Lawyer Who Made Millions Suing Deep Pockets Soon To Be Disbarred

I have written before about lawyers of dubious motives trying to take advantage of both victims and defendants for their own financial gain. One of the latest involved a suit against Dick's Sporting Goods I wrote about on February 2. (http://crisisexperts.blogspot.com/2011/02/lawyers-often-only-winners-in-class.html)

Don't get me wrong. I like lawyers. Some class action suits make sense. (For example, see Larry Smith's blog on February 22 at http://www.crisisconsultants.blogspot.com/: "2-year-old Harrison Kothari of Houston, TX died Dec. 1, 2010 from a rare infection that has been linked to a contaminated alcohol wipe (manufactured by the Triad Group of Hartland, WI) used in a hospital. His parents have filed a 'gross negligence' lawsuit. At last count this week, more than 50 potential victims have contacted plaintiff's attorneys wanting to sue. That number is sure to swell."

What I don't like are frivolous, drummed-up law suits that create crises for innocent organizations and line the pockets of shysters. Remember the McDonald's customer who sued because he didn't know the coffee was hot?

Here's a story of the people 1, vs. the ambulance chasers 0. "Stan Chesley built his career and reputation on big, class-action lawsuits like the one filed more than a decade ago over the diet drug fen-phen.

"His strategy over the years was both simple and successful: Swoop in after a disaster, find as many clients as possible and launch a legal assault against the deep-pocketed companies accused of doing the damage. His approach helped change the way major cases are litigated in America and it made Chesley rich, famous and influential." (http://www.courier-journal.com/apps/pbcs.dll/article?AID=2011302260090)

But here comes the good part: "A trial commissioner in Kentucky last week recommended revoking Chesley’s law license for life because of 'shocking and reprehensible' behavior related to the $200 million fen-phen settlement in Boone County.... If the Kentucky Supreme Court adopts (Trial Commissioner William) Graham’s recommendation, the loss of Chesley’s law license would be akin to a professional death sentence for Cincinnati’s most famous lawyer. If Chesley is disbarred in Kentucky, it is 'virtually automatic' that he also would lose his Ohio law license, said Jonathan Coughlan, disciplinary counsel for the Ohio Supreme Court....

"It also would be a severe personal blow to a man who is married to a federal judge, has hosted fundraisers for presidents at his home, flown on Air Force One and handled groundbreaking court cases from Ohio to Bhopal, India. But Graham said such a stiff penalty is justified because Chesley knew the rules from his decades of experience with class-action lawsuits and chose to break them anyway.

"He said Chesley, 74, not only took too much money, but he also misled the trial judge, failed to get the clients’ consent for the settlement and tried to conceal his actions."

I doubt Chesley will have to live in a cardboard box. Nevertheless, there's one down.

During the next month or so, watch the news for class-action settlements. Most settlements aren't publicized, but try to guess who gets the most money: the "wronged" plaintiffs or their attorneys. Watch the TV ads by legal firms looking for "victims" of this drug or that asbestos exposure.

Then ask yourself if your organization's crisis plans includes a section on class-action suits. It doesn't matter if the suits have merit. Your plan needs to prepare you to speak to your key stakeholders about them.

Do States and Labor Unions Have Crisis Communications Plans?

I'm not a fan of labor unions but know they have a place in our culture -- as long as they don't get as powerful as the companies they claim to be resisting. (If you haven't seen F.I.S.T., watch the trailer at http://www.videosurf.com/video/f-i-s-t-trailer-1978-sylvester-stallone-66479582.)
"Wisconsin is just the tip of the iceberg. The Republican war on unions goes far beyond Gov. Scott Walker's attempt to end collective-bargaining rights for public employees in his state or Gov. John Kasich's effort to do the same in Ohio.

"For a more comprehensive view of the Republicans' war on unions, we need to focus on what Republicans in Washington did last week. In the House, Republicans passed, as part of their continuing resolution to fund the federal government through September, a provision that slashed the funding of the National Labor Relations Board by one-third. But the truly breathtaking measure was an amendment by Rep. Tom Price, R-Ga., to defund the NLRB — closing it down altogether — until the fiscal year ends in September. The measure failed Thursday because 60 Republicans joined every Democrat present in voting no, but three-quarters of House Republicans — 176 of them, including Majority Leader Eric Cantor, Va., and Majority Whip Kevin McCarthy, Calif. — voted yes." (http://www.courier-journal.com/apps/pbcs.dll/article?AID=2011302240013)

And then there is George Will, who I typically disagree with unless he is writing about how great baseball is. "Hitherto, when this university town and seat of state government applauded itself as “the Athens of the Midwest,” the sobriquet suggested kinship with the cultural glories of ancient Greece. Now, however, Madison resembles contemporary Athens.

"This capital has been convulsed by government employees sowing disorder in order to repeal an election. A minority of the minority of Wisconsin residents who work for government (300,000 of them) are resisting changes to benefits that most of Wisconsin's 5.6 million residents resent financing. Serene at the center of this storm sits Republican Scott Walker, 43, in the governor's mansion library, beneath a portrait of Ronald Reagan. Walker has seen this movie before.

"As Milwaukee County executive, he had similar dustups with government workers unions, and when the dust settled, he was resoundingly re-elected, twice. If his desire to limit collective bargaining by such unions to salary issues makes him the 'Midwest Mussolini' — some protesters did not get the memo about the new civility — other supposed offenses include wanting state employees to contribute 5.8 percent of their pay to their pension plans (most pay less than 1 percent), which would still be less than the average in the private sector. He also wants them to pay 12.6 percent of the cost of their health care premiums — up from about 6 percent but still much less than the private sector average....

“'I am convinced,' he says, 'this is about money — but not the employees' money. It concerns union dues, which he wants the state to stop collecting for the unions, just as he wants annual votes by state employees on re-certifying the unions. He says many employees pay $500 to $600 annually in union dues — teachers pay up to $1,000. Given a choice, many might prefer to apply this money to health care premiums or retirement plans. And he thinks 'eventually' most will say about the dues collectors, 'What do we need this for?'" (http://www.courier-journal.com/apps/pbcs.dll/article?AID=2011302240006)

I'm not taking sides in the battle between government and unions in Wisconsin, Indiana, and Ohio. But think about this: Do the unions have a crisis communications plan that lays out how they will communicate and with whom? Do the states have a plan on how to deal with unions when they shut down schools and other government organizations so they can protest at the capitol? The Institute for Crisis Management would tell everyone involved: You have to have a plan that includes stakeholders and messages.

Why Would You Create Your Own Expensive Crisis?

Please review my February 3 blog post. (http://crisisexperts.blogspot.com/search?updated-max=2011-02-11T14%3A41%3A00-05%3A00&max-results=10) In it, I took a Virginia school district to task for posting the Ten Commandments in what is clearly a violation of many court rulings.

Some school and government people have to learn the hard way. They insist on thumbing their collective noses at the courts and waiting until they waste tax-payer dollars to defend their position. The latest Supreme Court ruling goes against McCreary and Pulaski counties in southeastern Kentucky. The lead in The Courier-Journal article in Louisville by Peter Smith says it all: "Final answer: Thou shalt not." (http://www.courier-journal.com/apps/pbcs.dll/article?AID=2011302220059)

Eleven years and $400,000 of wasted tax dollars later, the court ruled exactly what any reasonable person who doesn't live and die with the 700 Club knows long ago. "The counties were seeking a second trip to the Supreme Court. The first came in 2005, when justices upheld a temporary injunction against the exhibits. After that decision, the U.S. District Court for Eastern Kentucky enacted a permanent bar on the exhibits, a decision upheld in 2010 by the 6th Circuit Court of Appeals....

"Attorney Mathew Staver, who represented the counties on behalf of the Liberty Counsel, a national group that promotes greater religious expression in public settings, said he was disappointed by the court’s decision. 'I'm quite surprising (sic) the court sidestepped it....'

"Newly elected McCreary County Judge-Executive Doug Stephens said he would talk with county legal representatives to determine how much each county may have to pay and whether insurance could cover some of it. He acknowledged the payment would strain the county, which has a limited tax base, but 'if we owe a bill, then we pay a bill.'"

I believe in the Ten Commandments. But I also believe in the separation of church and state, as do judges who rule on such matters. What I don't believe in is wasting tax dollars on lawyers to defend the posting of religious doctrine.

When I blogged about the Virginia school district, I quoted Charles C. Haynes, senior scholar at the First Amendment Center, who wrote. "It's not every day that a school board votes unanimously to ignore legal advice, defy Supreme Court precedent and invite litigation. But that's exactly what happened recently in Giles County, Va., when members of the board ordered school administrators to hang the Ten Commandments on the walls of the county's five public schools. Rehang, actually.... One resident told the board: 'You have a moral obligation to do what is right. Do not let our children be deprived of this right — a God-given right.' The crowd cheered and shouted 'Amen.'” (http://www.courier-journal.com/apps/pbcs.dll/article?AID=2011302030005)

I encourage you to avoid creating your crises. There are plenty of alligators out there just waiting to snap at your behind without you swimming through the swamp on purpose. Your organization first needs to have a crisis communications plan. Second, it needs to practice that plan once or twice a year. And third, you need to take the plan from the shelf and dust it off when a crisis strikes. I also would advise not to take actions that clearly violate court precedence. There are enough alligators out there without adding your own.

Depositing Into Your Bank Account of Good Will

* "Libyan strongman Moammar Gaddafi appeared on state television early Tuesday to prove he had not fled the country, as the opposition seized control in some areas and top officials resigned to protest attacks on civilians.... In Washington, Libya's ambassador to the United States announced he would 'resign from serving the current dictatorship.'" (http://www.washingtonpost.com/wp-dyn/content/article/2011/02/21/AR2011022104733.html?nav=emailpage)

* "The Bahraini government urged people to embrace a national dialogue February 22 as the country continues to experience anti-government protests that have swept through the Middle East." (http://edition.cnn.com/2011/WORLD/meast/02/22/mideast.africa.unrest/?hpt=T2)

* "The Egyptian military has set up refugee camps near its border with Libya and two mobile hospitals at the Salloum border crossing to assist Egyptians fleeing the protests in Libya, Egypt's state-run news website EgyNews reported late Monday. The agency also reported the Egyptian military is increasing its presence at the Libyan border. (http://edition.cnn.com/2011/WORLD/meast/02/22/mideast.africa.unrest/?hpt=T2)

* "Wisconsin Gov. Scott Walker, citing a budget crisis, has asked for increases in the amount government workers pay toward their health benefits and pensions. Walker, a Republican who reportedly received big bucks from Tea Party backers, also wants to essentially strip unions of their collective bargaining rights, with the exception of wages.

"'We believe this will have an impact on what happens with the rest of the nation,' said Greg Floyd, president of Teamsters Local 237.... 'This is not about the budget. It's about breaking unions,' said Floyd. 'The unions in Wisconsin have agreed to the budget demands.'" (http://www.nydailynews.com/ny_local/2011/02/22/2011-02-22_as_ground_zero_in_bargaining_debate_wisconsin_union_battle_has_nationwide_reperc.html)

* "A Republican-led Indiana House committee has advanced so-called right-to-work legislation after hearing opponents argue that it was aimed at weakening unions and would drive down wages. The House employment committee voted 8-5 along party lines Monday to send to the full House the bill prohibiting union membership and fees from being a condition of employment....

"'It's all about money. The rich want to get richer and make sure I am a little poorer,' said Jerome Davidson, one of many speakers at the union rally Monday." (http://www.wthr.com/story/14068363/ind-union-members-gather-to-protest-labor-bill)

* "Thanks to the tea party, we are now told that all our problems will be solved by cutting government programs. Thus the House Republicans foresee nirvana if we simply reduce our spending on Head Start, Pell grants for college access, teen pregnancy prevention, clean water programs, K-12 education and a host of other areas.

"Does anyone really think that cutting such programs will create jobs or help Americans get ahead?" (E.J. DIONNE JR., The Washington Post: http://www.courier-journal.com/article/20110222/OPINION04/302220021/1016/OPINION/E-J-Dionne-Jr-tea-party-winning?odyssey=modnewswelltextOpinions)

What do these stories have to do with crisis communications? Each is directed toward winning popular public opinion. These countries, states, and labor groups seek to build their cases in the court of public opinion.

So how about your organization? Are you in a position to win friends and influence people if and when a crisis strikes? If not, you need to start now to develop a public affairs strategy that will build you a bank account of good will. If you mess up some day, you then will have good will that you can withdraw. And if you never have to make a withdrawal, there's certainly nothing wrong in having a healthy bank account.

Memphis, Shelby County Schools Look at Merger and Integration

Memphis City Schools face a crisis, but you couldn't tell from the district's website. (http://www.mcsk12.net/) On the other hand, neighboring Shelby County Schools, which may be forced to combine with Memphis schools, makes a clear case on its website for remaining separate.

According to the New York Times, "With no Memphis school system, the city schools instead would become the county’s responsibility. Opponents of the move, an unlikely coalition of suburban residents, Republican state lawmakers, a Memphis teachers’ union and several of the city’s black ministers, see it as an unnecessary provocation, one that could end up hurting schools countywide.

There's more money in the county outside of Memphis. "The creation of special districts, which proliferated in Tennessee after school integration, was banned in 1982. But Republicans just won an unprecedented majority in the state legislature.... Memphians watched this with concern.

"The worry came down to financing: currently, property tax revenues in Shelby County are collected from everyone in the county and divided among all the schools, city and county both, based on daily attendance figures. Though city schools receive some additional money from a city-only tax, they rely heavily on taxes from the more affluent suburbs."

According to the district's website, 86% of all Memphis students are African-American and 8 percent are white. The Shelby County Schools website does a better job of addressing the merger controversy. "What are the educational merits of creating the 16th largest school system in the nation? NONE! Education research is clear on this matter and shows that large urban districts are far beyond optimum size.... There is strong consistent negative correlation between district size and student achievement in low-income populations.... The higher the level of poverty in a community .... the more damage larger schools and school districts inflict on student achievement.” (http://www.scsk12.org/SCS/pdf_files/MCS_Charter_Surrender_QA.pdf)

"Municipal districts in Tennessee have dissolved into county ones before, but never on this scale," according to the New York Times. "The Shelby County system, with 47,000 students, would absorb a system of 103,000, creating the 14th-largest (or 16th according to the Shelby County website) school district in the country."

From this distance, it's hard to take sides. But when it comes to making a case via websites, Shelby County has the edge. At the root of the controversy is the same problem faced by Memphis and cities across the country: The solution is to integrate neighborhoods so that we don't need to worry about integrating schools.

Where Have You Gone, Art Rooney?

I'm about two-thirds of the way through a book about Art Rooney, the late owner of the Pittsburgh Steelers. It's 521 pages written in part by my niece's professor at Duquesne University, Maggie Jones Patterson, that includes anecdotes of how Mr. Rooney (I have to call him "Mr.") saved the National Football League from imploding the way Major League Baseball has done. He made sure that small-market teams, like Pittsburgh and Green Bay, who played in this year's Super Bowl, had a chance to compete with the likes of New York and Chicago. Art's son, Dan, is now a principal owner of the Steelers and an Obama-appointed ambassador to Ireland. The NFL may be about to do to football what the major league baseball owners have done to baseball. (The Pittsburgh Pirates now have the record in all of professional sports for having the most consecutive losing seasons, indicating what is wrong with pro baseball.)

I wrote on February 9 here about the horrid Super Bowl this year (horrid if you're a die-hard Steelers fan as I am) and the mess-up in Dallas with temporary seats. "Inexplicably, sections of temporary bleachers erected inside Cowboys Stadium weren't completed in time for the game. About 1,250 people held tickets declared unusable. The N.F.L. said that about 850 of those ticket holders were relocated to other seats in the stadium. But long after the game started, hundreds were still outside, in line at the ticket window, awaiting a resolution that few imagined could satisfy them." (http://www.nytimes.com/2011/02/07/sports/football/07fans-super-bowl-dallas.html)

"Keep in mind that just a few floors above those displaced fans, NFL commissioner Roger Goodell and Cowboys owner Jerry Jones enjoyed the game. At any time, either of them, or a representative of the stadium or the NFL, could have gone down and said a quick, 'We're sorry,' and maybe even picked up the bar tab. It would have gone a long way toward establishing some good will. That didn't happen. The NFL made its first offer to reimburse a ticket holder three times the face value of a ticket, which wouldn't allow most fans to break even on the trip to a game they couldn't watch. It didn't take long for a lawsuit to be filed.

"On Tuesday the NFL made its third offer to fans who were displaced when their Super Bowl seats were not ready to go at kickoff. This offer, which basically will cover all verified expenses fans incurred to get to the game or give them a flat $5,000, is by far more generous. But it probably arrives too late to win the public relations battle. If the NFL is going to lock out the players, it needs to have some amount of public sentiment on its side, and it won't get that by looking like a group of arrogant owners who can't address the simplest of unfair situations. Like a ticket that didn't come with a seat." (http://espn.go.com/espnw/blog/_/post/6127416/)

According to ESPN, "A few days later Eric Grubman, NFL executive vice president of business ventures and chief financial officer, said on ProFootballTalkLive that he wished lawyers filing suit against the league for not fulfilling the contractual obligation to provide a seat would instead focus on 'world peace.'"

What a stupid thing to say! "Or maybe they should just eat cake," ESPN countered.

"But the penny-wise, pound-foolish approach to satisfying the wronged ticket holders makes the NFL look just plain stingy -- unlike the fiscally responsible adults they need to appear to be if they are going to lock out the players, according to ESPN.

"Season ticket holders can't offer counter-proposals or get the two parties to the bargaining table. But when the NFL players make an ad to run around the time of the Super Bowl called 'Let us Play,' there is no question that this is about the hearts and minds of the fans as well.

"The ticket fiasco isn't helping the league in that department. The NFL has built itself up in the sports landscape to look like clear-headed grownups when compared with the NBA, MLB and NHL. A lockout will harm that. But more importantly, the NFL needs to appear to be a league that is fair and reasonable, whether it is dealing with players or displaced fans.

"The NFL has dealt with the ticket holders by being reactionary in dealing with complaints and lawsuits, when a little foresight and a fair offer could have alleviated a public relations disaster.

"The stakes are higher in the case of a lockout. Let's hope that at the bargaining table, the league's lawyers aren't waiting weeks to make their best offer. If they are, make sure you're looking up terms like NLRB, desertification and antitrust. Because that's what you'll be reading about instead of rookie camp and OTAs this spring."

I love sports. But I hate big-time sports. The NFL is in a crisis. If only an Art Rooney would emerge from this mess!

Or maybe they should just eat cake.

Miami High School Coach and Athletic Director Plead Ignorance; That May Be the Only Truth

I guess this is "do the right thing" week. Here's another example (see the two posts below). If the apple is rotten to the core, no communications department can make the apple taste good.

Dr. Michael Krop High School in Miami is a basketball powerhouse. It has a 22-3 record and is ranked #1 in its class in the state. The only problem is that a court has ruled the team cheated and ordered it off a different kind of court. It is alleged that school officials knew about the crisis and -- guess what? -- did nothing.

"Dr. Krop (Miami), the No. 1-ranked team in the state in Class 6A, managed to overcome off-the-court distractions last week to win its district title Saturday night. The Lightning will begin their quest for the state title Thursday in the first round of the regional playoffs, but there is a pending investigation by the state's governing association for high school sports into the eligibility status of its star player hanging over them as they embark on that journey." (http://www.maxpreps.com/news/P9dtOjgHEeCkhgAcxJSkrA/dr-krop-basketball-wins-in-courtroom,-then-on-the-court.htm)

Not so fast, Lightning. According to Riptide, the Miami New Times blog, "In the last week, rampant rule-bending and outright cheating concerning the school's basketball squad has been exposed, most of it by this publication. The Florida High School Athletic Association (FHSAA) can fine Krop $2,500 for every game played by an ineligible student. That means not only more than $50,000 in fines for playing Brian Delancy -- the Bahamian student whose immigration paperwork problems caused Krop's disqualification -- but equal numbers for teammates Angel Rodriguez and Trevin Joseph. Riptide exposed that all three players had bogus addresses registered with the school district." (http://blogs.miaminewtimes.com/riptide/2011/02/krop_high_administrators_knew.php)

FHSSA claims Krop knew all along it was on "Shakey" ground. "'It's not just Delancy now, after what you dug up,' says FHSAA executive director Roger Dearing. 'When you purposefully cheat, and that's what this is -- I have no doubt that (Coach) Shakey Rodriguez knows what he's doing here -- it gets expensive.'"

Fines and fees could exceed $200,000. This is a bill that can't be be borne by taxpayers. "That's a lot of basketball game tickets and bake sales."

"The key to exacting such large fines is showing that Krop's administrators willfully broke the rules -- and there's evidence that the school was informed of multiple violations more than two months ago and did nothing."

The Miami New Times added, "On December 13, the FHSAA received a tip exposing Delancy's myriad eligibility problems -- including his claimed residency with notorious recruiter and longtime Shakey Rodriguez associate Bernard Wright at a non-existent address -- and claiming that 'a number of other illegal players field this particular team.'

"Dearing forwarded the letter to Cheryl Golden, executive secretary of the local athletic conference and spoke to Krop principal Matthew Welker about the accusations, he says. He expected that the school would investigate them itself. Clearly, that didn't happen.

"Golden has refused to return Riptide's calls for comment. Welker is currently suspended for a separate criminal matter." ("Michael Krop Senior High Principal Matthew Welker was suspended for 30 days without pay...for his alleged involvement in a scandal at the school." http://www.miamiherald.com/2011/02/09/2058881/krop-principal-receives-30-day.htl)

"Additionally, both Shakey and the school's athletic director, Michael Kypriss...have pled ignorance that Delancy needed to file special immigration paperwork. But Kypriss handled the exact same problem ten months ago with two tennis students, says Dearing."

Remember? Do the right thing and you will greatly reduce the frequency and severity of smoldering crises. Cheaters never win, and winners never cheat. The school's website (http://drkropathletics.com/) hasn't been updated for a week and, at this writing, contains nothing about the basketball crisis. This is a school that needs to make some major changes. By living in denial, it has sacrificed its basketball season, set a bad example for its students, and amassed huge fines that will stress the school to somehow raise sympathy so it can somehow raise money to pay six-figure fines. None of this mess needed to happen.

Payday Loan Bill to Cap Interest Rates in Kentucky Is Dead

I wrote here on February 8 about a bill in the Kentucky legislature aimed at capping interest rates for payday loan businesses at 36%. At the time, I claimed that this is an industry that has an ongoing crisis due to the nature of its business. The payday loan industry, in my view, isn't doing itself any favors in the way it communicates with legislators or makes its case online. (http://kdda.wordpress.com/about/) It seems Cash Express, with the most outlets in Kentucky, and its competitors think political donations constitute effective communications.

I'm sorry to report that maybe Cash Express and its fellow loan sharks might be right.

"By a close vote, the House Banking and Insurance Committee effectively killed a bill for this legislative session that would put a 36 percent cap on consumers' rate for payday loans, as the U.S. Congress has done for members of the military. Seventeen states and the District of Columbia have such a law. At present, the small, short-term loans cost $15 per $100 borrowed, which amounts to about 400 percent interest a year, critics of payday lenders say." (http://www.kentucky.com/2011/02/17/1637741/proposed-cap-on-payday-loan-interest.html#more)

The Courier-Journal in Louisville reported last month that 39 people, most from outside Kentucky with connections to Cash Express, donated the maximum of $1,000 each to the campaigns of both gubernatorial candidates, Democratic incumbent Steve Beshear and Republican challenger State Senator David Williams. Beshear supported the bill; Williams was opposed.

"(Sponsor of House Bill 136, Rep. Darryl) Owens noted some payday lending officials have contributed heavily to state officeholders. 'My gut says, 'Poor folks, zero. Special interests, one.'"

This is the third consecutive year Owens has introduced the bill and the third year it hasn't made it out of committee.

Mary Love, an Oldham County retiree, told the committee she had to pay $1,450 in fees to a payday lender for a $400 loan. "Melissa Fry Conty, with the Kentucky Center for Economic Policy, said a state database set up in 2009 shows at least 83 percent of payday lending revenue was generated by borrowers with five or more transactions in 2010."

But John Rabenold, president of the Kentucky Deferred Deposit Association, and Tommy Moore, Community Financial Service Association of America, testified against the bill.

"Rabenold called Owens' bill 'a job killer.' He said the payday lending industry provides jobs to more than 2,000 Kentuckians and has a payroll of $35 million. (By the way, that's a measly $17,500 per employee.) Moore said a 36 percent cap on payday loans would kill the industry. Several committee members opposed to Owens' bill said payday lending provides a service to needy people and that more information is needed from the state database. 'What is the alternative for people who need this?' asked Rep. Johnny Bell, a Glasgow Democrat, in opposition to the bill. Rep. Jim Gooch, D-Providence, said payday lending is 'an outlet some people may have to have.'"

Try telling that to Mary Love.

The moral of the story is the same as my post just below about doing the right thing. A 36% interest cap would kill the industry? Come on! "Democratic Rep. Mike Denham, a Maysville banker, said before voting for Owens' bill he would be put behind bars if he made loans with even 36 percent interest."

It's the same as if the meth lab operators claimed to be providing a service to addicts who wouldn't be able to get a fix if they were put out of business. The payday loan companies are in a crisis, in Kentucky and other states. The industry chooses to lobby its way out of its crisis, rather than doing the right thing: stop taking advantage of the people it claims to serve. And if it really does provide a valuable service, communicate with customers as vigorously as with state legislators.

A State Audit? Don't Sweat It -- Unless You Are Fudging Financials

If you follow my blog, you know that a recurring theme is "do the right thing." Organizations that don't cheat or lie can avoid many crises that befall less reputable companies. I've given examples here through the years of organizations that make shady deals and then tell Communications to fix it.

Today, I have an example of what happens when an organization does the right thing. The Metropolitan Sewer District (MSD) in Louisville, Kentucky, lays and maintains sewer lines, operates treatment plants, and is responsible for miles of run-off ditches. This quasi-government organization doesn't make many friends: it warns of much higher rates to meet Clean Water Act requirements; assesses homeowners hundreds or thousands of dollars to bring sewer services to neighborhoods still with septic tanks; and is stretched too thin to meet everyone's complaints about flooded basements and standing water.

"The state auditor’s office in September asked MSD’s private auditor, Crowe Horwath, to look into allegations of financial and other irregularities within the sewer agency. The inquiry was launched after allegations of mismanagement were raised by Future Fund, a land trust that’s fighting a sewer line extension in eastern Louisville." (http://www.courier-journal.com/apps/pbcs.dll/article?AID=2011302150087) Allegations included paying too much interest on debt, conflicts of interest by board members, and cozy financial relationships between the agency and developers.

Many non-profits break into a sweat at news of a state audit set off by a complaint and an accusation. The results of the MSD audit are just in.

"The state auditor has found no evidence of 'fraud or abuse' in Metropolitan Sewer District financial practices that involve borrowing hundreds of millions of dollars for sewer repairs.... After reviewing the work by Crowe Horwath, Crit Luallen, the Kentucky Auditor of Public Accounts, has concluded that there was no merit to some of Future Fund’s concerns, and others were beyond the scope of a financial audit."

If MSD had been mis-spending money, it would have touched off a crisis that would have tarnished its image even more than it already is and quite possibly would have cost someone a job. Instead, MSD was "doing the right thing." A smoldering crisis, therefore, was averted.

Georgetown College Slow to React, But Now Dealing Well With Its Crisis

Georgetown College, just north of Lexington, Kentucky, is a Christian school with an enrollment of 1,200. According to the Lexington Herald-Leader, Georgetown's minorities and international student population five years ago stood at 3%. Through the efforts of the college's leadership, that number now is 11.4%.

Recent racial incidents threaten to undo Georgetown's diversity progress. On February 4, someone from a Beta Delta chapter of the Kappa Alpha Order fraternity house shouted a racial slur at an African-American student taking part in a traditional men's run in their underwear to women's dorms. Ah, college! The fraternity, by the way, says its "spiritual founder" is Robert E. Lee. (http://www.georgetowncollege.edu/StuOrg/KA/)

Georgetown President Bill Crouch spoke to the student body on February 14. He said "the school was initially slow to respond to a complaint more than a week ago from a black freshman who said someone called out a racial slur to him... leaving him feeling as if he had been threatened.

"'The college takes full responsibility for not being fully prepared for this situation,' the Georgetown News-Graphic reported Crouch as saying during the assembly. 'We own the problem. The problem is ours.'" (http://www.kentucky.com/2011/02/15/1635989/georgetown-college-admits-response.html#more#ixzz1E2vgOvry)

Georgetown's first response was to send e-mails to students on February 8 and 10 about racial issues. It later took more appropriate actions. "Since then, however, the college has increased security and set up a hotline for students to report disrespectful behavior, Crouch told students. He also said the school will add a clause to its student handbook outlining penalties for students who make racial slurs, including possible expulsion. Crouch added he is setting up a task force to 'examine our current campus culture and climate.'"

In addition, "Beta Delta members have formally apologized and have been placed on probation by the college, which includes mandatory diversity sensitivity training for all members. Another incident could result in the chapter being removed from Georgetown, said Crouch."

According to News-Graphic, the student news site, "Porsha Jackson, a freshman African-American student who was interviewed before the chapel assembly, said the school should have responded on the day it happened. 'The school didn’t take it as serious as they should have,' said Jackson. 'It could have been worse. They handled it like it wasn’t offensive and were trying to cover it up by not addressing it with students. Now, parents, students, alumni and everyone is concerned.'” (http://www.news-graphic.com/breaking_news/article_59b3e9a6-388e-11e0-9190-001cc4c03286.html)

Maybe this will blow over in a few months, but maybe it won't. According to today's Herald-Leader website, "Some students said the incident has tainted their view of the school.... 'Now, some black students are talking about not coming back, said Jackson. 'Our parents are involved and don't want us to be here. I don't want to come back.'

"Maya Mclin, a black freshman, said the college responded only after Tevin Lloyd, the student who made the allegations, began bringing attention to the incident. 'It is a big deal,' said Mclin."

Since the frat's racial slur, "there also have been complaints that a Confederate flag was displayed in the common area of the dormitory that Kappa Alpha members share with other students and that photos were posted on the fraternity's website depicting members wearing Confederate uniforms, said Jim Allison, associate vice president for college relations. (The Beta Delta website has been wiped out except for the home page.) In addition, graffiti that Allison described as 'hateful' was found in and removed from a bathroom stall in a dormitory, he said."

Georgetown College clearly has a crisis on its hands. Its president admits leadership was slow to respond. That led to other acts of racial hatred, leaving a tense environment. Black students are threatening to leave the school, which may cost Georgetown revenues and progress toward integrating the campus.

Crouch did the right thing in addressing the students and admitting the school should have acted sooner. He did the right thing in taking responsibility and announcing a response: a hotline, increased security, a change in the student handbook, and a task force.

So many organizations are slow to respond to smoldering crises! Too often, they wait until the crisis is out of control and unmanageable. Give credit to Crouch and Georgetown for recognizing this crisis wasn't going to go away by itself and recovering their own fumble.

Zoos And Other Public Destinations Need a Crisis Communication Plan -- Before, Not After a Crisis

The public at last knows the results of an investigation into the death of a teenager mauled by a tiger at the San Francisco Zoo. Officials did a good job of communicating the tragedy. More on that later. But shame on the zoo or the city or whoever held back the report for three years after a Freedom of Information request.

To refresh your memory: "A female Siberian tiger killed in a hail of police gunfire after fatally mauling a man at the San Francisco Zoo on Christmas Day 2007 likely was provoked into leaping and clawing out of its enclosure, a federal investigator said in documents obtained by The Associated Press.

"The tiger named Tatiana killed 17-year-old Carlos Sousa Jr. and injured his friends, brothers Paul and Kulbir Dhaliwal, leaving claw marks etched in the asphalt and claw fragments in the bushes outside its pen. Claw marks were also discovered near the top of the enclosure wall, which was lower than federal safety standards dictate, showing that the big cat was able to get enough leverage to pull itself out." (http://topics.sfgate.com/topics/San_Francisco)

The Associated Press reported shortly after that toxicology reports showed the men had alcohol and marijuana in their systems. (http://www.youtube.com/watch?v=1xvZ-JdND0Y&feature=related)

On Saturday, AP said the report, which it obtained through a Freedom of Information request filed more than three years ago, provided evidence the men were teasing the tiger before she was able to scale the wall and attack. The first draft report came right out and said that, but it was stricken in the final report because it was called "irrelevant from an Animal Welfare Act enforcement standpoint," according to David Sacks, a spokesman for APHIS (Animal and Plant Health Inspection Service, which oversees the nation's zoos).

That information is relevant to the zoo and the city, which has been sued by the families of the victims.

"'After a kill, I find it interesting the tiger would leave a kill to go after something else unless there were a compelling reason,' wrote (Laurie) Gage (a tiger expert who investigated the scene for APHIS.) 'The tiger passed exhibits with warthogs which it ignored as it followed (the blood trail?) of the two brothers to the Terrace Cafe outside the dining area." (http://www.usatoday.com/news/nation/2011-02-12-tiger-attack-documents_N.htm)

AP goes on to say that Gage and inspector Michael Smith investigated the enclosure and zoo premises on Dec. 27, 2007. "In more than 65 years no other tiger had escaped from that enclosure. San Francisco Zoo officials now say the enclosure should have been safer."

So what else did the zoo say? In a release December 31 of that year, “'Our hearts go out to the family of Carlos Sousa Jr. and the surviving individuals and their families,'” (San Francisco Zoo Director Manuel A.) Mollinedo said. 'As a Zoo and as conservators of animal life, we also mourn the loss of Tatiana, who was a beloved member of our Zoo family.'" (http://www.sfzoo.org/openrosters/docdownload.aspx?ID=32463)

When your crisis has victims, always express sympathy to the families. The quote goes on to express sorrow at the death of their tiger, which is a nice touch for those across the country who felt more sorry for the tiger than for the strung-out victims who likely teased the tiger.

Another message that should always follow crises like this is to tell what steps you are taking to prevent a recurrence. The release said, “'We are working with the City of San Francisco’s Recreation and Parks Department, which has promised to build as expeditiously as possible a new safety enclosure to protect the public as well as the tigers,' said Mollinedo. “'We will work with the City to create a secure and proper enclosure.'”

The release takes into account another key crisis communications element: the investigation. "Police and other investigations into what may have caused the 350-pound cat to escape are ongoing.... Mollinedo said the Zoo has asked the AZA (Association of Zoos and Aquariums) to assemble a group of prominent zoo directors to visit and consult with San Francisco Zoo management on safety issues. This panel is being assembled and should visit at the early part of next week."

My only criticism is that the release should have gone out sooner. Six days is too long. Reporters, in the Bay area at least, want this information yesterday. But I can imagine the rush to deal with all the details and hire an architect to design the new enclosure so the zoo could reopen as soon as possible. It opened January 3, 2008.

This story brings back memories of the train derailment at the Louisville Zoo in June 2009. I know that zoo doesn't have a crisis communications plan. Nevertheless, it was able to get out a release the same day as the accident, which sent 22 people to hospitals for treatment. (http://www.louisvillezoo.org/news/press/MR/2009/MR%2009-06-01_train.htm) Unfortunately, in the haste to issue the release, it contained a couple errors that never were corrected online. I don't know if the San Francisco Zoo has a crisis communications plan, but the author of the news release knew all the right things to say.

Any public venue -- zoos, museums, science centers, restaurant chains -- need to have a crisis communications plan. Many such organizations have disaster plans and practice so they know how to respond physically. But few that I've encountered have thought about, "What are we going to say to ensure our guests (and our financial backers!) renew their faith in us?"

Activists Expose Coal Companies' Violations, Allowed to Partcipate in Legal Actions

Two coal companies in Kentucky may find themselves paying larger fines than negotiated with the state. This might be a crisis, but I expect they have the funds to handle their fines. The larger smoldering crises are still ahead. The companies can thank three environmental groups and a Franklin County judge for that.

According to Sean Rose of The Courier-Journal in Louisville, International Coal Group Hazard and Frasure Creek Mining negotiated a fine with the Kentucky Energy and Environment Cabinet for violations in eastern Kentucky. International agreed to pay $350,000 covering 1,245 violations in 64 operations. Fraser Creek plans to pay a $310,000 fine for violations at 39 locations.

"In October, the environmental groups, which include Appalachian Voices, Kentuckians for the Commonwealth, and the Kentucky Riverkeeper and Waterkeeper Alliance, alleged the companies had falsified their water-pollution discharge reports and caused pollution to get into state waterways.

"State officials, in a Dec. 3 lawsuit against the companies, said their investigation of the companies and the laboratories they hired revealed poor record-keeping, inadequate quality control and other improper procedures." (http://www.courier-journal.com/apps/pbcs.dll/article?AID=2011302110092)

The three environmental groups argued that the Clean Water Act allows for fines of $740 million and also calls for criminal prosecution of anyone who falsifies reports. Circuit Judge Phillip Shepherd ruled Friday that the environmentalists can formally intervene in the cabinet's suit against the coal companies, seeing how they were the ones who brought the matter to the state's attention.

Lawyers for the cabinet and the companies don't sound very pleased with Judge Shepherd's decision. They claimed state law doesn't allow citizens to intervene in enforcement actions. "Dick Brown, spokesman for the cabinet said 'We’re reviewing the ruling and considering our options.'”

Let's look at the smoldering crises that exist in this case. Remember that a smoldering crisis, as defined by The Institute for Crisis Management, is a problem that has potential to become a full-blown crisis, and usually someone in the organization knows about it but takes no action. First is the money. The fines won't approach $740 million, but I'll be surprised if they aren't higher than negotiated previously.

A second smoldering crisis is the possibility of criminal prosecution. I was brought into a chemical plant in 2000 to improve its image in the community, which in large part was caused by the environmental manager fudging water quality reports. He was convicted and would have gone to prison if he hadn't been on his death bed when the sentence was pronounced. The coal companies need to take the possibility of criminal charges seriously. This man's cheating, along with other violations discovered during the investigation, cost the company $20 million in fines, $16 million in environmental projects, $2 million in criminal charges, plus untold legal fees.

Third are civil suits that could be filed whatever the size of the fine. In this litigious culture of ours, such suits are likely.

And a fourth smoldering crisis is the likelihood of environmentalists' increased scrutiny of the two companies -- and perhaps other coal companies as well. They easily can keep tabs via the internet and public documents that note violations.

If I were advising the coal companies, I would suggest first that they improve their operations. I'm sure many of the violations were ticky-tack. But they need renewed focus and culture changes that eliminate most of the violations. Second, I would want them to launch thorough investigations of emissions record-keeping, and make that project public and transparent. If violations are found, self-report and describe actions taken to prevent a recurrence. And fire the person or persons responsible. Not much can be done to prevent the civil suits. They come, justified or not. But I would make sure they keep in mind the communities where they do business and be sure to build good will. And as for the increased scrutiny, if the companies clean up their act, that crisis should take care of itself.

But if these coal companies are like other coal companies I've written about in this blog, they wouldn't want my advice. Tell me: Does anyone know of a coal company committed to doing the right things in employee safety, following regulations, and dealing with the community? I haven't read of any.

Government Expands Investigation of VW Diesel Engines

The National Highway Traffic Safety Administration announced it is expanding its investigation of diesel-powered Volkswagens. NHTSA said it has received 160 complaints about engines shutting down or losing power, primarily at high speeds. The investigation began in August. The complaints involve 2009 and 2010 model year Jettas and 2010 models of the Golf and the Audi A3 with TDI clean diesel engines. (http://www.manufacturing.net/News/2011/02/Automotive-Gov-t-Expands-Volkswagen-Investigation/)

"The safety agency says one minor crash has been reported related to a failure of the car's high pressure fuel pump."

When Toyota was going through its sticking accelerator problems, it conducted its own tests and hired outside experts to run tests. I can't find a sign that Volkswagen is taking similar measures. Instead, the manufacturer is blaming the cars' owners, claiming "the problem could be related to gasoline contamination from drivers pumping the wrong fuel."

I'm not sure how seriously VW is taking what could become a crisis. I feel it needs to work on its message. Saying that its cars' owners aren't smart enough to put in the right fuel may not be the best way to go. Throughout most of the 1990s, no one took the exploding Firestone ATX tires on Ford Explorers seriously until 271 people died and 800 were injured. VW better not wait that long.

Ice Rinks Can Contain Silent But Deadly Poison, Plus Few if Any Have Crisis Plans

What you don't know won't hurt you, I was told through much of my life. What you don't know, can't see, and can't smell surely can hurt you -- if it's carbon monoxide.

I wrote on February 7 about an ice rink in Colorado, where 61 now they say 81) people at a youth hockey tournament were treated at a hospital for carbon monoxide poisoning. The chief culprits appear to be the Zamboni, the ice edger, and poor ventilation.

Channel 7 News in Denver reported, "(Gunnison Fire Marshal Dennis) Spritzer said the ice rink did not have a carbon monoxide detector and was not required to by law." (http://www.thedenverchannel.com/news/26770176/detail.html)

On the Today Show this morning, a segment described how dangerous some ice rinks are because of high carbon monoxide levels. (http://www.msnbc.msn.com/id/21134540/vp/41508607#40230853) The reporter and air experts set up monitors across the ice in a rink in Pennsylvania. The Zamboni hadn't smoothed much of the ice surface before the alarms started going off. An hour later, the levels still were so high that the reporter and his experts evacuated the rink.

The EPA and four members of Congress who serve on air quality committees all declined interviews with NBC. Only three states have laws regulating carbon monoxide.

My advice to rink managers and associations is to switch to electric equipment (which, according to Today, is unfortunately twice as expensive), improve ventilation, and develop a crisis communications plan, in that order. As an aside, a crisis communications plan probably would have saved a roller rink in Louisville, Kentucky, after a boy was beaten to death out front. Parents stopped sending their kids, and so the rink now operates under new ownership.

A Google search shows many state rink associations and the Metropolitan Ice Rink Managers Association, which lists dozens of members. I encourage all of you to lobby for CO tests at members' rinks and develop a crisis communications plan. One size should fit all, and splitting the cost of hiring a firm such as the Institute for Crisis Management would cost each member rink very little.

I wrote this two days ago and I'll write it again: Have gas-burning devices inspected annually and buy at least one carbon monoxide alarm (about $20) for your home and business. I was ill for months last year and doctors couldn't figure out what was wrong. I was exhausted and dizzy all the time. The furnace service person immediately shut off my furnace because it was emitting CO. A day after getting a new furnace, I felt much better again. Carbon monoxide poisoning is no fun, as those Colorado hockey players and their parents learned.

Super Lawsuit Follows Mess in Dallas Sunday

In addition to the final score, another crisis has emerged from the Super Bowl. Temporary seats were declared unsafe shortly before game time.

Imagine being a Steelers or Packers fan, enduring long delays at airports caused by icey weather in Dallas. You finally make it and feel like new after a refreshing night in your hotel. About noon, you go to the stadium to party with others wearing the same colors as you are. Then you find out you don't have a seat, even though you have a ticket. Sorry. You can either stand for four hours or leave.

"A group of furious fans are lining up outside Cowboys Stadium and trying to figure out where they’re supposed to go after the NFL announced that some temporary seating has not been completed, and some Super Bowl ticket holders may not get into the game.

"At the moment," wrote Michael David Smith an hour before kickoff Sunday, "fans are being directed to the Party Plaza area outside Cowboys Stadium. I left my press row seat to go down there, and I saw enraged fans getting what didn’t seem to be satisfactory customer service from the ushers assigned to the thankless task of helping them.

“'I just found out when I got here two minutes ago,' said Michael Noble, a Steelers season ticket holder from Erie, Pennsylvania, who planned a special trip to Dallas when his team won the AFC Championship Game.

"Noble, who was holding a ticket with a $900 face value, wanted to be inside the stadium watching the Steelers warm up, but he’s currently stuck outside, with no guarantee that he’ll get in." (http://profootballtalk.nbcsports.com/2011/02/06/fans-furious-over-super-bowl-temporary-seating-screw-up/)

Inexplicably, sections of temporary bleachers erected inside Cowboys Stadium weren't completed in time for the game. About 1,250 people held tickets declared unusable.

"The N.F.L. said that about 850 of those ticket holders were relocated to other seats in the stadium. But long after the game started, hundreds were still outside, in line at the ticket window, awaiting a resolution that few imagined could satisfy them." (http://www.nytimes.com/2011/02/07/sports/football/07fans-super-bowl-dallas.html)

This appears to have been a smoldering crisis. The stadium managers knew the Super Bowl was coming on February 6, 2011, for years. They had more than a month since the last Cowboys' home game to get the temporary seats installed safely.

According to the New York Times, "Those sent away to watch the game elsewhere, or invited to watch the game on televisions inside a club at the stadium, were promised refunds by the N.F.L. worth three times the face value of their tickets, which were mostly $800 or $900 apiece. But most of those affected had paid far more for their tickets, and had spent small fortunes on travel and lodging. And any number of them, having had to exit the stadium before re-entering, missed a quarter of the game."

Many weren't there just to watch the Super Bowl. They were there because their team was playing. The NFL's offer may seem generous on the surface, but "'I’ve just lost eight grand,' said Bradley Geier, a Dallas lawyer, who said he spent $9,700 for two tickets that had a face value of $900 each. 'Just because they decided to put seats where they shouldn’t....'

"'The frustrating thing here is that they wait till the day of the game to say these auxiliary seats aren’t good?' said Dan McGinnity of Spokane, Wash., a Packers fan who paid $900 for his ticket. “Don’t they have any sort of plan ahead of time?'”

This is another example of a crisis that never should have happened. Here come the lawyers. "Fans whose Super Bowl plans were altered by seating problems at Super Bowl XLV have filed a lawsuit against the NFL, the Dallas Cowboys and (Cowboys' owner) Jerry Jones. The lawsuit alleges breach of contract, fraud and deceptive sales practices. The Dallas News reports that the plantiffs are seeking $5 million from the NFL. Up to 1,000 fans may join the suit." (http://sports.yahoo.com/nfl/blog/shutdown_corner/post/Fans-file-suit-against-NFL-and-Cowboys-over-Supe?urn=nfl-319085)

Yahoo! Sports website continues, "The NFL can't get into a legal battle with fans because it would be a public relations disaster. Lawyers on both sides know this, which is why it's never going to go to trial. They'll settle way before that.

"The league screwed up twice: first by not having Cowboys Stadium ready, and second by its inadequate offer of repentance which would give fans $2,400 and was later amended to include a ticket to next year's Super Bowl or an option to take a ticket to a future Super Bowl, airfare and hotel included. This wasn't a negotiation. The NFL should have made the fans an offer they couldn't refuse up front. Now it'll end up having to pay more than they would have originally needed....

"The NFL would be wise to refund any and all money the fans spent to get to Dallas and into the game, hook them up with tickets and VIP access to see their favorite team play a game next season, and maybe throw in some spending money for their trouble. The quicker this gets out of the media the better. We have a lockout to focus on, after all."

Chris Chase, who wrote those words above, has gotten it right. The NFL is a rich organization. Spend what it takes to stay out of the news, and return concentration to the future rather than the past: the threatened lockout/walkout facing the NFL this spring and summer. I'm still trying to figure out who was at fault for this mess. But the NFL needs to make it right and stay out of court.

Safeway Deals With Druggist Whose Mistake May Cost Colorado Woman Her Unborn Child

I guess SAFEway is a bit of a misnomer.

A Safeway pharmacy in Fort Lupton, Colorado, mistakenly gave a pregnant woman methotrexate. The drug is used in chemotherapy, but it is also known to some as the abortion drug because it is used to terminate early-stage pregnancies.

Mareena Silva is six weeks pregnant with her first child. She thought she was filling a prescription for an antibiotic, but received methotrexate intended for a 59-year-old woman with the same last name and similar first name.

"'It couldn't be a worse mix up than that,' said Dr. Paul Doering, professor emeritus of pharmacology at the College of Pharmacy University of Florida, in an ABC News report. 'There is no excuse for them. I can't think of anything worse.'" (http://www.huliq.com/10473/pregnant-woman-mistakenly-receives-abortion-drug-safeway-pharmacy)

A statement from Safeway said, "When the pharmacist became aware of what happened, he worked with the patient and with her physicians to minimize any possible health consequences to the patient and her unborn child. We have extended our sincere apologies to the customer, and offered to pay any medical expenses incurred as a result of a prescription error. We are also very concerned about how this happened and we are conducting a full and complete investigation. Safeway has pharmacy systems and processes in place to prevent this kind of occurrence." (http://consumerist.com/2011/02/safeway-pharmacist-accidentally-gives-abortion-inducing-drug-to-pregnant-woman.html)

Silva responded, "Sorry's not going to cut it. I'm going to have to deal with this for a long time. My baby could have deformities."

Safeway found itself in a position where nothing it could say would fix things. Its statement is probably the best it could do under the circumstances. What it needs to do now is settle the matter out of court quickly and quietly so the company isn't shaken by crisis aftershocks. The goal is to quell the controversy and keep this from being an eight-month-long story.

Toyota Acquitted of Sticking Accelerator Accusations

Toyota got some good news this afternoon. There hasn't been much of that lately.

The Transportation Department, assisted by engineers with NASA, announced that a 10-month study of Toyota vehicles concluded there was no electronic cause of unintended high-speed acceleration.

"Toyota has recalled more than 12 million vehicles globally since fall 2009 to address sticking accelerator pedals, gas pedals that became trapped in floor mats, and other safety issues. The recalls have posed a major challenge for the world's No. 1 automaker, which has scrambled to protect its reputation for safety and reliability."
(http://www.theoaklandpress.com/articles/2011/02/08/business/doc4d51a1bc0d4e5739283318.txt?viewmode=fullstory) Toyota paid a record $48.8 million in fines for three recalls.

In addition, Toyota agreed last year to pay $10 million to the relatives of a family of four killed in San Diego. (See my blog post on December 24, 2010)

"LaHood said NASA engineers 'rigorously examined' nine Toyotas driven by consumers who complained of unintended acceleration. NASA reviewed 280,000 lines of software code to look for flaws that could cause the acceleration. Investigators tested mechanical components in Toyotas that could lead to the problem and bombarded vehicles with electro-magnetic radiation to see whether it could make the electronics cause the cars to speed up."

Also, today in Tokyo, Toyota announced a 39% drop in sales, a contrast to improving fortunes at Ford and GM. Nevertheless, the news from the Transportation Department boosted the stock price by 4%.

The National Highway Traffic Safety Administration (NHTSA) received about 3,000 reports of sudden acceleration incidents involving Toyota vehicles in the past 10 years or so. Ninety-three allegedly involved deaths, but NHTSA has confirmed just five of them, four in a single accident.

Toyota took steps to reassure consumers that it was dealing with the perceived problems with its cars. "In addition to the recalls, Toyota began installing brake override systems on new vehicles. The systems automatically cut the throttle when the brake and gas pedals are applied at the same time. The company also created engineering teams to examine vehicles that are the subject of consumer complaints and appointed a chief quality officer for North America amid complaints its U.S. division did not play a large enough role in making safety decisions."

Response to allegations was more than a "Hey, Communications, fix this!" The company took concrete steps to determine how to make its cars safer. Then it was up to Communications to show the world that, even though Toyota didn't believe flaws were responsible for all those allegations of sticking accelerators, the company was taking the issue seriously. To become defensive and do nothing is the formula for a smoldering crisis.

Not so at Toyota. Shortly after the Transportation Department released its findings today, Toyota's website already was updated. "We hope this important study will help put to rest unsupported speculation about Toyota's ETCS-i, which is well-designed and well-tested to ensure that a real world, un-commanded acceleration of the vehicle cannot occur."

We can hope that the quality of Toyota's cars matches the quality of its communications.

Payday Loan Industry Is Making a Weak Case in Kentucky Legislature

Add Kentucky to the list of states looking to cap interest rates in the payday loan industry. A bill before the state legislature, for the third consecutive year, looks to cap interest rates at 36%. The business' response lacks credibility and, I contend, elicits little sympathy among the general public.

Cap it at 36%? The industry is balking at a 36% cap?

Kentucky Deferred Deposit Association (KDDA) is a trade group that has weighed into the debate. According to the Lexington Herald-Leader, "Pat Crowley, spokesman for the Kentucky Deferred Deposit Association, said the legislation could force payday lenders out of business, leaving some of the 180,000 customers to look at unregulated Internet lenders and others for loans. 'There are times when people need money to repair a car or get groceries or buy medicine,' Crowley said. 'Where are people going to go if this product goes away? This is something that people need and want to use.'" (http://www.kentucky.com/2011/02/07/1626361/payday-lenders-targeted-again.html#more)

The February 7 article goes on to say, "Consumer groups complain that some payday lenders have charged as much as 400 percent interest on a single loan, prompting the Rev. Marian McClure Taylor, head of the Kentucky Council of Churches, to use the word 'sinful' to describe the lending practice."

The Courier-Journal in Louisville last month reported that 39 people, most from outside Kentucky with connections to Cash Express, donated the maximum of $1,000 each to the campaigns of both gubernatorial candidates, Democratic incumbent Steve Beshear and Republican challenger State Senator David Williams. That's called hedging your bet. (http://www.courier-journal.com/article/20110114/NEWS01/301140094/1008/rss01)

Candidate Williams is quoted in the Courier February 8 (no internet story posted) as saying, "There are a lot of people that have no other place to go when they need short-term temporary loans." He doesn't think the bill will get out of the House.

The industry has a handful of registered lobbyists, including one of the highest paid lobbyists in Frankfort, Bob Babbage. He represents -- guess who -- Cash Express, which has the most payday loan locations in Kentucky.

The Herald-Leader article said, "Critics contend that borrowers who find themselves in need of short-term financial assistance often end up taking out a series of payday loans, sometimes to pay back previous loans, causing them to become trapped in a borrowing spiral."

A woman at a state House hearing this week said, "It's so easy to get caught in this trap. The fees keep adding up and putting you deeper into the hole. A Louisville man called the practice "legal loan-sharking."

According to KDDA's website, "Our mission is to promote legislation and regulation that provides payday advance customers with substantive consumer protections while preserving their access to short-term credit options, and encourage responsible industry practices by requiring." Huh? (http://kdda.wordpress.com/about/) That website admits "$100 payday advance with a $15 fee = 391% APR." The average loan, according to a study by the Kentucky Department of Financial Institutions is about $310. Cash Express loans up to $1,500 a pop.

I see nothing on the website of Cash Express, which operates 124 outlets in Kentucky, that mentions interest rates. Simply apply online. "Submitting your online Loan Application at Cash Express Loans is Free of cost and no need to pay any kind of fee. Only if your loan gets approved then you need to pay a small amount of fee depending on your loan amount sanctioned." (http://cashexpressloans.net/faq.html) Hire a writer, people!

Applicants can direct money to be deposited in their bank accounts. On the next payday, the company withdraws the amount owed from that bank account. If there's not enough in the account to pay off the loan, the natural option is to borrow more. Credit history isn't considered.

This is an industry that has an ongoing crisis due to the nature of its business. The payday loan industry, in my view, isn't doing itself any favors in the way it communicates with legislators or makes its case online. The state Department of Financial Institutions said 182,000 people took out payday loans in the first nine months of 2010. I don't see any of them testifying to keep high-interest loans available "to repair a car or get groceries or buy medicine." It seems Cash Express, for one, thinks political donations constitute effective communications.

Mets' Financial Home Run May Be Ruled a Foul Ball

I wrote about a suit filed against JPMorgan as part of a post on February 4. Irving Picard is trustee appointed to recover investors' money lost in Bernie Madoff's Ponzi scheme. Picard now is going after the New York Mets and their ownership's share of Sterling Equities for $300 million to $1 billion, depending on any punitive damages.

As a result, owner Fred Wilpon is looking to sell 25% of the Mets. Some wonder if he will have to sell his entire interest. He and partner Saul Katz may lose part of their Sterling Equities business, which includes the team’s television network, commercial real estate ventures, and investment funds, in addition to the Mets.

"The suit is seeking the return of what it calls $300 million in 'fictitious profits,' a net gain from some 200 accounts held by Mr. Wilpon, Mr. Katz, their real estate business and the Mets organization that over the years Mr. Wilpon and Mr. Katz used to build and sustain their multimillion-dollar empire. The trustee is also seeking roughly $700 million beyond those profits, in part because the two men looked the other way for so long while their empire benefited from tainted Madoff money." ( http://www.nytimes.com/2011/02/05/sports/baseball/05mets.html?pagewanted=2&_r=1)

According to the New York Times, Wilpon, Katz, "their families and their businesses 'made so much easy money from Madoff for so long' that despite the many warnings — from within their own inner circle, and by other investors and financial institutions — they 'chose to simply look the other way...'” If you follow baseball, you'll figure out that the Mets could afford better players and fund a larger payroll in large part through Madoff money.

"The chief investment officer at Sterling Stamos, a hedge fund independent of Mr. Madoff in which Mr. Wilpon and Mr. Katz invested, said he repeatedly warned the men and their families that Mr. Madoff’s returns were 'too good to be true.' Other senior officers at the Stamos fund expressed similar concerns about Mr. Madoff."

The Mets' owner insists he was a victim, not an enabler, of his friend Madoff's scheme. "On Friday, in a personal statement and through their lawyers, Mr. Wilpon and Mr. Katz decried the trustee’s legal assault. 'The trustee’s lawsuit is an outrageous strong arm effort to try to force a settlement by threatening to ruin our reputations and businesses, which we have built for over 50 years.'”

It's up to the courts to decide if Sterling is a sinner or a saint. In the meantime, we know one thing: Anything too good to be true isn't. And I guess we know another thing too: Always do the right thing without "simply look(ing) the other way." Communicators need to question business activities that defy common sense. In this case, Wilpon and Katz wouldn't have listened to us. But if you feel strongly enough that this crisis or any smoldering crisis is being ignored, you can find another job or get ready to bail out the boat as it starts to sink. I get a rush helping clients work their way out of a crisis. It's not nearly as much fun when I'm thinking, "I tried to warn you."

Hockey Rink Closed Indefinitely Due to Carbon Monoxide

More than 30 people (CNN says 54) were treated at hospitals for carbon monoxide poisoning during a youth hockey tournament in Greeley, Colorado.

"The fire department says they've closed the Mountain States Ice Arena until they can find what's causing elevated levels of carbon monoxide in the rink.... The ice rink was evacuated after the initial carbon monoxide scare during a kids' hockey game Saturday afternoon.... The mother of one player affected Saturday says everyone started feeling dizzy at the hockey game. Firefighters were called, and the carbon monoxide levels were tested. (http://www.9news.com/rss/article.aspx?storyid=107505)

I can't find a website for the arena, but found a biography of the rink manager, Tim Knox. "He is also involved with converting the Warnoco Roller Skating Rink in Greeley, Colorado to an Ice Hockey Rink, Mountain States Arena." (http://www.spoke.com/info/pEWX8uo/TimKnox)

That last statement is significant given some of the comments to the Channel 9 News site referenced above. According to EllyC, "I think everyone should know that this building was never intended for ice hockey. It was renovated and therefore didn't have the proper ventilation."

JRG76 commented, "They should close it permanently. It is a subpar program in a subpar facility. The carbon monoxide is only part of the problem in that building and it's not worth risking lives."

As a segue to my next point, kempokiller wrote, "Is it weird to anyone else besides me that all of a sudden we're having a big leap in cases of carbon monoxide poisoning?"

I don't know if there's a big leap in cases, but do me a favor and avoid the personal crisis that hit me: Have gas-burning devices inspected annually and buy at least one carbon monoxide alarm (about $20). I was ill for months last year. I blamed my heart and my medication. I tried not to think about dementia, but that seemed like the only explanation left after a series of heart tests. I was exhausted all the time. I felt light-headed, my pulse was racing, and my arms and legs felt like the blood wasn't circulating through them right. My wife said she thought I was drunk. I had memory lapses and sometimes became confused. I continued to function well enough to get my work done, but it was hard.

Last month, I had my furnace serviced. The man immediately shut it down because it was emitting carbon monoxide. I had a new furnace installed and felt better the next morning than I had in months. I've been fine ever since.

I would advise Knox to create a crisis communications plan to help his rink maneuver through crises like he is having at Mountain States Arena. He also better check his furnace and buy some CO alarms.

Here Are Three News Items Worth Noting

Three stories in today's paper caught my attention -- and I haven't even gotten to the sports section yet. All three stories carry a similar theme.

"A Senate investigation of the Fort Hood shootings faults the Army and FBI with missing warning signs and not exchanging information that could have prevented the massacre.

"The report, released Thursday, concludes that systemic and cultural problems caused military officials to miss signs that the suspect, Maj. Nidal M. Hasan, was becoming increasingly radical before the 2009 attack.... The report says the agency (FBI) may have dismissed such clues to avoid 'a bureaucratic confrontation.'" (http://www.washingtonpost.com/wp-dyn/content/article/2011/02/03/AR2011020306884.html)

The second story involves the Madoff scandal that created crises for many. "JPMorgan Chase executives suspected that Bernard Madoff's investment strategy was actually a Ponzi scheme years prior to its collapse, but did nothing to stop it, according to the court-appointed trustee trying to recover assets stolen by Madoff. The claims come in a lawsuit filed by trustee Irving Picard against JPMorgan Chase...unsealed Thursday....

"The complaint contains a redacted e-mail from a JPMorgan risk officer warning as early as June 2007 that Madoff was running a Ponzi scheme, and using the bank to hold his money." (http://money.cnn.com/2011/02/03/news/companies/madoff_jpm/index.htm)

The third item involves another legal suit. "A Paducah-area man has sued the Boy Scouts of America and the Episcopal Diocese of Kentucky, alleging he was sexually abused in the 1970s by the scoutmaster for a troop based at a Paducah church....

"The lawsuit alleges that the Boy Scouts had known since at least the 1950s of sexual predators among troop leaders but never warned parents or scouts to be alert for such dangers. The suit also alleges the organization continued to publish handbooks encouraging scouts to see each scoutmaster as 'a wonderful man' and a 'friend to whom you can always turn.'" (http://www.courier-journal.com/apps/pbcs.dll/article?AID=2011302030078)

Do you see a pattern here? Each article talks about a smoldering crisis that someone knew about. But nobody took action. Many of our organizations have skeletons in their closets that someone is aware of. As you read this, somewhere an employee or a manager is sitting on a time bomb and doing nothing.

About 65% of all crises are smoldering crises. Almost all of them could be prevented if only the organization took action. How many smoldering crises are dealt with appropriately? I don't know because we never hear about them.

Would you like to be the subject of a legal suit and/or negative news coverage, or would you rather handle smoldering crises quietly internally?

Those Who Don't Recognize Separation of Church and State Are Inviting a Needless Crisis

I know that many people feel strongly about their religion. That's fine. And that's their right. But a school district in Virginia is doing something stupid and creating a crisis on purpose.

Charles C. Haynes, senior scholar at the First Amendment Center, brought this to my attention in an op-ed piece he wrote. "It's not every day that a school board votes unanimously to ignore legal advice, defy Supreme Court precedent and invite litigation.

"But that's exactly what happened recently in Giles County, Va., when members of the board ordered school administrators to hang the Ten Commandments on the walls of the county's five public schools. Rehang, actually." (http://www.courier-journal.com/apps/pbcs.dll/article?AID=2011302030005)

Mob mentality ruled the day. "Many county residents were not happy (about legal counsel directing the commandments be removed). At the school board meeting on Jan. 20, hundreds of people demanded that the Ten Commandments be returned to schoolhouse walls — and the board enthusiastically agreed. The next day, the commandments went back up.

"According to The Roanoke Times, one resident told the board: 'You have a moral obligation to do what is right. Do not let our children be deprived of this right — a God-given right.' The crowd cheered and shouted 'Amen.'”

Haynes went on to question how hanging the Ten Commandments in a school is a "God-given right." He cites two Supreme Court decisions that barred favoring one religion over others in schools and other government institutions. "Giles County officials appear determined to promote the majority faith in public schools, even if it means fighting an expensive (and futile) court battle."

What's the point? Practice religion in your home or even on a street corner, but you can't in public schools. I love and worship God. But proselytizing in a tax-supported place is a smoldering crisis sure to happen. If you in your organization draw a line like this in the sand, you better be sure you have the law on your side or else you're inviting trouble.

Scandals Continue at Louisville's Animal Services

I wonder what it is about Metro Animal Services in Louisville, Kentucky, that creates ongoing crises. In 2009, MAS made the news too often before the then-mayor fired the four-year director, Gilles Meloche. Among his messes I wrote about in October 2009:

•Meloche was reprimanded after sexual harassment complaints by three employees and was served with a civil suit. Also named was his assistant Wayne Zelinsky and Metro Louisville government. The plaintiff claimed she was retaliated against. When Meloche left at the end of 2009, Zelinsky was named acting director. Remember this character in our story, because he resurfaces 110 words or so below.
•An internal audit found mismanagement of an arrangement between animal services and a non-profit animal adoption agency. MAS was accused of needlessly euthanizing animals.
•A Louisville couple filed suit against Louisville metro government, Miloche, Zelinsky, and an animal control officer for allegedly entering their home and taking away two adult pit bulls and a litter of puppies without a warrant. The last I heard, more suits were pending for similar invasions.
•Following a severe rainstorm in August 2009 that flooded the shelter, animals had to be evacuated to the fairgrounds and several animals drowned. A number of people blamed Meloche and his department for negligent treatment.
•The city's Government Accountability Committee held several hearings over issues within Animal Services.

A permanent director, after more than a year, has yet to be appointed. Meanwhile, the city elected Greg Fisher as its new mayor. He appointed a committee to audit MAS and a second committee to search for a new director. Before either committee got very far, Zelinsky resigned from the interim director position yesterday. The reason may amaze you.

A blog written by the Louisville Eccentric Observer (LEO), which I would guess you would call an alternative publication, posted on February 2, "After countless stories of managerial ineptitude (and) wanton animal slaughter, the resignation of Zelinsky apparently came down to the fact that the outgoing interim director operates an escort service, Derby City VIP....

“'... (Fischer said) “The point is that he is running an operation outside of what his normal, day-to-day operation is. We just brought it to his attention and we told him we need to discuss it with him and he decided to resign.'

"According its website (which has since been taken down), Derby City VIP offered guidance on Louisville’s best strip clubs, security details and other escort services." ((http://fatlip.leoweekly.com/) The site was registered to Zelinsky and his wife.

Questionable behavior and poor judgement certainly aren't new to government, businesses, and nonprofits. But such smoldering crises are usually easy to take care of if only people take appropriate actions in a timely way. There's no way former mayor Jerry Abramson should have put up with allegations and law suits against Meloche for so long. And picking his assistant, also named in legal suits and part of the old MAS administration, was a poor choice. I said so at the time.

I hope the new interim director, Debbie Fox, is squeaky clean. She comes from another metro government department. Fischer seems to be handling this mess appropriately with the two committees he appointed, which was among his first actions after taking office in January. I know many members and all, as far as I know, are smart, reputable people. For the sake of the animals, let's hope this ongoing crisis will be fixed. Now.

Lawyers Often the Only Winners in Class Action Suits

I have a problem with attorneys. Who doesn't? Not all of them. Just the ones like I see advertising during the local news and late at night -- and last year during the Super Bowl. If you work for a business with deep pockets, you are suscepible to ambulance chasers.

Dick's Sporting Goods is among the latest victims. It agreed to pay $15 million dollars, pending approval of a Rochester, New York, judge, because the company allegedly "violated wage and labor laws through practices such as requiring employees to work through their breaks or interrupting their breaks without paying them for the additional time worked, and requiring employees to work more than 40 hours in a week without paying them overtime." (http://www.timesonline.com/bct_news/news_details/article/1373/2011/january/31/dicks-to-pay-up-to-15-million-to-settle-suits.html)

I read from enough former employees to make me believe many were shorted by Dick's. Doing what the company did sounds like a violation of the Fair Labor Standards Act. But what the legal firm is doing isn't much better. Just $15 million? "The settlement covers about 190,000 current and former employees of the company, according to court records."

A writer in Columbus, Ohio, asked in a chat room or a website (http://www.golfwrx.com/forums/topic/218818-anyone-joining-the-class-action-lawsuit-against-dicks-sporting-goods/), "I know for one that i was subjected to this in 2005 when i worked there during a summer in college, but im not sure if the benefits or a sucessful ruling are worth the hassle. Has anyone ever participated in a class action suit, and do you know what would be required of me?"

Some of the responses amused me. Chickenpotpie responded, "Yeah, the lawyers usually make this really easy for the "class". You usually have to fill out a form saying what your experience was.... Then just wait for the check for $2.69, or whatever other nominal damages they award the class. The lawyers are the ones who win here, not the workers. I think I won one against one of the phone companies once and got $10, and I think I got $25 from Visa. Woo-hoo. Beats a stick in the eye, I guess."

According to Royalrota, "We (at Dick's) were always understaffed and if there wasn’t somebody to cover my area during lunch, I didn’t take a lunch. I would have found this much more acceptable if I was at least earning a livable wage. Bottom line, Dick’s Sporting Goods doesn’t treat their employees with respect."

And one more from Redbird. "The lawyers are the ones who make out like bandits. You'll get enough to do a load of laundry and maybe buy yourself a McMuffin."

What can we learn from cases like this? First, treating employees poorly and without respect, even the lowly sales clerks, often comes back to bite you, financially and by word of mouth -- or text. Second, class-action lawsuits usually aren't about those who were wronged. This company settled out of court for what is next-to-nothing to a retailer with 437 stores in 42 states, as well as 79 Golf Galaxy stores in 29 states. The plaintiffs are "defended" by Thomas and Sullivan, Rochester, "The Employment Attorneys." According to the website, "Allowing an experienced attorney to negotiate on your behalf provides clear advantages. It allows a third party to handle monetary issues, so as to preserve positive rapport with an employer while maximizing compensation for the employee." (http://theemploymentattorneys.com/about/index.php)

We'll see about that after Thomas and Sullivan take their cut and then divvy what's left to those thousands who joined the suit.

By the way, the Beaver County Times article referenced above ended with, "Company executive and spokesman William J. Colombo, one of the parties named in the suit, was out of the office Monday, according to an assistant. Colombo did not return a call for an interview." Dick's website is nothing more than a marketing tool. It contains no useful information. (http://www.dickssportinggoods.com/home/index.jsp) A big company like this can do better.