Fallout Continues in Penn Fiasco

Clients, Competitors Offer PR Advice as Press Leaks Make Matters Worse

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NEW YORK (AdAge.com) -- To see how the tables have turned on famed crisis counselor Burson-Marsteller in the past few days, consider this. Ted Smyth, chief administrative officer and senior VP-corporate and government affairs at Heinz, is used to his company paying the firm big bucks for PR counsel. Now he's got some of his own PR advice for an agency that, after decades of quietly helping corporate giants out of sticky situations, is caught up in a crisis of its chief executive's making.

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"He forgot the importance of avoiding conflict of interest or any apparent conflict of interest," Mr. Smyth said in an interview. "It was impossible to balance the responsibility of being the chief strategist for Clinton while representing a number of clients for Burson. At some stage it was going to end up in tears."

Penn punching bag
The Heinz executive is of course referring to the firestorm that erupted when Burson CEO Mark Penn, who moonlighted as chief adviser to Sen. Hillary Clinton's presidential campaign, was forced to resign the latter post earlier this week, undone by a conflict of interest arising between Ms. Clinton and the nation of Colombia, a Burson client. Colombia cut Mr. Penn loose, and he now finds himself facing withering criticism from media, Burson insiders, competitors in the industry and even his agency's own clients. And, naturally, everyone has his own take on how this famed massager of issues should take care of its mess.

"What Burson should make clear is that they have rules in place to avoid conflicts of interest and that these rules will be strictly articulated and enforced, which they weren't in this case," Mr. Smyth said. "The agency will need to issue a policy or, if they have one, re-issue it, indicating how this would be handled in the future."

Inside out
Ah, transparency. It's crisis-management 101, something the leadership at the WPP Group-owned PR firm will have to bone up on now as the fallout from Mr. Penn's resignation as Ms. Clinton's chief strategist continues. Managing it hasn't been easy so far, with two embarrassing leaks from the famously buttoned-down firm that have extended the story. The first was an internal memo, obtained by The Wall Street Journal, that tried to spin Mr. Penn's resignation as a good thing for the agency by stating: "Despite this unfortunate series of events, our business in the U.S. has never been stronger and we have achieved remarkable results for clients across the system so far this year. This momentum will only improve with Mark's return to our day-to-day business."

Even worse was the second leak, a dial-in number for an internal conference call on which Mr. Penn spoke. The Huffington Post's political reporter was able to listen to approximately 25 minutes of the call, during which one employee talked about her "pretty panicked client" and Mr. Penn answered employees' questions such as: "Ultimately did you think that it was the best thing for the company [to work for Clinton's campaign]?" To which Mr. Penn replied, "The situation has played itself out."

That might be a bit premature.

Speaking on background, a representative from one of the agency's largest current clients said he thought it was wrong for Mr. Penn to cause the type of problem for a client that his agency is being paid to help them avoid.

"His actions seemed wrong in that he drew the client into the story," this Burson client said. "[Mr. Penn] threw his client into his own bad story that had to be told and you certainly don't win points by doing that. You always risk losing a client by you doing something like that. And your client ends up getting the exact opposite of the services they were expecting to get."

Negative PR
Companies hire PR agencies "to help bolster and improve their image or to help them communicate a story they couldn't do themselves," the source continued. "And instead you've drawn them into something they didn't bargain for at all."

Mr. Smyth said Mr. Penn will probably survive the fiasco as long as he comes forward and clarifies what his position is going forward -- a concept Mr. Penn has seemingly yet to grasp since his firm is still being tapped to handle polling for Ms. Clinton's campaign. Mr. Smyth said Heinz -- which employs Burson overseas -- would most likely not be reassessing its relationship with Burson because of Mr. Penn's actions. However, he does expect the agency to explain itself to all of its clients. "I would expect them to clarify this situation pretty quickly for their clients and we move on," Mr. Smyth said.

Though he has few public allies these days, Mr. Penn did receive some words of understanding from another industry heavyweight. Mark Hass, worldwide CEO of Publicis Groupe's MS&L, called it a "classic conflict situation."

"I know why he tried to do both, because I would have tried to do both, thinking I could balance and manage it," he said. "But politics is such a tough game. It's one thing to try and balance Ford and Nissan because the rules of the marketplace are a little more civil than the rules of politics."

Wary, but not panicked
Mr. Penn also still has the blessing of one of WPP's top executives, Howard Paster, who said Mr. Penn's actions didn't concern the holding company in terms of scaring off or upsetting clients. "There's certainly no evidence of that in the first few days," he said, allowing, "I suppose we'd be foolish not to be wary of that, but we certainly haven't run into that problem."

He went on to say that Mr. Penn was right to call his now infamous meeting with the Colombian representative an "error."

"It was an error because it caused the client unwanted and unhelpful publicity," Mr. Paster said. "Part of our job with clients is to protect them from unwanted publicity, and he clearly acknowledged that he should have anticipated that it would not be in the client's best interest to do that meeting. It didn't help them a bit, and that's why they ended the contract. There's nothing good about this, but I also don't think it's going to fundamentally alter the business."

That of course depends on how long this drags out. Will it continue to spread or will it smolder and run out of oxygen soon, as Mr. Penn suggested in the conference call transcribed by the Huffington Post. "There will probably be another day," he said, "but there really is only a one-two-three to the story but not really much more."
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