U.S. News & World Report and Altria? No Problem

19 Corporate Crime Reporter 39(3), October 6, 2005

Not too long ago, it would have been considered improper for a major news organization to team up with a major tobacco company to sponsor a forum on corporate social responsibility.

After all, tobacco companies are in the business of killing off their customers.

But now, there are consultants who make a good living setting up such public meetings.

They happen all the time.

But even so, yesterday’s event at the National Press Club was a touch surreal.

The event was titled “Corporate America and Congress: Has Sarbanes-Oxley Restored Investor Confidence?”

It was hosted by U.S. News & World Report.

And sponsored by Altria – formerly known as Phillip Morris – the maker of Marlboro and Virginia Slims cigarettes.

The consultant who set up this tobacco/U.S. News & World Report event was James Long.

He said he makes a living hooking up corporations with mainstream magazines.

The company said it changed its name from Phillip Morris to Altria in 2003 to clarify the relationships between the parent corporation and the operating companies.

But a group of public health advocates at the University of California San Francisco have set up a web site – that documents that in fact the company changed its name from Phillip Morris to Altria “to hide the taint of tobacco and attempt to restore a corporate image brought low by decades of deception and death.”

“For more than a decade, Philip Morris planned this renaming and restructuring in order to distance itself from the ever-increasing liability of selling tobacco, a product that kills more than a third of its long-term users,” the public health advocates at say. “As part of this strategy, Philip Morris hopes to be perceived as an outstanding corporate citizen by increasing its philanthropy under the name of Altria. But don't be deceived. Don't allow Philip Morris to win by corporate sleight of hand. Accepting gifts from Altria is the same thing as accepting gifts from Philip Morris: it allows the company to buy legitimacy and respectability while ignoring its starring role in the deaths of millions worldwide every year – over 400,000 in the United States alone.”

The panelists at the tobacco/U.S. News & World Report event were Senator Chuck Hagel (R-Nebraska), William J. McDonough, the chairman of the Public Company Accounting Oversight Board (PCAOB), John J. Castellini, president of the Business Roundtable, and Alyssa Machold Ellsworth, managing director of the Council of Institutional Investors.

The panel was moderated by Brian Kelly, executive editor of U.S. News & World Report.

It wasn’t much of a debate.

The panelists all agreed that Sarbanes/Oxley was working, that while it might take a bit of administrative tinkering, there should be and will be no legislative fix.

Nothing to fix.

The corporate guys from both U.S. News & World Report and the tobacco company didn’t mention the word tobacco during their introductions.

And none of the panelists mentioned the word tobacco during the discussion.

But during the question and answer, the question was asked:

“Senator Hagel said transparency is critical. What's the deal exactly between U.S. News & World Report and Altria? What are the details of the sponsorship? Members of the social responsibility community refuse to invest in tobacco companies. Did you find it a little odd that a panel on corporate responsibility is being sponsored by a tobacco company?”

Apparently, nobody found it a little bit odd.

From the back of the room, James Long, the consultant who set up the forum, answered that the event was underwritten by the corporate sponsor and he would give me details after the event.

After the event, he said that the forum was paid for with advertising dollars paid by Altria to U.S. News &World Report – but he didn’t give specific amounts.

“There's nothing unusual about it,” answered U.S. News & World Report editor Brian Kelly. “We work with a variety of companies in a number of different kinds of forums. We operate obviously as a magazine, as a journalistic institution, but we also are a forum for advertisers. So there are often events we do that are not directly related to our news coverage – something like this, which we think has a public policy purpose. . .It's very consistent with what we've done. Altria is a very large company that makes a lot of products and has been an advertiser in the magazine in various capacities so, you know, we don't see anything unusual about this.”

Alyssa Machold Ellsworth, managing director of the Council of Institutional Investors, said that she too wasn’t uncomfortable at the event and didn’t see anything unusual even though a number of her member pension funds refuse to invest in tobacco companies.

Outgoing PCAOB chair McDonough ignored the question.

Things turned a bit more weird during the question period, when a reporter from the Financial Times, Stephanie Kirchgaessner, asked McDonough about whether given the level of fraud acknowledged by the KPMG recently, the deferred prosecution deal cut with the firm was proper.

“Or do you think it's an acknowledgment by prosecutors or by the SEC that some companies are too big to fail and that the accounting profession couldn't handle just three accounting firms?” she asked.

McDonough started his answer this way:

“Well, my first observation is you look like such a nice young woman until you asked that question.”

There was nervous laughter in a room where about half the attendees were women.

(Earlier, during the panel discussion, McDonough observed that he was sitting “slightly to the right of my favorite United States Senator, Chuck Hagel, and slightly to the left of this lovely lady, Alyssa” – referring to the Council of Institutional Investors managing director Ellsworth.)

McDonough quickly straightened and answered the Financial Times reporter directly:

“Do I think that the Justice Department or the SEC or the PCAOB or I personally believe that there is an accounting firm too big to fail? The answer to that is no, and it must be no. When I was a banking supervisor, I always said, there is no such thing as a bank to big to fail. Why? As soon as the authorities say there is something too big to fail, you've de facto nationalize it. Is there a public interest in the continuation of four large accounting firms? Yes. We all agree.”

What we all don’t agree on is whether such corporate sponsored events are proper, or not.

Anna White of the Global Partnerships for Tobacco Control thinks not.

She has just returned from South America where in Uruguay, members of her group observed the following:

Phillip Morris had dressed ten women in Marlboro costumes and sent them to a nightclub in Montevideo, the capital.

The Marlboro women were signing up people at the nightclub to win a trip to Italy – which has just banned smoking in workplaces nationwide.

White says that Phillip Morris does this around the world to get names and addresses of smokers and potential smokers – so that they can direct market to them.

The tobacco company sponsored the U.S. News & World Report forum for the same reason that it changed its name to Altria – to make it appear altruistic.

But as the health advocates at point out – a genuinely responsible company, faced with its role in the deaths of millions, would – at minimum – stop marketing this addictive product that would not be allowed on the market if introduced today.

Until then, maybe news outlets ought to shun the tobacco companies – whatever their names.



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