine the brand-threatening, media-savvy grandstanding of a Congressional inquiry with the legal liability presented by a regulatory inquiry or criminal trial. Former New York State Attorney General Eliot Spitzer set a new standard that survives his disgrace.

 

We often know that AG really does stand for “Aspiring Governor” from the first press release announcing an investigation to the leaks that give the story legs. Potential monetary penalties are so often significant for the simple reason that anything less is unlikely to generate the positive press that AGs covet. Conversely, if your company is only tangentially involved, the AG may opt for a small penalty today – only to use it tomorrow as a way to show how they got you to acknowledge culpability.

 

For companies with a national customer base, 49 other state AGs may jump on the bandwagon after the first investigation – lending credibility to the government’s case in the eyes of key stakeholders, putting the company on the defensive from the outset, and multiplying the potential losses. The need for coordination between legal and communications professionals is nowhere so critical than in determining a response.

 

The first order of business is to define the company’s strategic objectives. In short, decide on what the “win” is – and then plan from there. Circumstances may change that objective, but begin with some notion of whether success will mean full vindication or a deal. Consider the consequences of further inflaming a resolute adversary by counter-attacking. You may choose to take the gloves off if you decide to fight by questioning the AG’s political and personal motives.

 

Others have done so and lived to tell the tale. Some have come out ahead by refusing to be bullied. When Ken Langone – a Home Depot co-founder and former head of the New York Stock Exchange Compensation Committee – was targeted by former New York Attorney General Eliot Spitzer for allegedly misleading board members as to the scope of NYSE CEO Richard Grasso’s pay package, he highlighted the political aspirations of his nemesis – which, at the very least, played well with important financial market audiences, who knew exactly what Langone was talking about.

 

As of this writing, four of the six claims in the AG’s suit have been dismissed and, even though Langone still faces prosecution on the other two, his reputation remains largely intact. He has won a great deal of third-party support from groups such as the Center for Individual Freedom. As that group publicly stated, “Spitzer’s move against Grasso and Langone was more about self-promotion than the public interest.”

 

For companies that choose to cooperate, they must do so with an eye toward reputation benefits and losses. When current New York Attorney General Andrew Cuomo brought charges against Facebook for allegedly failing to protect minors online, the result was a partnership between the AG’s office and the embattled social networking site that resulted in what has been called a “new model” to protect children online.

 

To be sure, you need to weigh the personal agendas and proclivities of each state AG before deciding if and how a Cuomo handshake might differ from a Spitzer handshake. In this case, Facebook set an industry gold standard, which would not have come about but for the AG’s actions and the company’s temperate response.