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Sunday, February 23, 2014

New Coke Didn't Fail: The Strategy Did

Revisiting and debunking an accepted belief.

In going through the aisles at a local beverage distributor at which the variety of beer is unparalled (they sell a donut-flavored beer that comes in a tall pink bottle for $15 -- looks like Pepto-Bismol), I thought that all these brewers are getting their growth, it seems, through the introduction of new varieties and that it would indicate that growth of the "main" drink is stalling. 

I thought back to the widely-accepted marketing disaster of "New Coke," where the company replaced its original brand with a sweeter version. (At the time my reaction to New Coke was "so what?" as it was not distinctive and provided no compelling reason to switch from my preference for Pepsi. Less filling.) It turns out New Coke wasn't a marketing disaster or a failure as a product. It was successful in taste tests and did lead to an increase in sales after the switch.

So what was the mistake? I propose the disaster was the removal of the old brand instead of its retention alongside the new formulation, because it removed a preferred and accepted flavor.  The larger issue was the principle: the company was essentially making a choice for the consumer by removing the old drink, and the consumer resented this move.  Lesson: Don't insult or take your customers for granted.

Some background is in order. In April 1985 the Coca-Cola Company changed the composition of its flagship drink to a reformulation which the public widely referred to as "New Coke." The impetus behind the change was Coca-Cola's declining market share against Pepsico. The new brand was introduced in April 1985 AND the company also immediately stopped production of the old formula. Coca-Cola's sales actually rose after the rollout. What did happen, though, is that a small but sizable vocal minority rejected the flavoring change. Also noteworthy is that Coca-Cola did not introduce the new drink as an alternative brand, but instead replaced the "old" flavoring. I argue that had the old flavoring been retained alongside the new drink, consumers would have applauded, sales growth would have been realized without the publicity downside from a segment of the market, and the company would have achieved its market share growth objective. (I will note that a major obstacle for even the established companies, and definitely for beverage startups, is to even get supermarket shelf space or space in independent distributors' trucks.) Lesson learned. Now all the beverage bottlers, including the beer companies, follow suit. Adding new flavors is the way (and it seems, the only way) to get growth. Guinness and Samuel Adams, to name two, catch my eye as beer brands rolling out new varieties while keeping their iconic originals. (Imagine the heresy if Guinness stopped making its original draught and replaced it with a shandy?)

Thursday, February 20, 2014

Another Foreclosure Relief Disaster

The foreclosure-relief crowd is taking advantage of New Jersey Governor Chris Christie's (potentially fatal to his career) weakness due to Bridgegate to try to ram through a new iteration of the Residential Foreclosure Transformation Act that was passed by that state's Legislature but then vetoed by Christie in 2012. (A revised version was also passed and subsequently vetoed.)

The new act is another disaster.  First of all, the text has apparently not even been revised from the 2012 bills' text; Section 2.c. still refers to anticipated 2012 foreclosures.  Secondly, it retains the 30-year deed-restriction on the foreclosed properties so that they are permanently (that is, for at least the 30-year period) turned into very-low-income, low or moderate-income housing or special needs facilities.  Thirdly, the bill would only allow foreclosure purchases under the act in significantly impacted towns, so small towns with fewer than 10 foreclosures would not be "helped" despite the fact they might be afflicted in small but concentrated areas just as severely as larger municipalities.  (In essence, the smallest municipalities in the state would not be subject to the Act.)   Finally, as economic reality dictates that foreclosure-available relief funds be used to maximize the number of purchased properties so as to maximize the number of people to whom housing could be provided (this would make sense, no?) the relief under this Act will likely be concentrated in the towns with the lowest purchase prices.

I see all sorts of equal protection (Fifth and Fourteenth Amendment) issues and the specter of de facto discrimination in the effect of the bill, if it ever gets signed into law. The risk now is political; to save his political skin Chris Christie just might sign an abomination of this bill.  The people most likely to be hurt by this bill will be minorities and the poor

I've argued before that these "foreclosure relief" bills will not put a floor under depressed home prices in affected areas to stop them from falling; instead, they will put a ceiling (and a 30-year ceiling) over current depressed prices to prevent them from rising.  If you're a homeowner affected by an abandoned property, which is worse for your home's value?  I don't argue that foreclosures, abandoned or neglected homes are not a major detriment to home values, but an open-market purchase or even a tear-down allow for recovery of home prices.  Putting a housing project next door to your home, however, is almost guaranteed to crash the value of your house and then keep it stuck there.

I have written extensively about the 2012 bills' problems and those articles (including this one) are just as relevant here.

Sunday, February 16, 2014

When Chris Christie Threatened Me

Chris Christie has a problem admitting he is wrong.  

His bigger problem may be his willingness to use his power -- first as a federal prosecutor and now as Governor -- to hide evidence of his mistakes.

I know this from personal experience.

The press has repeatedly covered the apparent incongruity between the regulatory charges brought by the Securities and Exchange Commission against 20 traders including Christie's brother Todd Christie, and the decision to omit Todd Christie from the list of those charged criminally (15 were charged in the Southern District of New York). 

Perhaps the special treatment -- and as some have long theorized, the illicit special treatment -- of Todd Christie prompted Christie to look elsewhere for people to prosecute, not to fight crime, mind you, but to rebut the presumptions of softness or preferential treatment.

Maybe that explains why Chris Christie seemed to take a personal interest in going after a fellow young Republican lawyer (and a candidate for State Assembly) some ten years ago.  Perhaps someone who -- at least on paper --  might be a rival some day.

Some ten, twelve years ago, I did some legal work for some people and organizations which, over time, generated some suspicions.

There was one client which I started working with while I was a senior associate at a prominent New York "boutique" securities law firm. After I left the law firm, I stayed in touch with the client and got some of their routine corporate work. This is what you do as a lawyer. This is how you build a practice. 

Over time, I raised questions about what the client was doing. Each time, I was reassured by the client. But something started to happen. Other lawyers and accountants started to become involved. Shockingly (at the time), some of these people were the very same people about whom I warned the same client! There were questions that soon went unanswered.  There were events and circumstances that went unexplained. There were documents whose absence went unaccounted for. 

I raised as many questions and objections as I could think, knocked on every door I could, even sought the advice of additional professionals.  At the end, I got no closer to the real answer other than to conclude that these additional people were not allies but obstacles, people running interference. There was this unsettling -- and infuriating -- sense of being stonewalled. When I got to the point that I could no longer uncover information, I left enough of a paper trail for someone else (someone who did have access to the information I was missing) hopefully to pick up and follow, and I quit the client.

In the past, a lawyer with misgivings about a client could always fire the client, but you were prohibited from going to the authorities unless you had proof of a crime or fraud. (That is what is called the "crime-fraud exception" to the attorney-client privilege.)  Soon after I quit, the various bar associations liberalized their rules to allow for what's called "noisy withdrawal."  But before then, any communication to the authorities without a smoking-gun document meant risking one's career and financial ruin from a civil lawsuit from the client for a broached attorney-client privilege.  Therefore, I had to remain silent, and wait for the truth to emerge.

Interpreting stonewalling as a form of disrespect, I also walked away from everyone associated with this client, including a partner at a prestigious New York accounting firm.  I'm glad I did, because the client was raided by the authorities the next year.  Its principals were arrested and five served jail time.  In fact, these five appeared to have agreed to plead guilty and "cooperate" with authorities in unrelated investigations that in turn resulted in additional arrests and convictions of at least seven other people.

But something else happened.  While I never heard a peep from regulators, from investors or clients of this wayward client, Chris Christie's U.S. Attorney's Office began threatening me.  While a civil case against the client, its principals and some other people identified me only as someone deceived by those same principals, the U.S. Attorney's Office would not tell me -- nor my lawyer -- what they suspected me of doing regarding this client (or anything else) unless I decided to "cooperate."  

As a lawyer, it is natural to ask how certain terms are defined.  The plain English definition of "cooperate" is not what the feds meant in this case.  When the question of how to define "cooperate" was posed, here's what Chris Christie's U.S. Attorney's Office said: We aren't interested in anything you say unless you agree to plead guilty to some crime...that is, a crime we cannot determine nor explain to you.

I kid you not.

Even more curious was that one of Christie's line prosecutors admitted there was no criminal intent.  That's like admitting, "there's no case." You see, without criminal intent, there is no crime. (Just like in the "Law & Order" spinoff.) Intent is a necessary (but not sufficient) element of any crime. But this inconvenient fact didn't stop Christie's office. The threats continued.

It's one thing to be threatened...if you've done something arguably wrong.  It's entirely another matter when the facts and the law seem to be beyond the grasp of the person threatening you. It brings to mind the saying, "It's foolish to talk sense to the fool."  It also brings to mind a different saying: "Do not ascribe to malice what can be ascribed to incompetence." 

When the U.S. Attorney's Office claimed the client had waived the attorney-client privilege (but never showed the documentation), I still volunteered to answer any questions they had.  You might think someone really wanting to get to the bottom of a serious financial or corporate crime might just want to ask questions of the one person who was actually trying to find out what was going on, what had gone on, in real time. 

But not Chris Christie's U.S. Attorney's Office.  Not even when I offered to answer any question they might have, on any topic.  Not even when doing so would allow the feds the ability to take notes, for possible use against me if I contradicted those notes in later testimony.  That might be because I had one condition to the question-and-answer session. One condition. I insisted the session be independently video-recorded.  This way, I would be able to prove what I did, and did not, say in response to their questions.  This way, I would be able to prove the feds were wrong, or lying, if they tried to falsely claim that I "obstructed justice" by giving them a "false statement." This, mind you, is precisely how Martha Stewart got convicted in 2004. (It turns out the FBI has a policy against recording such sessions, if you can believe that.) 

If you wanted the truth, there could not be a more golden opportunity. But not Chris Christie's U.S. Attorney's Office.  They kept on delaying and rescheduling their free question session.  They never bothered to ask one question of me.  Not one. Not ever.  (The last prosecutor to punt on this question session got an award from the Justice Department in 2009 and later went to work for Governor Christie in 2010.)

What did Chris Christie's U.S. Attorney's Office do?

They sent Yale Law School a subpoena in May 2007 for all my academic records, merely a full thirteen years after I 1994. (I did not object.)

They did make sure to let me know that, in their view, my legal career was over.

They did make sure to let me know that I was facing "Enron-type" jail time if I didn't cooperate.

They did make sure to chase my lawyer up the courthouse steps to tell him they were "going to hurt" me if I didn't cooperate.

They did make sure to use as much intimidation, as much pressure, as they could get away with.  When the law was not on their side, when the facts were not on their side, that is all that remained.  The one-trick pony.  You see a lot of that with lawyers, which explains their popularity.

And as if to disregard any pretense of the truth, they had someone talk to me after I had been awake a full 26 hours uninterrupted, in an attempt to try to trick me into saying something sounding incriminating. 

One could be accused of being a coincidence theorist for refusing to think that a former line prosecutor under Chris Christie in the U.S. Attorney's Office, moving right next door to us in 2006 during the time of the investigation, was merely one hell of a coincidence. 

Chris Christie's U.S. Attorney's Office never asked me any questions, never asked me for any documents. Just like Governor Chris Christie never asked Bridget Anne Kelly or David Wildstein any questions.  It's as if they tried to avoid asking any questions.  

I guess he was afraid of the camera.

What's crazy is that the threats continued, even after the perpetrators of a $20 million fraud went to jail -- briefly -- and came out. One of the perpetrators was a potential key witness in an unrelated federal case.  That is, until I exposed his fraud on the court involving his other civil cases (including one involving his work as a mortgage broker, for goodness' sake) and attempts to file bankruptcy.  Fraud by an admitted felon and government witness, fraud occurring in 2006-07 while this man was supposedly (one would hope) supervised by federal agents in Christie's U.S. Attorney's Office. One day I received a response on my blog threatening me that my "best bet was to lay low." Whatever the hell that means. What's curious is that I got this response, just seconds after walking out of Manhattan's federal courthouse after observing a brief segment of an interesting trial.

For people charged with the duties of uncovering and fighting serious crime, the way Chris Christie's U.S. Attorney's Office treated me showed they were very interested in keeping me very quiet. 

Revelations of Immorality As Character Gold Mine

I am reading this morning about some people objecting to elementary school lessons that purport to refer to "baby daddies" and such other alternative lifestyles.

Assuming you object to such lifestyles, I wonder if instead of objecting to the lesson, we should be welcoming the lesson.  Even in our schools.  Even to our impressionable youngsters.

Here's why.

Those of us who monitor our kids, including their education, will reap the benefits of the vigilance.  This is a brilliant opportunity to (a) teach your kids a valuable lesson, and (b) identify those with whom you do not want to associate.  

In a world where most people take pains to conceal their immorality or other character deficiencies, and where deception is the rule and not the exception, such revelations allow you to make an effortless discovery. As such, they are timeless. 

Moreover, the benefits of morality and discipline tend to multiply exponentially over time.  As such, this presents a competitive advantage, in all fields, and one that should also grow exponentially.  Therefore, you should view this as an opportunity to be identified, seized and exploited.  This is a great thing! 

Saturday, February 15, 2014

Americans Steal Game From Russians In Pale 1980 Rematch

This morning the Team USA hockey squad won a disputed shootout victory over Team Russia (f/k/a/ the Soviets) in an eagerly-anticipated, overhyped and utterly pale by comparison rematch of the legendary 1980 Winter Olympics match where the Americans beat the Soviet hockey machine 4-3 at Lake Placid. (That victory, by the way, only ensured the Americans would win a medal; they had to beat Finland two days later to win the gold.)

This morning's game should have been a Russian victory.  A Fedor Tyutin slapshot from the point, seemingly deflected, entered the net after it had been knocked off its moorings by the American goaltender Jonathan Quick.  The refereees in the National Hockey League are alert to such net malfunctions and typically repost the net while play is in action.  What they were doing here is open to debate.  This goal, ruled a good goal on the ice only to be overturned upon review, would have given the Russians a 3-2 lead.  Instead, the game remained tied and ultimately was won by T.J. Oshie on his sixth shootout attempt.  (The use of the shootout is an abomination, much like the shootout in the old North American Soccer League and even penalty kicks in soccer's World Cup.)

But this game was no comparison to the Lake Placid "Miracle on Ice."  The 1980 United States squad was comprised of college kids, pure amateurs, although several were already professional caliber and right after the Olympics did turn professional.  (Watch carefully the end of the USA-Soviet game to see defenseman named Ken Morrow get extensive ice time. Within days of winning the gold medal he joined the NHL's New York Islanders and won silver -- the next four Stanley Cups.) The Soviet squad was crypto-professional and a highly identical squad had beaten National Hockey League all-stars in two of three games in the 1979 Challenge Cup. (Watch the Canadian telecast of the close Soviet victory in Game 2 at Madison Square Garden.) The upset was epic.

Today's matchups, featuring players from the National Hockey League, are all professionals who have competed against one another (or in some cases are teammates). There is no mystery now.  Drop the 1980 comparisons.  You'll sound like a rank amateur if you make them.

Thursday, February 13, 2014

Going To Court To Get New Jersey Public Records

The Bridgegate - Christie scandal has provoked various organizations to request various documents from various public entities in New Jersey to investigate various issues involving one very particular possible presidential candidate.

All of this is occurring because New Jersey has a law requiring public entities produce government records unless they fall within one of 24 specified exceptions or unless good cause can be found for a delay or denial of the request.

I have handled and won some cases under this law, and in other cases the mere threat of my involvement has induced municipalities to produce the documents lawfully requested.

If you are getting stonewalled like in this case, you have a very short period of time to act.  The law's statute of limitations is only 45 days from when your request is considered to have been denied.  You should contact me via email at and we can assess whether you have a case and should proceed.

Friday, February 7, 2014

Bitcoin Price Plunge Shows Black Swan Risk With New Currency

Full analysis from my article on the Financial Policy Council website.

Monday, February 3, 2014

Christie's Core Incompetency Explains Bridgegate Crisis Mismanagement

Embattled Governor Chris Christie's crisis management problems (or just simply, crisis mismanagement) may stem from his inability to cope with situations where he is not in sole and total control.

The political news media is aghast at how Christie is losing composure in responding to the allegations of former aide/Port Authority appointee David Wildstein last week. However, these sentiments largely ignore or fail to appraise the true nature of Christie's prior jobs.

Chris Christie was New Jersey's United States Attorney for approximately seven years during the Bush Administration. During such time, he built a reputation as a reformer who was tough on political corruption. But crucially, his prosecutorial successes were (or appeared to be) the result of the use of the state's prosecutorial and investigative powers -- in short, the use of leverage provided by the fearsome and mammoth resources of the federal government.

The true test of one's skill, legal acumen and strategic thinking is not measured when one enjoys the steep advantages of having the federal government at your back. Rather, these qualities are best tested when one does not have them at one's disposal and, even more impressive, when one is actually confronting those resources and battling at a huge disadvantage.  It makes one think whether the best lawyers to handle investigations are not the ones who have launched investigations (that is, playing offense), but rather the ones whose clients are the targets (that would be playing defense), and the very best might be the ones who have directly been targeted but who have withstood the pressure in addition to winning on the facts.

Maybe, just maybe, Chris Christie built his career as a one-trick pony, someone who knew only how to throw a punch, but all the while escaping being challenged on his wits, his brains, or his guts. His career does seem awfully short on instances where Christie has been successful when confronting anyone -- and I emphasize, anyone -- who has had the inclination to stand up, take a shot, and then push back.

When Christie is put to the test, when he has to fight and show what he is made of, how smart he is, how strong his case is, how strong the facts are, whether the law is on his side, we don't know how strong Christie is.

Chris Christie is, for all intents and purposes, largely unproven. He is not battle-tested.

And perhaps Chris Christie is not very strong, not the brightest star, just someone who parlayed fundraising connections (of his brother) into a political career in elective office, with eight years as a federal prosecutor only a mirage to create an image of a reformer.

There are plenty of people who get to amazingly high levels in corporate America (and one would assume, also in the public sector) without having their incompetence, neuroses or lack of integrity revealed.

I hate to recycle the common criticism of Christie, but these traits and weaknesses are characteristic of, well, of bullies.

The question we are now seeing is whether Chris Christie can handle even one hard shot in the jaw. Can he even take one punch? The results thus far have not been promising for the formerly presumptive presidential frontrunner.

Perhaps Governor Christie has run into his version of Mike Tyson's Buster Douglas.

His career may not survive if it turns out he is only starting to run a gauntlet of tough punchers.