October 22, 2008
Incriminating Emails: How to Resist?
Posted by David Zaring

In the Waxman hearings today on credit rating agencies, some emails, via Clusterstock:

  • In one email, an S&P analytical staffer emailed another that a mortgage or structured-finance deal was "ridiculous" and that "we should not be rating it." The other S&P staffer replied that "we rate every deal," adding that "it could be structured by cows and we would rate it."
  • Meanwhile, an analytical manager in the collateralized debt obligations group at S&P told a senior analytical manager in a separate email that "rating agencies continue to create" an "even bigger monster -- the CDO market. Let's hope we are all wealthy and retired by the time this house of cards falters.;O)"

Some of us here at the Glom have always suspected that this sort of thing is exceptionally hard to avoid.  And plenty of people are going to go to jail over the bailout.  Who will they be?  Email discovery will probably play a role.  Henry Blodgett, famously brought down by sarky emails, says this about the stuff (HT: MM):

...it's the folks who are just chattering and venting to colleagues about normal business tensions who are most at risk. The computer doesn't capture the wink or head nod. It doesn't say "this is my first reaction...when I have considered everything in detail, I'll give you my final opinion." Etc.

I haven't read the S&P stuff, so I don't want to take a position on the folks who wrote those specific emails. But I'd venture to guess that, if you sat them down and asked "Was it your professional opinion that the product you were rating was structured by cows," the answer would be "Of course not. I was trying to make my colleague laugh."...

The chief scientist at Merck is the perfect example. When he got the first test results back on Vioxx, he wrote email saying (effectively) "Oh, shit. We're screwed. It kills people." Several days later, however, after reviewing many OTHER tests, he concluded that the initial test was noise. His first email, obviously, will live on forever as the "smoking gun." But what happened afterward is why Merck has won so many of the Vioxx suits.

... I actually have given talks at business schools about this.... it's very hard to convey to people that email can screw them even when they aren't doing anything wrong. Specific examples like the above help a lot, though.

And I'm definitely not saying "don't get caught." If you're going to do something you know is wrong, you deserve what you get. What I'm saying is be careful even when it would never occur to you in a million years that you're doing something wrong.

When all that stuff was in the headlines, I asked some lawyers whether execs had changed their email habits because of me, et al. "For about five minutes," they said.

And the really horrifying thing is that I quickly went right back to the same email locker-room trash talking myself. Just irresistible. You work with people you like, you want to make them smile, you want to sound off, needle, react, do a thousand other things that you do in voice all day long that you would never do in a formal memo or professional communication. And why not? People talk that way, so you might as well write that way.

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