Business Laughs

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Excuses for Fraud: Now We’ve Heard It All

Call it the lighter side of fraud, if there is one. As a follow-up to my columns on fraud prevention, I thought I’d share some of the more entertaining excuses people have given for why they committed some type of fraud.

One guy from Glasgow tried to use the soap opera defense. He claimed the investigators were really seeking his “evil twin brother” who lived in Pakistan about the identity and benefit fraud he was accused of. Wait, it gets better. He had two Pakistani passports with the same children listed on them. Seems his evil twin had children born on the exact same days with the exact same names. Wow, what are the odds?

This one could be called the “50 Shades of Grey” excuse. One man was collecting housing benefit money in Great Britain while working but hadn’t informed authorities. He claimed he owed money to his landlady. Her efforts to collect included wearing high heels, brandishing a prop similar to those in the movie and chasing him down for “payment in kind.”

How about the “I never got that raise” excuse? A bookkeeper was once denied a monthly raise of $100. He was angry and decided to help himself to the company till, stealing exactly $100 a month. For 20 years, until he retired.

Then there’s the CFO of a bank in Tennessee who tried the “It’s the tractors fault” excuse. The case study was reported by the Journal of Accountancy of the CFO who invested a lot of money in a local tractor dealership. He borrowed from his own employer to increase his investment and when the investment soured, didn’t want to admit to his employer that he was no good with his own money. So he began stealing from the bank, and by the end of the year had helped himself to $150,000.

He became so enamored of stealing money that when a customer accidentally paid a note twice, this guy just signed his own name on it and put it into his checking account. That was his downfall. He was caught when the customer noticed the duplicate payment and they tracked it to his account. He spent three years in prison.

And finally, the “My ego was too big to admit failure” excuse. That’s what Russell Wasendorf Sr., who was the owner and CEO of Peregrine Financial Group, said when he admitted he had embezzled an estimated $215 million with forged bank statements over a period of close to 20 years.

Wasendorf received all bank statements from US Bank and was able to make counterfeit statements and deliver those to the accounting department. He also made forgeries of nearly every document that came from US Bank and established a PO box to intercept paperwork sent by regulators.

In a signed statement, he said he began stealing when his business was on the verge of failing if it didn’t receive additional capital. “I was forced into a difficult decision: Should I go out of business or cheat? I guess my ego was too big to admit failure. So I cheated.”

In 2013, Wasendorf was sentenced to 50 years in prison and was ordered to pay $215.5 million in restitution.

Don’t set yourself up to hear any of these excuses. Make sure you have adequate fraud prevention policies and measures in place. Check my previous columns on the topic and the chapter in my book, How Not to Hire a Guy Like Me: Lessons Learned From CEOs’ Mistakes. These excuses may be comical, but fraud is not.

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2014: A Look Back at Some Intriguing Stories

We live in interesting times. Here are some entertaining stories from 2014. Not all of them involved big money. In fact, a lawsuit was threatened over $4, while a billionaire declared money to be a great pain.

It was the year that a Chinese man nicknamed Crazy Jack Ma became one of the richest people in the world, an amazing innovation in plane design was introduced, a car service becomes indispensable in many cities but is banned in several countries    and a few funny food fights made the news. We even found out about a secret Internet.

Although he couldn’t even get a job with KFC in his hometown of Hangzhou, China and instead made $15 a month teaching English at a local college, Jack Ma is now one of the world’s richest men.

The founder of Alibaba, a business-to-business online platform, he saw an opportunity with the rise of the Internet in China. When Alibaba went public in September, raising $21.8 billion, it was the largest global IPO in history. Ma’s net worth is estimated at $23.2 billion, although he’s not basking in his wealth, calling it a great pain.

This was the year Uber, the car service, became available in more than 50 countries and 250 world cities. The company recently raised $1.2 billion with investors valuing the company at $40 billion, one of the most valuable private companies on the planet. Five years ago it was just an app.

Its success has come with controversy, however. It’s been banned in Germany, France and some cities in India, while taxi drivers have protested its presence in London. Thailand, Spain and the Netherlands have ruled it illegal and protests have been filed in other cities. Some users have deleted the app after expressing concerns over privacy.

A windowless plane, which could be flying our skies in a decade. Photograph: Tomasz Wyszo/mirski/ww.dabarti/CPI

A windowless plane, which could be flying our skies in a decade. Photograph: Tomasz Wyszo/mirski/ww.dabarti/CPI

Speaking of transportation, we won’t need a window seat for a view when a new kind of aircraft is introduced — one without windows. The Centre for Process Innovation, a U.K.-based cutting edge technology association, has plans to create an aircraft where the windows will be replaced by full-length screens with full views of the exterior. The new design will significantly reduce the weight of airplanes, which will reduce operating costs. Maybe they’ll be able to afford to bring blankets back to coach.

And speaking of planes, this recent story of taking customer service standards too far really amused me. Cho Hyun-ah was incensed when a senior flight attendant for Korean Air Lines served her macadamia nuts in a bag rather than on a plate.

The daughter of the chairman of the airline and also head of in-flight services, Cho ordered the plane to return to the gate and threw the senior flight attendant off. She was forced to resign her position and I don’t think Daddy was any too pleased with her when the story went viral. He apologized for her foolish behavior and asked for the public’s forgiveness.

Then there was the story of the associate professor of the Harvard Business School. Seems Ben Edelman was enjoying take-out from a nearby Chinese restaurant when he discovered something horrifying. Something he had to threaten legal action over. Was it a rodent part in his food that caused such anguish?

No, it seems his despair was over his bill. He had been overcharged $4. That led to an increasingly aggressive and ridiculous series of emails where the owner of the small family restaurant explained that the prices had not been updated from their website. Citing a Massachusetts statute, Ben demanded “triple damages for certain intentional violations.”

He wanted $12 back. And threatened to hire an attorney.

The kicker? He teaches in the Negotiation, Organizations & Markets unit at Harvard. Seems to me his negotiating skills are a bit lacking. But he did admit the food was delicious.

I was certainly in the dark myself about the “Darknet,” the dark markets on the Internet. Seems you can buy drugs, weapons and even hire a hit man, all from the comfort of your home. European law enforcement officials, the FBI and Department of Homeland Security announced a crackdown in November, shutting down more than 410 hidden services.

Here’s to a wonderful 2015 for you and your loved ones. And may we all look forward to many more entertaining stories in the coming year.

And some of these things actually keep me in business.

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CEOS Behaving Badly

Just like my many stories of fraud, there will never be any shortage of stories about CEOs behaving badly. I’ve witnessed several notable incidents myself during my career as the Turnaround Authority and include many of the more salacious ones in my book “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes” in the section called The CEO Can’t Keep It Zipped. You can figure out what those stories are about.

It’s not just philandering that gets CEOs in trouble. The latest tale comes from the CEO of T-Mobile, whose mamma apparently neglected to inform him that you don’t go to parties to which you have not been invited. Claiming he was a fan of the band Macklemore, John Legere crashed a private concert party in Las Vegas hosted by competitor AT&T with whom he’s been engaged in a public battle after AT&T offered T-Mobile customers $200 in credit to switch. He was barely there for 20 minutes, long enough to have his photo posted on Twitter, before he was escorted out of the party.

Of course, the flashy CEO attempted to turn the event to his advantage, and milked his expulsion for everything he could on social media, making himself the talk of the International Consumer Electronics Show.

Jason Goldberg founded Fab.com, an online shopping site. He took to Facebook to express his dissatisfaction with a fellow passenger on a flight from Stockholm to Newark who had the audacity to turn down his offer of $100 to switch seats with him. The other passenger’s lame excuse? He wanted to sit close to his family. “Who does that? … Grrr.” Goldberg posted, exposing both his arrogance and disdain for people who seem to care about their family members.

Tumblr founder David Karp managed to alienate his entire workforce when he attended the Cannes Lion International Festival in June. He went there to talk with advertisers, but apparently became impressed with the crowd he was addressing. “You guys are more talented than anyone in the Tumblr office or in Palo Alto or Sunnyvale. We’re constantly in awe. Constantly in service.” I doubt he got much of a welcome back party on his return.

The CEO of Barilla Pasta Company found himself in very hot water. (Sorry, couldn’t resist that one.) For some reason, Guido Barilla felt it was important to let the world know that he would never have gay people in his ads. “We won’t include gays in our ads, because we like the traditional family. If gays don’t like it, they can always eat another brand of pasta.” He later claimed he “simply wanted to highlight the central role of women in the family.”

I didn’t read much response from women, many of whom may not feel that their central role is to boil noodles, but one gay person politely responded. Aurelio Mancuso, president of Equality Italia, said, “We accept his invitation to not eat his pasta.”

Meanwhile Barilla US fought the huge PR crisis he dumped on that division by apologizing profusely on Twitter and Facebook.

CEOs who behave badly may enjoy the resulting publicity or just may not have anticipated how widely news of their antics would be spread. Whatever the reason, it’s a dangerous game. They risk alienating their customers, who may also invite themselves not to use their products or services.

It’s a good reminder that when you are a CEO or business owner and are interviewed or go on social media, you are always representing the company, not just yourself.

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Business Impossible: How My Job is Like a Reality Show

I’m not much for watching reality shows, but I did catch an episode of one called “Hotel Impossible” recently. And I realized the premise of this and similar shows, like “Restaurant Impossible” and “Tabatha’s Salon Takeover” are actually very close to what I do for a living.

The premise of all these shows is that the host of the show goes into a failing business with the goal of turning it around and making it successful. Which is exactly like I do.

Although in my business, we don’t accomplish everything in two days and we don’t have lots of corporate sponsors donating goods and services. Oh, and I don’t have a hair and make-up person to make me look pretty all the time.

But there are a lot of similarities between what these hosts and I do. Here are just a few:

In the show "Hotel Impossible" the host goes to failing hotels to whip them into shape, much like I do with failing companies. But with less decorating involved.

In the show “Hotel Impossible” the host goes to failing hotels to whip them into shape, much like I do with failing companies. But with less decorating involved.

• We have a lot of experience in our respective businesses.

Anthony Melchiorri is the star of “Hotel Impossible.” He has 20 years in the business and has developed and repositioned some very high-profile properties in the United States, including the Algonquin in New York.

I’ve been in the turnaround business for more than 30 years and have served as an interim executive officer and reorganization director for both large and small companies, public and private, with annual revenues from $1 million to $5 billion.

• We force people to face their harsh realities.

Anthony told the general manager he isn’t doing his job and that the property was falling down around him. He told the owners that they were treating this Alaskan fishing lodge as their own personal vacation spot, not like a real business. He doesn’t sugarcoat anything and gives it to them straight.

I have to tell CEOs and business owners things they don’t want to hear all the time. A lot of them, like the owners of this failing hotel, have been ignoring their problems or living in the land of denial. And I don’t mean the river in Egypt. They can’t fix anything until they acknowledge that there is an issue and their businesses are failing.

• We see ways to help a business that have been overlooked, ignored or dismissed by the CEO.

Anthony told the owners of the fishing lodge that they had to have a way to book the property online. He also looked at the shipping costs for provisions and determined that if they cut their monthly shipments to quarterly ones, they could save more than $20,000 a year.

I look at the operations and finances of a company and often find ways a company can improve or make money by making simple changes. In one case I found out that a client had a 90 percent market share on a product but hadn’t raised the price on it in years. One of my first actions was to raise the price by 25 percent, which made the company profitable on a going forward basis.

• We deal with dispirited and disheartened employees.

It’s no fun to work in a hotel property that is literally falling apart around you and where guests are often unhappy. The same is true of a business that is failing. Anthony wants to make people proud of where they work again, and I feel the same way. One of the most rewarding parts of my job is not just helping a company get back on its feet, but helping the employees keep their jobs.

• We leave the company is better shape than when we started.

Anthony leaves his properties with some common areas and at least one room made over, and gives the owners a plan for continuing the improvements so they can be on the road to success.

I don’t hang new curtains, or renovate bathrooms but I improve the operations and finances of a business so it can either succeed again or at least be in a better position to be sold and recoup some of the investment for the owners.

The last similarity? If you work with someone like Anthony or me, you’ll never end up as “The Biggest Loser.”

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5 Big Blunders CEO’s Make That Lead to Crises

My last white paper was about the faux pas of CEOs in crisis, but in writing that paper I started thinking about some of the biggest mistakes CEOs, presidents and business owners make that result in crises. Since you may not be facing a crisis right now – and I hope you never are – I wanted to share these blunders with you so that you could either avoid them or start rectifying them.

1. Growing a Business Without Proper Equity or the Right Financial Structure

It’s never wise to try to grow your business without enough money. I once carved an injected molding company in Toledo, OH like a Thanksgiving turkey because the president sunk $2.5 million into his pet project: making the perfect bottle-cap. He effectively leveraged the entire company by borrowing against it to pursue this dream. Not only did he bet the ranch, but he tried to grow and evolve his business without sufficient funding to keep it running. Let that be the first lesson: make sure you have enough capital before making any big moves.

2. Growing a Business Without a Sufficient or Competent Management Team

The corollary to having enough capital to grow your business is having the right management team to do so as well. I’ve run Ocean Pacific twice. The first time was because they were expanding overseas without the proper personnel who understood sourcing and distribution in international markets. Though they lost a ton of money before we arrived, we were able to scale back to domestic manufacturing and refocus the company on design and licensing.

Many years later we were brought back in for a similar reason. Not only had the company lost control of its brand, entered into poor licensing arrangements and become embroiled in trademark issues, but they had accumulated a ton of debt. Once again, the management team couldn’t handle its responsibilities. The company was restructured through bankruptcy, selling its licenses to a private equity firm. Learn from Ocean Pacific and don’t embark on new strategies for growth without acquiring the right management team first.

3. They Allow Idiot Family Members to Run Key Divisions of the Business

Putting family members in key positions of your business can be dangerous without written expectations and a timeline for control, advancement and responsibilities. It takes a unique father and CEO to balance the intersection of a family and a business. Problems arise in many places, but particularly as it comes to entitlements, compensation and selling the business.

I had a mechanical engineering company in New York that was in the middle of a restructure that included a large union shop. The father had died and put his wife in charge as CEO. The son, resentful of his diminutive role due to a lack of delineated expectations and a board-approved succession plan, and, in his eyes, inadequate compensation, was stealing a lot of money. When we confronted good ol’ Charlie, he took a kitchen knife to his mother. Fortunately, she lived, got a restraining order, and kicked him out of the company.

Mixing business and family is not easy. Be careful and have the sense to know when someone is incapable of doing the job he feels entitled to do, family or not. Always manage expectations by putting everything in writing.

4. They Skew the Facts to Boards, Creditors and Constituents to “Sell the Deal”

As I’ve discussed before, honesty really is the best policy. The CEO of a hard drive manufacturer in California desperately wanted a line of credit from his bank for $60 million, so he stuffed the channel in order to make his company appear worthy.

Stuffing the channel is when a manufacturer oversells product to put sales on the books, despite knowing that much of the merchandise will come back unsold; this inflates the books by overstating the top line, thereby improving the bottom line. This strategy led to the loan, but when the company repurchased the inventory on the channel within 60 days, it became out of compliance on the line of credit. Once the bank defaulted the company I was brought in to salvage what I could and to hopefully restructure the company. The company survived thanks to some hedge fund loans, but the CEO lost his job because he skewed the facts.

Not bending the facts is so important that it deserves a second story. Before the technology was so ubiquitous, lazer-tag equipment had a very high value, and a Texas-based company seeking a large loan claimed it had more inventory on its books than it did; the company added the inventory in its Ireland-based location to the US books. The US auditors never verified the inventory and granted the company a far larger loan than it could handle. When the company filed for Chapter 11, I was brought in as CEO; within weeks of my new position I discovered we were $75 million short in inventory. I immediately went to the judge to convert the case to a Chapter 7 rather than try to bring the company through the bankruptcy and be embarrassed by the fraud. The creditors ultimately sued the accounting firm and made millions of dollars from faulty accounting, once again highlighting the blunder of skewing facts.

5. The President/CEO/Owner Can’t Keep It in His Pants

I have more examples for this one than any other lesson I know, but I’ll highlight this case with two basic stories to indicate how easy it is to get caught and how ruinous it always is. The president of an apparel manufacturer had other interests: he wanted to design the perfect yacht. He certainly succeeded in making a great one, such that he ended up in a prestigious yachting magazine. However, when he and his innovative yacht were photographed for the cover shoot, he failed to ask his girlfriend to get off the yacht or at least cover up her delightfully revealing bikini. When his wife saw the cover of the magazine, she filed for divorce and he lost control of the company.

In another case I was brought in to resolve as president, the CEO and Chairman of the Board of a retail establishment was caught with his kids’ babysitter while his company was going through a Chapter 11 restructuring. Once the matter became public, he lost focus on the business and the employees and the creditors lost faith in him. Ultimately, the business was sold off in pieces.

Gentlemen: keep it in your pants. Not doing so can be very expensive. For the record, I have similar stories about the other gender, but I’ll save them for another time.

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Not Keeping It in Your Pants can be Very Expensive

Here’s something stupid that CEOs, presidents and business owners do: they fail to keep it in their pants.

The biggest case in recent memory concerned the dear old president of these United States, William Jefferson Clinton – or Ol’ Willy as the stories will one day be told.

His failure to keep it locked down had to do with so many issues: his ego, his self esteem, his power, and the simple urges of simple men – or for short, men. Interestingly enough, it’s these same forces – ego, esteem, power and manly urges – that drive men to start companies and become presidents in the first place (money could be added to the list, too), but that’s no reason to get led around by your lesser brain.

If for no other reason (and when I’m talking about neglecting reasons I include things like the sanctity of marriage, practical morality, metaphysical morality, putting your family or business first, etc.) than to avoid getting caught, do not cheat on your wife or spouse while running a company.

Don’t cheat on them anyway but especially if you’re running a company it’s a bad idea. You will get caught – especially if your company is facing a crisis.

It always comes out . . . and not in the way to which you may have grown accustomed.

What’s worse is that these issues always have a way of arising when things are already headed south . . . and not in the way to which you may have grown accustomed.

I was dealing with a guy who was originally in the business of manufacturing apparel. He couldn’t keep focused on his core business, however, because he had a dream of designing the perfect yacht.

Lucky for him, he succeeded in making such a great yacht that he ended up on the cover of a major yachting magazine for his unbelievable hull design.

Unlucky for him, when he and his yacht were photographed for the cover shoot his scantily clad girlfriend, simply busting with joy and enthusiasm, ended up on the yacht in the background of the photo.

When his wife saw the cover of the magazine, she filed for divorce and took the company with her. After all, the business was started with her daddy’s money.

Another quickie, so to speak. The CEO and Chairman of the Board of a retail establishment – in the middle of his company’s bankruptcy – got caught with his kids’ babysitter. The messiness that ensued caused him to lose focus on the company’s issues, which ultimately had to be sold off in pieces.

Both of these men (and I’ve got 20 more of these stories) lost everything – businesses, money, families, and the lives they had built – because they couldn’t keep it in their pants.

Not keeping it in your pants can be very expensive.

Know anything about this and want to share a story?

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The Lessons I Learned from Bull Sperm

Did you know that top notch bull sperm is worth in excess of $75,000 a gallon?

This is something I know personally thanks to Fred, the CEO of a refrigerator warehouse company in Texas, who, instead of grabbing the bull by the horns, kept his eye on the ball a little too much.

Fred’s hobby was breeding the perfect bull. He wanted the black spots on one side and the white spots on the other side, but he got it backwards and had to keep working. Thinking that breeding the perfect bull would be the next step in his career, Fred put all of his time and energy into this hobby and none into the “no-ball” endeavor of actually saving his family’s struggling refrigeration business.

Fred bet the ranch.

If Fred had been more concerned about getting busy with his business rather than his bull, he may have saved the company. Unfortunately, though, the core competency of his company was not bull sperm. It was refrigeration.

Thus, Fred’s hobby got in the way, and he stopped paying attention to refrigeration. When the bank realized that Fred was distracted, they defaulted him on his loans and brought me in.

I had a mismanaged and neglected refrigeration company to deal with that was over $500,000 behind in debt to the bank, had maintenance issues that created spoiled product for its clients, and that had a CEO who was focusing on bull balls rather than the family jewels.

Since the company was already being forced into bankruptcy and on the path to being sold, it was my job to recover as many assets for the bank as I could. I fired his 85 year old mother who was on the payroll, and even though the bank thought the bull seed was worthless, I held a little auction at which I sold off bull sperm by the gallon at anywhere from $75,000 – $100,000.

When your company is having difficulties, put your hobbies aside and keep your eye on the prize – not your eye on the ball.

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5 Foolish Faux Pas of CEOs in Crisis

While preparing for my speech on “How Not to Hire a Guy Like Me: Lessons from Past CEOs’ Mistakes,” I realized that it was worth sharing a few of the biggest faux pas CEOs make along with a few of my more colorful anecdotes.

What follows are the 5 things CEOs in crisis do that you want to avoid as the leader of your company or organization.

1. They Act Like Deer in the Headlights

In crisis situations, it’s amazing how many CEOs and company leaders act like deer in the headlights. They just freeze up and wait for the impending SMACK!

I was working with a guy whose company had entered a crisis. In the midst of this crisis, his very time-sensitive catalog that directly generates 80% of his 65 million dollar annual revenue within 90 days had to go out. It was hours before the catalogs had to be postmarked and mailed, but in order for this to happen we had to have $10,000 – immediately. In a cash crisis, this guy, worth a few million, wouldn’t take $10,000 out of his own pocket to pay the postage. If anything went wrong, he was personally guaranteed on 40 million dollars. He would have been totally wiped out had he defaulted, and all he had to do was personally put up $10,000.

I was brought in within hours of the deadline and convinced him to put up the cash. This was the first of many critical decisions amongst endemic problems, but thankfully, this incident established trust and a working relationship that led to a successful restructuring plan.

2. They’re Only as Smart as the Last person They Talked to

Many CEOs (and people for that matter) are only as smart as the last person they talked to – especially in a crisis. They cease being able to think for themselves, whether out of the hope of being able to pass the buck or because anything and everything sounds better than what they’re doing.

At a non-profit educational institution, the president was kicked out of office for various well-deserved reasons, resulting in a crisis of leadership, and the interim president kept changing the restructuring plan with every person to whom he spoke. He’d announce firings and closings almost daily, and then backtrack when someone objected, subsequently calling those he’d fired to tell them to disregard the two week notice they’d received. Back and forth he’d go like this, only spouting the last thing someone else said to him.

The only smart thing he did without changing his mind was hire me – and I fired him six weeks later. In restructuring, you generally get one plan to move forward with – it’s a house of cards and you don’t want it to fall from a lot of movement. Keep your plan conservative and reasonable, and don’t be as smart as the last guy you talked to.

3. They Can’t Check Their Egos at the Door to Admit Mistakes

The president at an electronics parts manufacturer found some cost accounting discrepancies that meant he was selling products under cost. Though he didn’t tell the bank, perhaps thinking that his Ivy League Ph.D.s would save him, the truth emerged a year later when his cash flow continued to deteriorate until the bank noticed. If he’d set his ego aside, spoken to the bank and brought in a professional early, he’d still be president, but the bank gave him the boot and brought me in. He lost everything because his ego got in the way.

Queue the Dragon Lady of El Paso: his wife and executive VP. Upon arrival, my first goal was to build loyalty and get buy in, and an opportunity dropped into my lap. The assistant immediately asked for twenty bucks to buy coffee and toilet paper. “Huh?” I asked. Apparently, in the interest of the budget, the company was rationing coffee and toilet paper. The Dragon Lady was losing millions on her left side while hoping to limit enough toilet paper and coffee for 60 people on her right side to balance out the equation. I gave the assistant $100 and told her to buy the biggest can of coffee and pack of toilet paper she could find, telling the other employees, “compliments of Lee.” From then on, they loved me. I had full buy-in, no one lost his job and we sold the company in full six months later.

4. They Don’t Depend on Their Key Subordinates

I hire people who are smarter than I am. I have no problem with people making more money than I do or being smarter. I view myself as a catalyst for positive change. However, I was brought into a company at which the CEO did not share this sentiment.

The CEO had created a generous sales commission structure, and the Sales Manager did a great job  for the company, meeting and exceeding goals. Resultantly, he made twice as much as the CEO in his first year on the job. When the board refused to give the CEO a raise to exceed the Sales Manager’s salary, the CEO attempted to lower the sales team’s commission structure, thereby dis-incentivizing them, even though they had been very successful on behalf of the company.

After the CEO forced a changed pay structure, the Sales Manager quit and went to work for a competitor. The board of directors found out and fired the CEO. While this echoes the sentiment of the ego problem, it also highlights the issue that CEOs fail to utilize good talent and rely on key subordinates.

5. They Don’t Get Buy-In

Buy-in is so important, and the CEO who isn’t getting it is looking for trouble because nothing goes forward for long without buy-in. At WYNCOM the CEO didn’t want any bad news, and he never wanted to hear what anybody had to say. He therefore didn’t have 100% of his team’s focus to make his wishes a reality. Subsequently, he lost 8 million dollars in 2 years.

As a CEO it’s important to know which way you want to go, and though a business is no voting democracy, you shouldn’t be handing down dictates from on high either. Have a conversation with your people, and let them tell you what they think. Even if they disagree and you still go the way you want to go, you can incorporate their feedback and by doing so, get their buy-in and support.

All I did when I became CEO of WYNCOM was act as a catalyst and seek others’ input, Thus, we went from an EBITDA of negative four million to positive four million in 12 months. In fact, we saved a half million dollars in postage just because I listened to someone.

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Testimonial Magic: Know All the What You Want, But Don’t Neglect the Who

When being retained as an expert witness, generally the other side tries to undermine your credentials or experience in order to either discredit your answers or, in extremes, not allow your testimony at all. The opposing side also tries to undermine one’s credibility by investigating whether you’re always a plaintiff or defendant side witness – or if you only represent creditors and not debtors. It’s a game that we’ve all seen on Law and Order or Perry Mason.

The Pledge

For my first case as an expert witness, I was hired to testify to the feasibility of a cash collateral order in a bankruptcy case. As I took the stand my lawyer introduced me and gave my background.

Now, I knew what I was talking about, but we were all still confident that the other side was going to absolutely skewer me. It’s not that I had a shady past, but because 25 years ago I’d only done a few turnarounds. The question was, Was I really an expert at this point?

Now I’m The Turnaround Authority and I have the experience to prove it, but back then, well, there just wasn’t enough gray hair on my head yet.

The Turn

The opposing counsel introduced herself to me as she prepared to elaborate on my experience, or supposed lack thereof. However, as soon as she called me “Mr. Katz,” the federal judge took notice, looked down at me from the bench over the rim of his glasses and said, “Katz? Are you related to Israel Katz?”

I replied, “Yes, your honor. He’s my father.”

At which point the old judge bellowed jovially, “How’s old Israel doing? Did you know that in 1967 your father was head of the Democratic Party in Dekalb County, and in the late 40s he filed the first Chapter 11 case in this district? I know him well but haven’t seen him in a long time. Please give ol’ Israel my regards.” Then turning to the opposing counsel, who had reared back on her haunches, ready to pounce, said, “Oh, sorry, counsel. It’s your witness – please proceed.”

The Prestige

Having been totally flustered but regaining her composure and straightening up, she answered, “No questions, your honor. Mr. Katz is an acceptable witness.”

And that’s how I got through my first case as an expert witness without any trouble. Sometimes it’s not just what you know but who you know that counts.

Now, with my history of workouts I don’t ever worry what the opposing counsel will say – indeed, in a recent case the lawyer already knew me and asked why my side would “bring out the big guns when a pea-shooter would do” – but back then this was a lucky break.

I’m even proud to say that after this case I became friendly with the opposing counsel who has since retained me for a number of client cases over the past twenty or so years.

Have you ever been to court over business issues? What were your experiences?

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“I Would Like to Say That Your Jobs Are Safe”

To a lot of people out there, this is no laughing matter (though thank you for the chuckle, Working Daze). Their jobs are on the line or long gone. They’re out of work, looking for work or at least brushing up their resumes.

If you’re one of these people, it’s hard to give you concrete advice that’s going to yield employment soon. Yes, we’re hearing that the economy is improving and that unemployment is creeping down (however slowly), but in my opinion, these numbers are a bit doctored. Not in any particularly malicious way, but at the end of the day, I believe that unemployment is flat and will hold where it is for a while (if it doesn’t get worse…).

So what can you do?

As someone who has – and I’m sorry this is so – had to lay off a lot of people in his day, I know how horrible it is to see people put out of work. But for every job I have to end, five are saved along with a company that would otherwise have collapsed under the weight of divisions and personnel that it didn’t need. Not many laid-off people take solace in this knowledge, but there’s no manager, CEO, president or leader who wishes to lose good people.

Stand Up and Stand Out

If you’re in a division or business that’s getting downsized or eliminated, you need to do your best to stand out as someone who is indispensable. You may have heard in the past that if you are so good at your job that no one else could do it then you can never move up because you can’t be done without where you are. True as that may be in great times, these aren’t those, and you’re going to need to stand out as exemplary and someone without whom things will not run well.

You can do this by bringing ideas to management, both right above you, and if it’s called for, higher up the ladder. When I go into a business to restructure it, I often promote from within, seeking the best talent and those who understand the inner-workings of the business, those who have seen what works and what doesn’t and have ideas for improvement in efficiency and quality. I ask current managers for recommendations, and I leave my door open to all – often including letting people know where I’m staying so that they can come to me with greater anonymity if need be.

In a bad economy with high unemployment, don’t squander an opportunity by laying low. Put in the extra time, make yourself and your good ideas known and heard. Consider getting additional education to bolster your current perceived value. Leverage your network to create business for your business – those who bring in business are rarely let go. Even if I have to lay off someone who seems valuable because my hands are tied, I look for where else I can use him. But if I have no idea who you are or why you’re useful, I have to let you go and not worry too much about it.

Are you out of work? How are you seeking employment? Have you saved your job recently? How did you stand out to do so?