Executives Prepare for “Terrifying” Hearings Before Congress
by Glen Justice
The subpoenas were issued at 4:30 p.m. on a Thursday, requiring WorldCom Inc. executives to testify to the House Financial Services committee on accounting that erased more than $1 billion in profits last year.
Within four days, the telephone company sent lobbyists to Capitol Hill to brief congressional aides on WorldCom’s version of events and hired APCO worldwide, the public relations unit of the sixth-largest U.S. advertising company, Grey Global Group.
Corporate lobbyists and image consultants say such preparation can be crucial when executives are summoned to explain their actions to Congress — often on national television. WorldCom executives appear today, following Enron Corp., Arthur Andersen LLP., ImClone Systems Inc. and Global Crossing Ltd. in being forced to testify before Congress.
“People in corporations aren’t used to this,” said Chris Hansen, a Boeing Co. lobbyist in Washington for 18 years. “They don’t view it as part of the game. It’s absolutely terrifying to them.”
Many consultants say company executives are more comfortable talking to Wall Street analysts or courtroom lawyers than being questioned by lawmakers on television. Chief executives lack control during the congressional hearings, unlike events where they are promoting an initial public offering or explaining a strategy to investors.
“Most are not intended to shed light on the underlying problem,” said Harry Clark, a former partner in the lobbying firm Clark & Weinstock that has represented dozens of companies, including Andersen. “They are intended to shed heat on the political aspirations of the committee members.”
As Nancie Poppema, executive vice president of CCA, a Dallas company specializing in “high risk” public communications, put it, “When executives go before Congress and C-Span, they are in front of the nation: their customers, their stockholders, their regulators and their employees. It’s a much bigger court.”
Collateral Damage
Consultants recommend several strategies. For Stanley Brand, a former lawyer for the Securities and Exchange Commission and general counsel to the U.S. House of Representatives, it’s a matter of minimizing legal damage.
Many companies facing Congress — WorldCom included — are enduring separate criminal investigations, regulatory hearings and civil court action. “You’ve got to be careful not to provide fodder for other forums,” said Brand, now a partner with Brand & Frulla and who worked for Andersen in its hearings.
“You want to be as laconic and as non-exciting as you can be,” he said. “Colorful witnesses are always invited back and expose themselves to collateral damage.”
For Poppema, it’s a matter of establishing credibility.
“Plausible deniability does not work before Congress,” she said. “You have to maintain credibility and integrity in that situation. It’s not plausible or credible not to know what the company is doing.”
A New Day
Several consultants say WorldCom’s Chief Executive John Sidgmore, promoted from vice chairman in April, should differentiate himself from former Chief Executive Officer Bernard Ebbers, ousted that same month. Ebbers was chief executive when WorldCom misclassified $3.9 billion in operating costs as capital expenditures, resulting in a false $1.2 billion profit for last year.
“The new CEO’s best case is that he’s the new CEO,” said Clark, who worked on the Andersen hearings. “You try to lay it off on Ebbers and say this is a new day.”
Richard Fruchterman, WorldCom’s director of government relations, didn’t return phone calls this week and B. Jay Cooper, an APCO spokesman, declined to discuss the company’s plan.
Whatever the strategy, consultants advise against fighting Congress. “It’s hard to beat up on somebody who doesn’t fight back,” Poppema said.
Shock Therapy
She stages mock hearings in which executives are peppered with tough questions. “Some people have to practice telling the truth,” she said.
Brand likes to show executives video of earlier hearings.
“Until they see the vitriol and the hysteria on tape, they don’t believe me,” he said. “It’s like shock therapy.”
Companies also send out their lobbyists to learn about the questioning and argue the company’s position.
“The biggest challenge is educating people on what you do and how you do it,” said Jody Hatcher, vice president for marketing at Novation LLC, a Texas-based hospital purchasing company. Novation faced Senate hearings in April into whether purchasing companies were colluding to siphon business from small hospital suppliers.
“To convey the story was a challenge,” he said. “These Senate staffers are tugged in 10 different directions.”
Damage Control
Global Crossing hired a lobbying firm to help handle the congressional inquiries. Ford Motor Co., summoned to testify on the recall of Firestone tires on their Explorer models in 2000, handled the job with its own employees.
“Either you survive it because, hopefully, you have been doing the right things for a number of years or you just hang on by your fingernails,” said Ford’s top lobbyist, Janet Mullins Grissom, at a panel last year.
In WorldCom’s case, consultants say the compressed timeline may make it difficult. The company’s hearing comes 12 days after its June 26 announcement that the accounting was botched.
“From what I can tell, they’re pretty much flat on their back,” said Bob Blau, a lobbyist at BellSouth Corp., a WorldCom opponent in many Washington policy battles.
Hatcher said Novation learned from its Senate hearing.
“Our view of what we are doing is different from other people’s view,” he said. “It’s a standard of perception — and that’s what you have to manage.”
Others note the difference between survival and winning.
“You lose or you lose bad,” said Hansen, who left Boeing this year to become top lobbyist at AARP, formerly the American Association of Retired Persons. “I don’t think there’s a way to win. The guy who walks in thinking he can win gets hurt really bad. They go to the woodshed.”
This article originally published by Bloomberg.
