AT&T Wins Ethics Award, Looks Ridiculous

Well this is awkward: AT&T won an award for corporate ethics earlier this week — just hours before news broke that the company paid hundreds of thousands of dollars to President Trump’s personal lawyer last year in what looks like a bribe to help curry favor with the Trump Administration.

The award came on May 8, from the North Texas Ethics Association based in Dallas, where AT&T was based. Chief compliance officer David Huntley was on hand to receive the Greater Dallas Business Ethics Award at a luncheon with other business notables around Dallas. Below is a photo courtesy of the Dallas Morning News (whose full story is worth reading).

Alas, later that afternoon came news that companies had funneled millions of dollars in 2017 to Michael Cohen, Trump’s long-time personal lawyer and all-around fixer. That money — including $600,000 from AT&T — went into the same Delaware shell corporation Cohen formed in 2016 to pay $130,000 in hush money to porn star Stormy Daniels, to keep her quiet just before the election about her alleged affair with the president 10 years earlier.

On the day of the ethics award (Tuesday), we only knew that AT&T had paid Cohen $200,000 for some reason. By Friday we learned that AT&T had actually given Cohen $600,000, specifically for “consulting and advisory services” on AT&T’s $85 billion acquisition of Time-Warner — a deal being challenged by the Trump Administration on antitrust grounds.

Cohen is a real estate attorney with a side business owning taxi medallions in New York City. He has connections to Russian and Ukrainian oligarchs. He is also the long-time personal attorney for Donald Trump and legal counsel for the Trump Organization.

And AT&T hired Cohen for consulting services at a very generous price, on a bet-the-company merger challenged on antitrust grounds.

Would you recommend someone like him to your board for an issue like that? Would you support anyone else in your company who did?

Of Ethics and Awards

We can’t fault Huntley (whom I’ve never met) for this epic case of bad timing. I don’t relish the idea of picking on him at all. Every chief compliance officer at a large organization has dozens of concerns at any given time, and plenty of people don’t tell the CCO what’s really going on. Such people can include other senior executives just as much as lower-level employees.

Still, there are only two scenarios here: Either Huntley knew about the payments to Cohen, or he didn’t. They embarrass him either way.

If Huntley did know, that undermines anything he says to AT&T staff that good conduct is important. If he didn’t know, that undermines anything other senior executives say that good conduct is important — and makes Huntley’s compliance program look like window dressing.

Let’s be honest. Imagine that an AT&T employee had proposed this arrangement for a foreign government: paying above-market rates to a foreign government official’s personal lawyer, for services the lawyer doesn’t seem capable of providing, while the company had business pending before that official.

That idea would set off every compliance alarm you could imagine. That payment, if it happened at all, would require more signatures than the Declaration of Independence. A chief compliance officer like Huntley would demand to know every detail of why the arrangement was necessary.

If the CCO did know, that undermines anything he says to AT&T staff that good conduct is important. If he didn’t know, that undermines anything other senior executives say that good conduct is important — and makes the compliance program look like window dressing.

Well, did that happen here? Did Huntley know about these payments to Cohen? Did CEO Randall Stephens? Did anyone argue that Cohen is a grifter and fixer who knows nothing other than Trump’s personal cell phone number, and shouldn’t receive a dime? If someone did, clearly he or she was overruled. Who made that decision?

Those are questions AT&T should answer if it wants people — AT&T employees, customers, shareholders, a skeptical public — to believe that the company takes ethics and compliance seriously. Otherwise its ethics award looks ridiculous.

Enter the Apologies

AT&T did apologize to employees on Friday in a memo from CEO Randall Stephenson, where he admitted that hiring Cohen “was a big mistake.”

To be clear, everything we did was done according to the law and entirely legitimate. But the fact is, our past association with Cohen was a serious misjudgment. In this instance, our Washington D.C. team’s vetting process clearly failed, and I take responsibility for that.

AT&T also ousted its senior vice president for external and legal affairs, Bob Quinn. He started in that role in October 2016, and engaged Cohen a few months later. You want to cut Quinn some slim bit of slack since he was so new to that role, but he had been with AT&T for nearly 40 years and working in legal affairs since 1993. You’d think a person with that much experience would know how to spot a grifter.

Then again, you’d think a firm that takes ethics compliance seriously enough to win an award would know how to spot a grifter, too — and know not to deal with him.

Apparently not.