Washington Imitates Life, Ineptly

It's a little-known fact that scandals in Washington DC happen on the same planet as events in real life, and involve members of the same species. Hence there can be odd similarities between events in the two spheres.

I mean, you expect me to believe that those law-firm billing records were just sitting around in a storage room somewhere? Ha ha. And how about that Hillary, demanding that the travel-office folks, against whom there were some allegations of financial wrongdoing, had to be fired? What an arrogant abuse of power.

But what if you've seen the same things in your own life? Will you react to this stuff the way you're supposed to? Here are two events from the mere ten years or so when I was playing the role of businessman trying to make an honest profit for a company.

1. The Missing Papers

It's 1985. An almost unknown startup company, Autodesk Inc., is trying to make its Initial Public Offering of stock at a time when the IPO market has been very bad and has barely begun to recover.

To offer your stock to the public, you need to show lots of financial information. It helps if the books show strong profits, as they did in Autodesk's case, but it's not really necessary, as Netscape and many others have demonstrated. What is vital is that a duly reputable and large accounting firm must certify that, whatever the numbers are, they are accurate! Considering the size of lawsuits that are common in the IPO business (and considering that for the first year after the offering any errors in the data are legally presumed to be fraud and not mere errors), you can understand why investment bankers are pretty sticky about this.

So, when the auditors are going through all the records with great care, it turns out that the original invoices from the first months of the company's operations are nowhere to be found. Bad news. However, the amounts of money involved are very small; and besides, the very same major accounting firm that is now doing the audit has been involved with the company from the very first, and reviewed all those records as part of their routine work. So, everything else being clean, they're willing to give a favorable opinion on the financials, and the bankers and their lawyers are willing to accept it.

In the end it's shrugged off light-heartedly. "I guess those invoices will show up some day in a shoebox in John Walker's basement" is the line, as everybody chuckles. Is there somebody in the room who's not chuckling? No matter, the deal goes through, and the early buyers in the IPO make really impressive profits.

Now, it's many months later. The accounting firm is clearing up a lot of files. It sends to Autodesk many old papers that have been buried in its offices. Among those papers, of course, is a small, sturdy cardboard box, the kind John Walker used to use, containing all the missing invoices. They have been in storage at the major accounting firm since the very first review of the books, before the first formal audit, which was before the audits for the IPO. Very amusing. Is there somebody in the room who's still not chuckling? No matter.

The amount of money involved here is, I suppose, comparable to the amount in the infamous Rose law firm billings. In both cases the records were in the care of a firm of professionals in that sort of thing -- but in Autodesk's case it was not some hicks who constituted the big-time in Little Rock, Arkansas; it was one of the top national firms in its field.

There is a difference, though: no one is claiming that there was criminal intent in concealing the Autodesk papers. No one possibly could, under the circumstances.

Here's another difference. The Autodesk papers were known from the very first to be important, not just something to store in a back room and forget; after all, we'd never have wasted scarce money on a Big Eight accounting firm if we hadn't intended to go public later. The Rose papers were a bunch of routine billings that represent a tiny part of the activity of a busy law firm. Were the Rose papers known in advance to be important -- years before there was a Special Prosecutor? Does their temporary disappearance prove guilt? You be the judge. After all, we're trying the case in the press anyway.

2. Fire Them All

It's now several years later. I have graciously allowed other people to take over whatever part I had in the wretched task of keeping a company running, while I've gone back to the job I know how to do, which is full-time programming. But I remain a member of the Board, and a Founder of the Company. I get a note from a person I've never heard of, who works in an operation of ours that I have little contact with; this person would like to take advantage of our Open Door policy to discuss a sensitive matter.

(Firecrackers?? What's this about firecrackers? I'm soon to find out.)

When we talk, a tale of Gothic horror unfolds. Well, OK, no headless corpses, but some unbelievably headless behavior. Not physical abuse, but everything short of it. Not offenses against 90s Political Correctness, but offenses that would have got a manager fired in the 1950s for the crime of being a major prick.

The general outlines of what I've heard are confirmed by a person whom I do know well enough to take what he says seriously. When members of management ask me what I think about it all, my reply is obvious: if the guy did this, you sack him. No warning notes in the personnel file; no HR-approved plans for job performance improvement; just get him out the door.

Management engages a third party, suitably qualified, to look into the allegations. When they turn out to be essentially true, Management, with a sort of bashful style that's hard to understand when they are managing and I'm just an involuntary kibitzer, says that it's intending to turn the offender's temporary involuntary leave into a permanent one, and is that OK? Sounds good to me.

Not long thereafter, when the wrongful termination suit is filed, I'm called for a deposition. OK, once more I sit in the luxurious offices of Wilson, Sonsini, Goodrich & Rosati, watching the useful and entertaining video on how not to act in a deposition. WSGR's attorney and I go over the events as I saw them, and review the company's written personnel policies. No surprises here, except that the lawyer isn't shocked by that peculiar affirmative action policy I once wrote. And in the documents accumulating in the case, there seems to be something about my having told the management to fire the person.

Comes deposition day. At last we're getting to the point of this story. The plaintiff's attorney grills me on what expertise I have in personnel management (very little, that's why I'm not doing any). He asks why I didn't investigate these allegations before taking action. (Is he playing dumb, or can he really not understand that I'm not making the decisions here? WSGR's attorney tells me afterward that the fellow probably really didn't have any understanding of how companies are run. I defer to his vastly greater experience.)

He asks why I told the management to fire the person, without having done anything to find out whether the allegations were true. I explain, repeatedly, at length, if perhaps not patiently, that managers made the decisions, and I accepted whatever they were, having only told them that if he really did the bad stuff, the company would be damaged if he wasn't promptly and mercilessly kicked out.

Nonetheless, the notion persists, and is on record, that I, Dan Drake, a Founder of the Company (a position that I suppose has almost the moral force, and all of the political force -- none -- of a First Lady) had ordered the VP and the general counsel and the CEO to fire the guy.

3. The Yellow Menace in the Lincoln Bedroom

What? Didn't I say just two anecdotes? What is this, the Hitchhiker's Guide, or the Spanish Inquisition?

Neither. I don't have any anecdotes here. I don't need any.

It seems that some American politicians are doing favors for financial contributors! Not only that, but our politicians are being bought and sold by foreigners!! Can you believe that? I thought only American companies and American citizens were allowed in that commerce.

I'm so outraged at this encroachment on an important American industry that I may very well fall sound asleep before I finish wr

Huh? What? What?

Oh, sorry. Now where was I?

Oh yes, I remember. In fact, the commerce in American politicians is restricted by law to American citizens and American companies. OK, and American unions as well. I never said the folks in the White House were setting a good example for the rest of us. But where's the outrage? Maybe it's all at the WTO and The Economist, which will soon get together and rid of us of such blatant protectionism.

still not chuckling: And does a later annual meeting bring in a proxy in which a very very large number of shares are voted against the routine confirmation of Arthur Young & Co. (now Ernst & Young) as auditors?

founder of the company: Till HTML gets Gothic as a standard type face, you'll just have to imagine the proper tone of voice for such a portentous phrase.

The Yellow Menace: A special mention in this Web page for the first correct answer to this poser: Who invented the term Yellow Menace? I can assure you that you will never guess. William Randolph Hearst? An excellent guess, but wrong.

Date last modified: February 3, 1999
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