Tuesday, May 24

The elephant in the room

This blog is about media relations, and how shaping public opinion (through positive positioning) can help you. It's also about how neglecting to defend your image can backfire.

So, why have I intentionally avoided the elephant in the room? My own backyard, even?

HealthSouth founder and CEO Richard Scrushy was on trial for his knowledge of a $2,700,000,000.00 (billion) accounting fraud. Over a number of years, HealthSouth fudged the numbers to meet Wall Street expectations. Fifteen former officers (including five CFOs) have reached plea agreements with the feds, in exchange for their cooperation against Scrushy.

(I will say that unlike the Enron's and the Tyco's of the corporate fraud world, HealthSouth was actually a profitable company delivering tangible service. Just not nearly as profitable as most were led to believe.)

The jury is now in its fourth day of deliberations, having to sort through 55 days of testimony and 6,000,000 documents. So again... why have I held off?

The Scrushy indictments and SEC hearings were among the last big stories I covered in my previous life as a journalist. That $2.7-billion figure came out of my addition and reporting. Needless to say, I know a heck of a lot about what prosecutors were up to, as they fought to freeze Scrushy's assets. With my new job, I didn't get the chance to directly see or hear a lot about what the defense was up to in the legal realm. But it's been interesting to see what's been happening on the public relations front.

I've maintained all along that Scrushy faces a monumental task: winning his freedom while keeping his reputation intact. He always had a corporate swagger of control, and was known for the degree to which he micro-managed certain aspects of HealthSouth. Richard Scrushy is a proud man, and intensely proud of the company he dreamed and established from nothing.

It takes a lot of moxie and ego to bring all of that together -- and those are exactly the sorts of things he had to let go of during the trial. How can one maintain that reputation, when the defense amounts to a lot of "I didn't know" and "I guess I'm not a great judge of character to have had such crooks in my trust."

The Scrushy saga has been the elephant in the room -- and now that it's in the hands of the jury, I can feel more comfortable as an ex-journalist to comment. And this particular missive has to do with Scrushy's playing of the race card. (I know what you're thinking... what's a white billionaire know about being black?) Throughout this ordeal, Scrushy has positioned himself as a simple man who grew up poor on the wrong side of the tracks in Selma, Alabama. A high-school dropout with no formal education, he made his way into the medical world as a respiratory therapist, married young with kids he could barely feed.

His attorneys have equated this to a civil rights case. Even now, you can't find Scrushy walking to or from the courthouse without an entourage of black attorneys, pastors, and supporters. Some think the display a little transparent, and will not affect the jury (split 6-6 black and white.) Some point to the timing of Scrushy's relationship with those inner city pastors, and a $1,000,000 gift he gave one influential congregation. Some even point to the executives Scrushy surrounded himself with, none of whom were black.

Richard Scrushy has spent a lot of time in and out of the courthouse on reputation managment. He and his wife Leslie did a religious talk show for more than a year, he had a website to refute the bias and false claims he saw in the media. From a trial standpoint, he bluffed jurors and reporters alike into believing he was prepped and ready to testify on his own behalf -- which he ultimately did not do. (I for one was not fooled, and I have witnesses to back that up.)

The prosecution's strategy was to play against Scrushy's need to rehabilitate his public image. Play his own ego against himself. It's not easy to win simultaneously in Federal court and the court of public opinion. We'll see how it works out.


At 5/27/2005 08:29:00 AM, Anonymous Anonymous said...

(from Kaa) Is it just me or does that first picture of Scrushy you used look overwhelmingly like he ought to be on the 700 club crying his eyes out and saying "Ah have SINNED!"? Televangelist-hair, anyone? :)


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