EDITION 1

WeeklyJuly 27, 2012

Barclays and Libor: Swim, Dammit, Swim

Scandal: What Every Business Needs to Learn From Penn State and the Freeh Report

Adjusting Your Content Strategy: for the Penguin Update

5 Ways Insurers Can Position Themselves to Win Under the ACA

BPA: Emotions Trump Science at Every Turn

Mike Koehler on Foreign Corrupt Practices Act Reform

Of course for American banks, the tsunami

du jour is the Libor-fixing scandal that has

already cost Barclays $450 million in fines,

exposed that British banking giant to an entire

generation of litigation, and forced Chief Ex-

ecutive Robert Diamond and Chairman Marcus

Agius to resign.

It’s a little surprising that an event that so

fundamentally compromises the global mar-

ketplace has generated widely divergent

commentary. There are even suggestions from

high-authority sources that the scandal has

been significantly overstated by vengeful me-

dia and self-interested politicians. On the other

side, equally informed commentators warn

that, if attempts to manipulate Libor were suc-

cessful, it could be “the biggest securities fraud

in history, affecting investors and borrowers

around the world.”

Since Libor involves literally trillions in global

instruments, an incalculable number of people

(like homeowners) can file lawsuits. In just

one American city, the Federal Reserve Bank

of Cleveland has already warned that a big

percentage of prime adjustable-rate mortgages

and subprime ARMS are tied to the Libor

index. In some cases, it may be difficult for

plaintiffs’ lawyers representing homeowners

to show causation but they’ll certainly try, and

won’t stop trying for years.

Can you say “asbestos?” It’s a neat comparison

and a vexing one. The world can (and does)

live without asbestos. It cannot live without

banks.

There is, as has been pointed out, every reason

to anticipate that U.S. financial institutions

are also in for their share of severe regulatory

fines, incessant litigation, and further political

calumniation. Earlier this year, it was reported

that traders at Citigroup and UBS tried to

manipulate Libor rates for the yen. UBS has

reportedly already cut a deal in various inves-

SwIm, DammIT, SwImThe thing about a tsunami is that, if you haven’t gotten to a safe place soon enough, there’s not much you can do except watch your own extinction roll in from the deep.

BarclayS aND lIBOr:

richard S. levick, Esq.Originally Published on Forbes.com

Weekly

in order to fix the prime rate. That the Libor

investigations stretch back to 2007 only exacer-

bates the communications challenge because it

additionally underscores the fact that the prob-

lem was systemic, not aberrational. And, when

Robert Diamond agrees to forego $31 million in

stock bonuses, it too fuels public ire by begging

the question, why was the man responsible for

this bank about to get so much money but for

the inconvenient fact that Barclays got caught?

Absent an extraordinary communications cam-

paign, there are long-term risks looming for

the entire financial industry. In the UK, “the

big unanswered question is whether we will

now see consumers begin to desert Britain’s

main street banks,” says Paul Mason, econom-

ics editor of the BBC’s Newsnight. “There’s an

uptick in inquiries about account transfers to

mutuals and ethical banks...Once customers

realized that manipulation may have artificial-

ly inflated the price of credit across the whole

economy, maybe for years, that’s a bread and

butter issue.

“After we then found out the Libor market was,

to use Paul Tucker’s word, a ‘cesspit,’ you were

bound to get the whole issue of banking reform

reopened,” adds Mason.

We’re reminded of a similar uptick in the U.S.

a few years ago when community banks saw

some increase in their business as a result of

the banking scandals. But the more pressing is-

sue on both sides of the Pond is the prospect of

new legislation that could dwarf Dodd-Frank.

In the U.S., the banks particularly need to take

the ongoing revival of interest in the Glass-

Steagall Act (the law limiting the securities

activities of commercial banks, passed in 1933

and repealed in 1999) very seriously.

Richard Levick, Esq., President and CEO of LEVICK, repre-

sents countries and companies in the highest-stakes global

communications matters — from the Wall Street crisis

and the Gulf oil spill to Guantanamo Bay and the Catholic

Church.

“ There’s an uptick in inquiries about account transfers to mutuals and ethical banks...Once customers realized that manipulation may have artificially inflated the price of credit across the whole economy, maybe for years, that’s a bread and butter issue.”

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tigations in exchange for leniency on criminal

charges. Bank of America was subpoenaed

last year. JPMorgan Chase, HSBC, and others

sat on the Libor panel during the period

under investigation and may also face

unpleasant questions.

A realistic assessment is that the industry’s

actual exposure, civil and criminal – as well

as the looming harm to global markets – lies

somewhere between “this is just a witch hunt”

and “this is an unprecedented disaster.” At the

same time, the impact of the tsunami will be

measured at least as much in terms of public

response and political reaction as in direct

economic fallout.

After all, we’ve reached something of a break-

ing point as stakeholders simply cannot toler-

ate more of the same betrayal they’ve endured

since the subprime disaster. In that sense, even

a much less threatening crisis than Libor could

become the straw that breaks the camel’s

proverbial back. As financial institutions wait

their turn to enter the Libor line-up, they must

therefore face an extraordinary communi-

cations challenge: how do we talk to people

who’ve given us every chance to talk to them

in the past but who, at this belated point in

time, are no longer inclined to listen?

Right now Americans are experiencing much

less of a media feeding frenzy over Libor than

the Brits, but that might change once they real-

ize that this scandal is almost tantamount to

some bank manipulating the Federal Reserve

With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs 140,000 people.

Tupungato/shutterstock.com

Scandal:

This week, former FBI Director Louis Freeh confirmed what most people following the Jerry Sandusky scandal have believed since the story was first reported; that the most senior Penn State officials knew about the coach’s reprehensible acts and did nothing to protect the children he was abusing for more than a decade.

What EvEry BuSinESS nEEdS to lEarn From PEnn StatE and thE FrEEh rEPort

richard S. levick, Esq.Originally Published on Forbes.com

Weekly

all, a few community members posting on an

internal social network don’t carry the weight

of 60 Minutes or the New York Times. The con-

tent was certainly damaging, but it was being

circulated by folks who seemingly lacked the

influence to be widely believed.

The problem, however, is that the message

board postings were, by definition, the breed

of high-risk, low-authority conversations that

can cause real problems in the social media

era. All potential news falls into one of four

categories. Let’s stick with the Penn State

example and add a few hypothetical stories to

illustrate the point:

• High-risk/high-authority: The Wall Street

Journal publishes front-page accusations

that Jerry Sandusky has been abusing

children for years. This is the moment the

story goes viral.

• Low-risk/high-authority: The Wall Street

Journal publishes a back-page report that

freshman applications at Penn State are

down slightly from the previous year.

• High-risk/low-authority: Community mem-

bers post to a message board that Jerry

Sandusky may be abusing children. This

is the moment that institutions should be

on notice. Monitor aggressively and advise

decision makers of the rumors and that,

critically, they are no longer operating in a

vacuum.

• Low-risk/low-authority: A student posts to

a message board that the dining hall food

gave him athlete’s foot.

Companies and organizations know how to

deal with three of the four quadrants outlined

above. High-risk, high-authority stories need

to be dealt with aggressively and immediately.

Low-risk, low-authority stories are best left

alone. And low-risk, high-authority stories may

require some form of response, but nothing on

the level of a national news conference.

It’s when we come to the high-risk, low-author-

ity stories that we see companies and organiza-

tions stumble. Penn State is not alone. It is the

warning shot across the bow. Your risks may

not be pedophilia, but what enterprise risks

are people talking about now that provide you

early warning?

Time and again, we’ve seen children’s product

companies fail to take what’s written on the

Mommy blogs seriously. We’ve seen food pro-

ducers ignore what the plaintiffs’ bar is writing

on its blogs as it searches for the next big class

action case. And we’ve seen single customer

service snafus detailed on YouTube evolve into

national scandals before the purveyor of said

service even knows what hit it. And it’s not just

bloggers and social media. It’s all sources. How

does your company stack up in search engines

when you type in risk terms, not just the name

of your company or brand? When you whistle

past Penn State, don’t whistle too loudly.

The advent of social media has provided even

the most low-authority sources with a mega-

phone that helps their messages reach the

mainstream media, plaintiffs’ attorneys, regu-

lators, analysts, and others who can do lasting

This week, former FBI Director Louis Freeh

confirmed what most people following the

Jerry Sandusky scandal have believed since

the story was first reported; that the most

senior Penn State officials knew about the

coach’s reprehensible acts and did nothing

to protect the children he was abusing for

more than a decade.

The only conclusion one can draw is that

former president Graham Spanier, former

athletic director Tim Curley, and the late head

coach Joe Paterno believed that whispers about

Sandusky’s gruesome acts were safely con-

fined within community walls. As long as they

kept the lid tightly shut, the accusations would

never spring forth from this particular

Pandora’s Box.

Among their many greater sins, they failed to

understand the transparent nature of this digi-

tal age—that institutional privacy has vanished

and everything is now discoverable. As a re-

sult, the rest of us have been provided a salient

lesson in how high-risk, low-authority chatter

ought not to be ignored by anyone responsible

for protecting a brand or high-profile reputa-

tion (not to mention children at risk).

When 22-year-old reporter Sara Ganim broke

the Sandusky story open, she did so by follow-

ing up on conversations she stumbled across

on Penn State’s own online message boards—

conversations that Penn State officials either

were not monitoring or disregarded as not

credible enough to ever cross the thinning

line between rumor and “real news.” After

Richard Paul Kane/shutterstock.com

Weekly

With the release of Google Penguin, it’s

likely time to take a good hard look at your

content strategy. Content has always been

king, but unique content that offers value

and substance in order to earn Penguin-

proof links is now absolutely essential.

How can organizations ensure that the Pen-

guin update doesn’t devalue their content

under the new paradigm?

First, assess your current content situation.

Check Google Webmaster Central to see if you

have a message from Penguin. If your content

was impacted by the update, chances are if you

will have been notified. Check your Analytics

to assess potential Penguin damage. A simple

90-day traffic report should tell you if you lost

visitors. Also, be sure to check your keyword

referrer report, as well as manually check

the rankings on some of your top keywords.

Finally, be sure to use link tools to see your link

profile and ensure that “spammy” or unnatural

links aren’t hurting your rankings.

Second, make your content shareable. Chances

are that the content you write will end up on a

social network. So why not write about con-

cepts in a manner that will gain popularity on

social media and social networking sites? This

way, you don’t have to rely solely on Google

rankings for traffic. Be sure to create meaning-

ful headlines, as most social users today won’t

read past the first 70 characters. Also be sure

to focus on quality and the value your readers

garner from your insights.

And third, watch your keyword use. While

keywords are great, the latest Google update

means that over-use will scream spam. While

we’ve all be trained that we should use the

same keyword combinations throughout our

content so that we’ll rank well for a particu-

lar phrase, you will now be penalized and

removed from the rankings all together if

keyword density is too high. It’s now best to

write content that is closely associated with

your business while not limiting yourself to

keyword containing topics. Instead, embrace

all relevant concepts, even if they don’t offer

many keyword opportunities. And remem-

ber, never write your content first and then

sprinkle in your keywords at the end. Do your

research ahead of time and naturally incorpo-

rate any keywords as you write.

Lauren Yontef is a Social and Digital Media Account

Supervisor at Levick and a contributing author to

Bulletproof Blog™.

Lauren Yontef Originally Published on Bulletproofblog.com

Adjusting Your Content strAtegY: for the Penguin uPdAte

L

Annette Shaff/Shutterstock.com

harm to a brand or reputation. At the same

time, however, it’s most important to note that

social media have also provided companies

and organizations with a crystal ball of sorts—

a tool by which they can see into the future to

identify the issues that may eviscerate their

brands in the coming hours, months or years.

Of course, that’s only true if they take the time

to study the tea leaves.

How can otHer companies and organizations best ensure tHat tHeY staY on top of HigH-risk, Low-autHoritY issues?

1. institutionaLize a sociaL media moni-toring structure: The task is greater than

simply having interns or assistants hand over

an aggregation of Google News items each

morning. Companies need to make use of the

myriad analytical tools available to know what

is being said about their brands online, who is

saying it, and—perhaps most important—who

and how many people are listening.

2. incLude risk and competitive anaLYses: Companies can’t just scour the Web for men-

tions of their brands or leadership; they need

to anticipate their greatest brand risks and

include related risk terms in their sweeps

as well—whether they be “product recall,”

“bribery,” or “white collar.” When worrisome

chatter is detected, they also need to perform

competitive analyses that tell them if the prob-

lem is theirs alone or an industry-wide trend.

To return to the PSU example, this would have

meant looking at the social media buzz sur-

rounding Notre Dame, Pitt, and other similar

institutions to see if speculation about football

coaches’ behavior is as rampant across the

NCAA as it was in State College.

3. understand tHat Low-autHoritY sources matter: A recent Agenda article authored by

Amanda Gerut details just how much weight

some forward-thinking companies lend to

social media chatter. Coca-Cola, for instance,

uses social media to “head off thorny issues.”

Proctor & Gamble CEO Robert McDonald is

personally involved in the monitoring process,

saying “I personally see the comments about

the P&G brand. This allows for real-time reac-

tion to what’s going on in the marketplace,

because we know that if something happens

in a blog and you don’t react immediately—or,

worse, you don’t know about it—it could spin

out of control by the time you get involved.” I

couldn’t have said it better myself.

Once we step back from the negligence carried

out by PSU officials, we begin to see how they

could believe such inaction was even possible.

They made the fundamental mistake of believ-

ing that low-authority sources lack the power

to take down an empire. Don’t make the same

mistake. The emperor’s clothes are as invisible

as they’ve ever been—even if the garment in

question is a navy blue football uniform.

Richard Levick, Esq., President and CEO of LEVICK, repre-

sents countries and companies in the highest-stakes global

communications matters — from the Wall Street crisis

and the Gulf oil spill to Guantanamo Bay and the Catholic

Church.

L

It’s not every day that an industry has as many as 46 million new customers delivered to its doorstep. But when the U.S. Supreme Court voted 5-4 to uphold the Affordable Care Act (ACA) and the controversial individual mandate last week, that’s precisely what happened for health insurance companies across the country.

The law has new hurdles to clear in

Congress and the November election results

could change the dynamic yet again—but

the machinery of government is nonetheless

lurching toward implementation as the

American public grows more accepting of

the new healthcare reality. Tens of millions

of Americans who previously chose to forgo

health insurance will soon seek coverage.

Let the battle for their dollars begin.

That contest will be predominantly fought in

the 50 state-run Health Insurance Exchanges

(HIX) that the ACA establishes to provide indi-

viduals and small businesses with affordable

coverage options from the industry’s private

carriers. The vast majority of U.S. states were

waiting on the decision before passing legisla-

tion to establish their exchanges. But with the

SCOTUS decision, most will begin propping up

their exchanges by 2014 rather than allow the

feds to step in and do it for them (a few ideo-

logical stragglers notwithstanding).

The influx of consumers is also problematic for

the industry. With more high-risk patients on

the rolls, insurers will need to offset increased

costs by aggressively pursuing young, predomi-

nantly healthy consumers who would not en-

ter the market but for the individual mandate.

If they don’t do so effectively, premiums will

rise even as the exchanges introduce unprec-

edented levels of competition.

You don’t need an advanced business degree to

know what that scenario will mean. It is now

incumbent on private insurance carriers to

modify their marketing and communications

strategies to navigate these new challenges.

Insurers can no longer simply focus on large

HR departments and other traditional custom-

er funnels. They must reach a generation of

American youth not entirely convinced of the

value proposition.

Richard S. Levick, Esq.Originally Published on Forbes.com

5 WaySInSuRERS Can PoSItIon thEmSELvES

to WIn undER thE aCa

Weekly

3. Understand that “yoUng people” is not one aUdience.

It’s not enough to define this new audience as

“young people.” Insurance companies need

to dig deeper and build brand identities that

cater to the separate market segments under

the “young people” umbrella. Whose brand

will be known for the policy that is tailored to

the young, single customer yet to start a fam-

ily? Whose brand will be known for the policy

that is tailored to small business employees?

Whose brand will be associated with policies

designed for 30-somethings with kids in tow or

on the way?

Establishing connections between the brand

and these microtargets will go a long way

toward defining a policy as best in class. Here,

the well-known brands have a head start be-

cause they are already viewed by many youth

buyers as a safety sell. These companies can

continue to leverage this trust and familiarity

as they have in the past.

4. localize oUtreach to 50 different exchanges.

Many young people will rely solely on the

exchanges that will be set up in each state for

comparative policy shopping. The devil will

be in the proverbial details as each state will

present coverage options in different ways.

Some will highlight deductibles over yearly

premiums. Others will focus more on coverage

details versus price.

Insurers must therefore be keenly sensitive

to how their brands look viewed through 50

separate prisms and either adjust their policy

terms or market the competitive advantages of

their coverage to address these varying local

priorities.

5. excel at cUstomer service.

Most of us who have had health insurance

for years still don’t fully understand every

nuance of our policies. From co-insurance to

deductible rates, to the medical definition of

an “experimental procedure,” today’s first-time

customers will be all the more perplexed by

the restrictions in effect and the options on the

table. They will have a myriad of questions

and concerns.

Customer service will therefore be paramount

to hold on to an especially fickle youth demo-

graphic and transform these buyers into life-

long brand loyalists. Full transparency must

be a priority to ensure that customers under-

stand their coverage limits. For the healthcare

industry, Sy Sims’ maxim, that “an educated

customer is our best customer,” is definitive.

Thanks to the Roberts court, an elusive market

segment long coveted by insurers is within

reach—but only for those companies that

speak to the needs of young consumers, and do

so in a language that educates, motivates, and

inspires them to make the right choices.

Richard Levick, Esq., President and CEO of LEVICK, repre-

sents countries and companies in the highest-stakes global

communications matters — from the Wall Street crisis

and the Gulf oil spill to Guantanamo Bay and the Catholic

Church.

L

1. Understand that the individUal mandate is anything bUt mandatory.

There is a sense among industry insiders that

many young people will opt to pay the modest

monetary penalty set forth by the individual

mandate, rather than premiums for policies

they don’t think they need. The ACA imple-

ments a maximum yearly penalty of $695 for

those who don’t obtain health care coverage,

which could look pretty attractive to potential

customers in lieu of policies they don’t believe

they will use.

As such, insurers cannot just articulate cover-

age details or the pricing advantages of their

policies. They must also show that it’s too great

a risk to decline coverage. Carriers need to

discuss the importance of preventative care;

how spending a little on routine doctors’ visits

can save your life; and the monumental costs

young people will incur if they contract a seri-

ous illness or simply break an ankle.

2. emote online.

Under the ACA, young health insurance con-

sumers are now able to rely on their parents

for coverage until they are 26—but they will

rely on the web thereafter. The 27-35 year-old

demographic is, of course, a digital animal.

That means insurance carriers must now begin

a new race to be found and chosen online.

Which companies will dominate search en-

gine optimization (SEO) and marketing (SEM)

for the terms used to research their coverage

options? Which companies will make effec-

tive use of blogs and social media to enhance

awareness of and affinity for their offerings?

Most important, which companies will gener-

ate the emotionally engaging video content

that helps consumers immediately understand

that the risk of not being covered is too high?

Two decades ago, the “Harry and Louise”

television campaign blended information and

a healthy dose of fear to effectively kill health-

care reform in the Clinton era. Today, the same

approach can be taken—with the opposite end

goal in mind—via YouTube and other venues

that young people populate. When they emo-

tionally connect to the benefits and risks of

not being covered, they will get it. Action fol-

lows understanding.

5 here are five strategic imperatives the will help private carriers carve oUt a significant slice of this still skeptical pie.

Bisphenol A (BPA) is back in the news. This

time, it’s the General Mills brand Progresso

coming under fire for using the chemical

as an acid-resistant sealant in the lining

of its metal soup cans. Despite a mountain

of scientific evidence that BPA is harmless

in the amounts found in food packaging,

more than a few Progresso customers are

demanding the brand discontinue its use o

f BPA and find other alternatives to

preserve its products and maintain

nutritional quality.

On Progresso’s Facebook page– which is

213,000 “likes” strong – and via a consumer

petition circulated being circulated online, con-

sumers are voicing frustration with the brand

in increasing numbers. They are concerned

about sensational reports that BPA can leak

into water and food and cause a host of serious

health problems.

It doesn’t really matter that the science doesn’t

actually support a ban on BPA. When it comes

to the safety of the food they put on their

tables, American families don’t pay much at-

tention to what the guys in white lab coats say.

Instead, they respond emotionally, taking steps

to limit risks, no matter how insignificant they

might be.

That’s undoubtedly why Campbell’s Soup made

the decision to go BPA-free earlier this year

and countless other brands of canned foods

have previously done the same. It’s certainly

why Beef Products Inc. had to shut down two-

thirds of its plants after parents campaigned

against the use of ammoniated “pink slime” in

school lunch hamburgers – even though the

fine-textured beef had had doubtless prevent-

ed thousands of cases of foodborne illness.

Consumer emotion is also why Progresso

probably will have no choice but to follow

suit. Fear – now jet-fueled by the Internet –

represents one of the most powerful motiva-

tors in the marketplace. When fear attaches

itself to a brand – rightly or wrongly – a com-

pany’s best course is to do is whatever it takes

to assuage anxiety and demonstrate that con-

sumers come first.

Gene Grabowski is Executive Vice President at Levick Strate-

gic Communications, the nation’s top crisis communications

firm. He is also a contributing author to Bulletproof Blog.

Connect with him @crisisguru.

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Bisphenol A (BPA) is back in the news. This time, it’s the General Mills brand Progresso coming under fire for using the chemical as an acid-resistant sealant in the lining of its metal soup cans. Despite a mountain of scientific evidence that BPA is harmless in the amounts found in food packaging, more than a few Progresso customers are demanding the brand discontinue its use of BPA and find other alternatives to preserve its products and maintain nutritional quality.

EmotionS trumP SciEncE at EvEry turn

gene grabowski

BPa:

Weekly

mikE koEhlEr

Mike Koehler, J.D., Assistant Professor of

Business Law at Butler University, discusses

the Foreign Corrupt Practices Act (FCPA). Mr.

Koehler believes the FCPA needs to receive

non-binding Department of Justice guidance.

Additionally, he stresses that the FCPA needs

some limited structural reforms and outlines

his personal suggestions to enhance the FCPA.

viSit

Foreign corrupt Practices act reform