Capitalists without a clue

The return of Sgt. Schultz is enough to spark nostalgia for Gordon "greed-is-good" Gekko, the oily insider trader from Oliver Stone's 1980s morality play, "Wall Street." At least Gekko's greed came with a side of self-respect. "I know nothing," by comparison, just strains credulity. It inspires a knee-jerk "For $10 million a year plus stock options you knew nothing! How stupid do these guys think we are?"

James Lukaszewski, a crisis communications manager in White Plains, N.Y., says executives considering this defense should ask themselves this question: "What would your mom or your kids say if they could hear you trying to explain away this problem or situation? Your mom would whup you upside the head, and your kids? Their eyes would roll to the ceiling."

The "know nothing" defense is "a fairly lame alibi," according to Steven Fink, author of the crisis P.R. primer "Crisis Management: Planning for the Inevitable." "These executives are giving the impression that they are saving themselves at the expense of the company and the employees."

The irony is that it may just make matters worse for them.

Jim Felman, a criminal defense attorney in Tampa, Fla., who specializes in white-collar crime, says: "From the defense standpoint, it's always better to have said less than to have said more. To stake out a position as to what they did and didn't know, specifically when the allegations are still being formed, is very, very risky."

Risk taking: Isn't that what running an innovative, thought-leading public company is all about? Maybe these guys are just ahead of the curve, like we thought they were in the late '90s.

But the problem with making a public claim that you didn't know anything is that it might turn out you did. What if there was that one little bit you knew, but kind of forgot about? What if there was that one 10 a.m. to 2 p.m. conference call with the accounting firm that just slipped your memory? Everyone goes to so many meetings these days!

"You better be able to prove that you didn't know, and you better be able to contain the range of things that you're insisting that you didn't know," says Robert Weisberg, a professor at Stanford Law School. "Most lawyers would prefer their clients not to say anything."

The I-know-nothing strategy has a long and distinguished history. In the Iran-Contra scandal, Admiral Poindexter was noted for his forceful, if somewhat repetitive, statements that "To the best of my recollection, I don't recall." But it may be Ken Lay, the former chairman of Enron, that we have to blame for dragging the Sgt. Schultz defense out of the rerun purgatory of Nick at Night and into the Congressional hearings room. Lay trumpeted his cluelessness about how the company he chaired did business even before the Enron scandal broke. Back in August 2001, he told a reporter that the deals that Enron did to shift debt around were "way over my head." And then, when Enron imploded, his supporters waged a campaign to testify to his obliviousness, including his weepy wife, who appeared on the "Today" show to defend her husband as simply unaware, since he "wasn't told" what was up.

So, if the CEOs and chairmen, CFOs and accountants who are making these avowals of ignorance aren't even saving their own hides by doing it, why do they keep up the fervent denials?

Weisberg suggests it's a vain attempt to avoid being pilloried in the court of public opinion. "I understand why people do it. They don't want to get caught up in the press vortex, and they hope to avoid getting characterized as villains." Saying nothing at all may be wiser legally, but it's probably an even worse p.r. move.

Still, don't these titans of capitalism have any pride? Wouldn't it be better to go down in history as a masterful villain than as Sgt. Schultz?

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