By J.G. Collins – New York May 12, 2013
Anytime grievous organizational wrongdoing is discovered, it must be addressed immediately, forthrightly, and completely by the organization’s principal leader, speaking with one voice, until every aspect of the wrongdoing is discovered, addressed and corrected. The wrongdoers must be sanctioned so that all the organization’s key stakeholders are satisfied. Senior management must recognize the wrongdoing as the crisis it is, and address it with humility as an organizational and professional failure. Not doing so – or, worse – attempting to keep the wrongdoing “under wraps” – can so inundate the organization as to destroy it.
The handling of the IRS “Tea Party” Scandal illustrates exactly what not to do.
The Obama Administration’s ham-fisted response last week to the Benghazi affair and the IRS “Tea Party” scandal could easily hamstring the balance of the Administration’s second term, subsuming its agenda for immigration, the budget, and tax reform to Congressional inquiries and the battering ram of a newly hostile press. Team Obama’s response showed that the president’s highly capable political team — while one of the best –is not even in the bush-league in crisis communications.
Friday may be have been the worst played day of presidential public relations since the Saturday Night Massacre. It was worse, even, than Bill Clinton’s mishandling of his affair with Monica Lewinsky because Friday wasn’t “about sex”; it was about governance and, worse, it was about hubris by those who govern.
Saturday’s bombshell disclosures in the aftermath of Friday’s IRS spin reminded me of watching Robert DeNiro and Joe Pesci lay into the Billy Batts character in the bar scene of “Goodfellas”: the blows were brutal, unrelenting, and killer. They were a reminder that disrespect – by a “Made” man to a mere mob soldier or by a Presidential Administration to the press and public — can rapidly morph into catastrophe for the arrogant offender.
Make no mistake – Friday’s spin was all about disrespect (or hubris, if you will.) This was a first-rate White House political team thinking they could shift seamlessly into PR mode and making a total and complete hash of it. It was political operatives thinking they were smarter than the press and the public; a team so confident in their own success as presidential staff that they thought it immunized them from the kind of brutal attack that only truly ticked off reporters — and livid political adversaries — can muster. It was the White House as Billy Batts, thinking his “made” status among New York’s underworld protected him from Joe Pesci’s vicious assault when Batts told him to get “your f*****g shinebox”.
THE RISK
Make no mistake: the IRS Tea Party scandal is potentially far more damaging to the Obama Administration than the Benghazi matter. People know – and fear – the IRS. The notion that its vast resources could be mustered for a willful political witch hunt prior to an election repulses Americans on a visceral, soul-shattering level that transcends partisan politics.
Benghazi is different. If its proven the Obama Administration indeed worked to cover-up an error in judgment – even a reckless error in judgment — that resulted in the deaths of four Americans prior to a close-fought election, the public would be more inclined to view it as “politics as usual.” They would find it repulsive and despicable, for sure. But its not the threat to democratic government that loosing an agency with police powers on political opponents is. Somehow, in the American mind, having a mere “ambassador” (albeit of cabinet rank) lie to David Gregory on “Meet the Press” by calling a terrorist attack a “spontaneous reaction” to a “hateful video”, ranks pretty far below a willful IRS vendetta, especially when the presumed liar precedes their version of events with an artfully crafted escape clause that says its “the best information we have at present.”
WHAT WENT WRONG
Let’s start with Friday’s IRS comments at the American Bar Association Tax Section conference. The head of the division that handles exempt organizations, Lois Lerner, made it clear that the decision to enhance examinations of groups with the names “Patriot”, “Tea Party”, or “9/12” was made by low-level career bureaucrats who saw it as an efficient means to triage thousands of not-for-profit applications for political activity. The upper ranks of the IRS, we were led to believe, didn’t have a clue that bureaucrats in Ohio were engaged in such facially political scrutiny. Then, Ms. Lerner made what appeared to have been a heartfelt apology for the IRS misdeed: “That was absolutely incorrect, it was insensitive and it was inappropriate. That’s not how we go about selecting cases for further review,” she said.
That would be all well and good, were that the end of it. But it wasn’t.
By Saturday morning, after Ms. Lerner’s apology, it was reported that the office of the Treasury’s Inspector General for Tax Administration (TIGTA) had been working on the matter since last summer and that they would be releasing a report on it within the coming week. Suddenly, Lerner’s statement looked less like a heartfelt mea culpa than a crude attempt to get ahead of the bombshell TIGTA report and to make it “old news” when it is released this week. 
Then, Saturday afternoon and Sunday moring, in a fury of news stories, as relentless as those blows to Billy Batts, based on leaks of the TIGTA report, started landing in the press, one after the other:
- The Associated Press reported that Lerner had known about the targeting of the Tea Party and Patriot group since at least early August, 2011 (Reuters reported she learned of the transgressions in June, 2011, but who’s counting?).
- While the AP report said Ms. “Lerner instructed agents to change the criteria for flagging groups ‘immediately’, it went on to report that the change wasn’t formally effected until the end of January, 2012, a least six months after she reportedly learned of the violation and well after the president’s re-election and inaugural.
- Even after the January, 2012, change, the AP reported that groups “involved in …educating on the Constitution and Bill of Rights” were still subjected to enhanced scrutiny and, presumably, still are today.
- Fox News reported that groups whose materials expressed concern about government spending, government debt, taxes, or even the direction of the country were subjected to special scrutiny by a team of specialists.
- The Washington Post confirmed the gist of the Fox News story late Sunday night, saying the Ohio IRS office “decided to focus on groups making statements that ‘criticize how the country is being run’ and those that were involved in educating Americans ‘on the Constitution and Bill of Rights’.”
- Perhaps most damning of all, The Jewish Press reported that at least one Jewish group seeking tax exemption said it was told by an IRS agent that it was being subjected to additional IRS scrutiny not by the anonymous “career bureaucrats” in Ohio, but by “a special unit in the D.C. office to determine whether the organization’s activities contradict the Administration’s public policies”. The president and Israel’s Benjamin Netanyahu had, of course, been widely reported during the 2012 election cycle to have chilly relations.
By Sunday night, Friday’s ham-fisted PR fail in front of the Bar Association had taken on the noxious scent of a cover-up of politics invading what should be non-partisan, quasi-judicial IRS decision making. Pundits and bloggers on the Right were in attack mode, some moving well ahead of the facts and alleging that the Obama Administration had used the IRS to staunch the grant of tax exempt status for groups that might rally opponents of the president prior to the 2012 presidential election. Republicans in Congress smelled blood and threatened to issue subpoenas.
HOW THE OBAMA ADMINISTRATION SHOULD HAVE REACTED
Generally, there is no harm in trying to get ahead of a bad breaking story; most times, its among the optimal solutions. But “getting ahead of the story” requires getting thoroughly ahead of it. That means having the top responsible official walking the story out to the public and taking the heat that bad news draws — telling everything that is known, without regard to potential legal or political consequences and letting the chips fall where they may.
If the TIGTA draft report was available to be leaked (almost certainly by Congressional staff) to the AP, Reuters, and the Washington Post, it was certainly available in the upper echelons of the IRS and the Obama Administration.
On Friday, Americans should have heard not an apology from a mid-level career IRS bureaucrat talking to tax attorneys, but from Jack Lew, the Treasury Secretary, in a press conference with reporters, after he had announced the firing, demotion or sanction of all the IRS staff in the chain of command that had engaged in, authorized, or permitted the IRS political scrutiny. All of the disclosures that were leaked Saturday that were in the TIGTA report should have been produced at the same Friday press conference, with the TIGTA at the Treasury Secretary’s side, to answer any and all questions from the media. Questions that could not be answered immediately at the press conference accurately and to a certainty should have been taken and answered with a “we’ll get back to you” and then promptly followed up.
Scandals – particularly scandal orchestrated (or seized upon) by adversaries – invariably have a “water torture” quality to them, with new disclosures coming out every few days to keep the story “live” in the public mind. So, Secretary Lew should have designated the TIGTA and a high-ranking Treasury Department deputy to take any and all questions from reporters (or from Congress) in the coming days and then scheduled another press conference for this week and every week, for as long as it takes, to update any additional developments. Lew should have made it clear that only he, the TIGTA, and the Treasury deputy he designated were authorized to speak on the matter, so that there was no conflict or error in the stories being released. Simultaneously, Lew should have created two “hotlines”: one for IRS agents and employees, who could report their suspicions of any scrutiny they suspected was politically-inspired, and a second for taxpayers who had evidence of such transgressions.
Secretary Lew should have arranged to meet personally with leadership on Capitol Hill as early as possible this week, particularly Congressional Republicans, together with the TIGTA, to assuage any concerns that the IRS scrutiny was a political exercise, to ensure that the wrong-doers were sanctioned, and that the practice is not continuing.
THE TAKE-AWAY FOR C-SUITE EXECUTIVES
Just as it is nearly impossible to keep a secret successfully between two individuals, so it is to orchestrate a cover-up of a misdeed of an organization; egregious organizational wrongdoing almost always comes out. It needs to be sanctioned and weeded out by the organizations top officials, irrespective of whether its intentional, occurred as a result of errors of judgment, or was a result of negligence, omission, or oversight. When such wrongdoing is discovered, no matter when, it needs to treated as the crisis it is with the full attention and undivided focus of senior management.
This vetting for truth is not a chore a CEO can delegate to lower-ranking staff, except for those senior staff he or she specifically designate to address it, and then only with the CEO’s intimate and constant supervision. Likewise, the CEO must be fully and intimately aware of the details found by auditors, counsel, or consultants that engaged to assist with the inquiry.
Messaging needs to be centralized, clear, and controlled so that there is no possibility of an inconsistent story that would give even a scent of a cover-up or unwarranted concerns of a wider problem. The people who commit the errors – and their leadership — need to be held accountable, by whatever means, without respect to the legal, political or commercial consequences of their wrong-doing, negligence, or oversight. Finally, organization’s disclosure of its misdeed needs to be complete, forthright, and direct for all the organization’s stake holders: customers, suppliers, shareholders and employees.
The temptation (and, usually, the legal counsel), of course, is to hide organizational misdeeds from disclosure, or to avoid letting errors being widely known because of the risk of legal or commercial damage. This is particularly the case where the misdeed was accidental or without malicious intent. In such circumstances, if a question is not asked, most lawyers will advise, there is no need to answer it.
But attorneys rarely tell their clients their advice is limited to legal matters; their PR advice can be highly detrimental. Worst, most attorneys won’t even consider the risk that non-disclosure in instances of egregious organizational malfeasance almost invariably outweighs the potential costs of litigation.
The risk of non-disclosure, of course, and the event most attorneys almost always fail to foresee in a crisis, is the ultimate destruction of an entire organization that has been subsumed by scandal it tried to hide.
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J.G. Collins is the Managing Director of The Stuyvesant Square Consultancy.
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