Is There a (Spin) Doctor in the House?

When the Securities and Exchange Commission recently charged three former senior executives of IndyMac Bancorp with securities fraud for “misleading investors,” two fundamental questions immediately arose in investor relations and strategic public relations circles:  Did they have professional IR/PR counsel when communicating with investors?
Contrary to popular and misguided belief, the professional practice of investor and strategic public relations isn’t about painting rosy pictures, making things appear better than they really are, or coloring fact.  Rather, best-practice counsel condones transparency, clarity, and timely, factual representation of corporate news–good or bad.
The corporate executives at IndyMac are accused of making false and misleading disclosures about their company at a time when its financial condition was rapidly deteriorating.  Perhaps in time, we’ll learn if they were counseled by IR/PR pros or not.
As Lorin L. Reisner, deputy director of the SEC’s Division of Enforcement, said in a statement, “Truthful and accurate disclosure to investors is particularly critical during a time of crisis, and the federal securities laws do not become optional when the news is negative.”
We and our fellow professional communications brethren couldn’t agree more with Reisner.  These IndyMac Bancorp officers now need legal representation.
Ironically, communications counsel is crucial more than ever, since the fight will continue in the court of public opinion, as the executives look to prove their innocence and reestablish their careers.
To many outsiders, this could sound like a job for a (spin) doctor.  The truth is that IR and PR pros, many of whom– yours truly included–began their careers as journalists, abhor the notion of spin, including the word itself.    There is no cure-all medicine for managing a crisis.  Only solid thinking and communications skills will win the day; certainly not a job for a doctor of spin.


Roger Pondel,

Banking on Oedipus

Before his birth, it was prophesied that Oedipus would murder his father, the king of Thebes, and marry his queen mother. To avoid this catastrophe, the baby was abandoned for death, only to be adopted and raised elsewhere.  Once an adult, Oedipus left home and along his journey, he killed a man in a roadside scuffle.  It was later discovered that Oedipus had killed the Theban king, so he was named the new king, married the widowed queen, and therefore fulfilled the prophecy of his birth.
Though not nearly as melodramatic, but perhaps just as perturbing, bank runs can also be seen as a self-fulfilling prophecy.  Starting with rumors that a bank is performing poorly, hundreds of customers will withdraw their money, and the bank will consequently be pronounced dead.
The recent failure of IndyMac Bank, FSB can be considered an example of this phenomenon.  Though IndyMac reported consistent losses in the year before its demise, it was the public release of letters written by the Chairman of Congress’ Joint Economic Committee that sent IndyMac customers into a flurry of panic.  The Senator’s letters, released June 26, 2008, opined that the collapse of IndyMac was a possibility.  In the two weeks to follow, IndyMac customers withdrew more than a billion dollars in deposits, sending the bank into a liquidity crisis.  With that, the FDIC overtook the bank, and on August 1, 2008, IndyMac filed for bankruptcy.
Could IndyMac’s collapse have been avoided?  If the Senator’s letters had remained private, would the bank still stand?  There’s no doubt that the bank would still have to deal with a slew of problems, but I’m sure that the day before the letters were revealed, government takeover and bankruptcy seemed like a fat chance.