Self-Inflicted Harm: From Today’s Headlines (2/6/08)

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Two stories in today’s (Feb. 6) New York Times compel me to blog.

Each reinforces our recent posts about self-inflicted harm, but each also provides its own teachable moment.

1. Wachovia Bank
Yesterday we blogged about the tendency of companies and their leaders to ignore a problem that is otherwise evident.

Another principle of crisis management is that companies can be forgiven if people have been hurt: killed, injured, insulted cheated, etc. But companies can’t be forgiven, and won’t be forgiven, if they’re seen not to care that people have been hurt.

Today’s Times, in a front business page story, reports that Wachovia Bank, which last year said it was unaware that fraudulent telemarketers were using the bank’s accounts to steal millions from unsuspecting victims, not only knew but had been put on notice about the fraud. Wachovia is the fourth-largest bank in the US.

The Times notes that newly-released documents in a lawsuit show that high-ranking employees at the bank frequently warned colleagues about telemarketing frauds routed through the accounts. Other banks and federal agencies also notified the bank, but it continued to provide banking services to the companies that helped to steal $400 million, the Times reports.


One e-mail from a Wachovia executive in 2005 begins, “YIKES!!!! DOUBLE YIKES!!!!” and goes on to note that one account used by telemarketers had prompted 4,500 complaints in two months. The executive said “There is more, but nothing more I want to put into a note.”

According to the Times, Wachovia continued processing transactions for that account, partly because the bank charged fraudsters a large fee whenever a victim noticed a fraudulent transaction and demanded money back. In other words, the bank’s financial interests seem to have aligned with those perpetrating the fraud, rather than with customers. According to the Times, one account alone generated 1.5 million in such fees for Wachovia.

In a statement, Wachovia told the Times that it is taking the problems seriously and that it has made changes to protect customers.

It must be noted that we’ve only heard one side of the story, and that from those suing the bank. Still, the perception caused by the story and the e-mails is that at the very least someone was asleep at the switch while senior employees tried to call attention to the problem, but that the problem was allowed to fester until it became public. Or it may be even worse.

Restoring trust, regardless of the outcome of the lawsuit, will be a challenge.

2. Sales Genie Super Bowl Ads

As I watched the Super Bowl on Sunday I was surprised by an ad that struck me, at least, as patently offensive. Apparently I wasn’t alone.

SalesGenie had an ad that featured an animated Panda family. As the ad unfolded, I was puzzled by the voices. They seemed hard to understand. Then it dawned on me that the voices seemed to be using a 1950s movie-type stereotyped Chinese accent.

Today’s Times notes that SalesGenie has pulled the ad and has issued what it calls an apology (more on this in a moment). The prompt to watch the ad is still on the SalesGenie home page as of 10 AM EDT today, but the link was unresponsive when I tried to click it. The ad is on YouTube.

Turns out that the ad was written by the CEO of SalesGenie’s parent, InfoUSA, Vinod Gupta, who describes himself to the Times as “half-Indian and half-Jewish.” Mr. Gupta told the Times:

We never thought anyone would be offended. The pandas are Chinese. They don’t speak German. Still, if I offended anybody, believe me, I apologize.

That isn’t a particularly reassuring statement. An animated caricature with a German accent would be offensive as well.

More important, apologizing if anybody was offended is not really an apology. It’s a faux apology. A genuine apology would be along the lines of “We never intended to offend anybody, but we realize that we did. We apologize for producing an offensive ad, and we’ve learned from it.” SalesGenie seems not to have learned much. Says Mr. Gupta, “Maybe next year, no audio, so we don’t offend anybody.”

A bigger lesson, of course, is not to let the CEO write the ad. Let the professionals write ads, and vet them through professional channels. When the CEO is personally invested in the creative side of an ad, the likelihood of getting candid feedback is very small indeed.

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