Big Brother at Procter & Gamble

Big Brother at Procter & Gamble (P&G)
In early August 1991, a former employee of Procter & Gamble telephoned Wall Street
Journal reporter Alecia Swasy at her Pittsburg office to report some disturbing news.
The cops want to know what I told you about P&G, he said. This 20-year veteran of
the company has just been grilled for an hour by an investigator for the Cincinnati
fraud squad. The investigator, Gary Armstrong, who also happened to work part time
as a security officer for P&G, had records of the ex-managers recent long distance
calls, including some to Swasy.
Alecia Swasy had apparently angered CEO Edward Artz with two news stories about
troubles at P&G that the company was not ready to reveal. An article in the Wall
Street Journal on Monday, June 10, 1991, reported that B. Jurgen Hintz, executive
vice president and heir apparent as CEO, had been forced to resign over difficulties in
the food and beverage division. The next day, on Tuesday, June 11, a long article on
the divisions woes quoted current and former P&G managers as saying that the
company might sell certain product lines, including Citrus Hill orange juice, Crisco
shortening, and Fisher nuts. Swasy believes that Artz had deliberately lied to her
when she tried to confirm the story of Hintzs departure in a telephone conversation
on Saturday, and that he tries to sabotage the journal by allowing the news to be
released to the rival New York Times and the Cincinnati newspapers in the time for
the Sunday editions while the public relations department continued to deny the story
to Swasy.
Immediately after the two articles appeared in the Wall Street Journal, Arts ordered a
search of P&Gs own phone records to determine the source of the leaks to the press.
When this investigation failed to uncover any culprits, the company filed a complaint
with the Hamilton County Prosecutors office, which promptly opened a grand jury
investigation. The grand jury then issued several subpoenas calling for Cincinnati Bell
to search its records for all calls in the 513 and 606 area codes, which cover southern
Ohio and northern Kentucky, and to identify all telephone calls to Alecia Swasys
home or office and all fax transmissions to the newspapers Pittsburg office between
March 1 and June 15. The search combed the records of 803,849 home and business
telephone lines from which uses had placed more than 40 million long-distance calls.
P&G contended that it filed the complaint because of significant and ongoing leaks
of our confidential business data, plans and strategies, which included not only leaks
to the news media but also leaks to competitors as well. The legal basis for the grand
jury probe was provided by a 1967 Ohio law that makes it a crime to give away
articles representing trade secrets and 1974 Ohio law that prohibits employees from
disclosing confidential information without the permission of the employer.
However, the reporters are generally protected by the First Amendment right of
freedom of the press, and Ohio, Pennsylvania, and 24 other states have so-called
shield laws that protect the identities of reporters confidential sources.
Information about an executives forced departure is scarcely a trade secret on a par
with the formula for Crest toothpaste and the use of the phrase articles representing
trade secrets has been interpreted in the Ohio courts to mean documents such as
Photographs and blueprints, not word-of-mouth news. Any law that limits First
Amendment rights must define the kind of speech prohibited and demonstrate a
compelling need, but the 1974 law does not specify what constitutes confidential
information or the conditions under which it is protected. Thus, some legal experts
doubt the laws constitutionality. P&G denied that any reporters First Amendment
rights were being violated. No news media outlet is being asked to turn over any
names or any information. The investigation is focused on individuals who may be
violating the law.
The response to P&Gs role in the investigation was quick and angry. The Cincinnati
chapter of the Society of Professional Journalists wrote in a letter to CEO Artz: The
misguided action P&G is taking threatens to trample the First Amendment and
obviously reflects more concern in identifying a possible leak within the company
rather than protecting any trade secrets Your complaint has prompted a
prosecutorial and police fishing expedition that amounts to censorship before the fact
and could lead to further abuse of the First Amendment by other companies also
disgruntled by news media coverage. An editorial in the Wall Street Journal asked
what possessed P&G? and questioned the legality by saying, We understand that
P&G swings a big stick in Cincinnati, of course, and may be the local law can, like
Pampers, be stretched to cover the leak. It is not funny, though, to the folks being
hassled by the cops.
The sharpest criticism came from William Safire, the New York Times columnist, who
objects to Edward Artzs contention that P&Gs mistakes are not an issue of ethics.
Safire concluded a column entitled At P&G: it Sinks with the words: Its not
enough to say, our leak hunt backfired, so excuse us; the make of Tide and Ivory can
only come clean by showing its publics, and tomorrows business leaders, that it
understands that abuse of power and invasion of privacy are no mere errors of
judgment regrettably inappropriate - but are unethical, bad, improper, wrong.
In the end, no charges were filed against any individual, and the company continued
to deny any wrongdoing. A spokesperson for P&G asserted that the press has the
right to pursue information, but we have the right to protect proprietary
information. Fraud squad investigator Gary Armstrong later went to work for Procter
& Gamble full time.
This case has been retrieved from the book titled Ethics and The Conduct of
Business by John R. Boatright.

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