Words Matter: In the Bubble

DALLAS, May 13 (UPI) -- In the bubble: That's how American Airlines former CEO Don Carty and Morgan Stanley CEO Philip Purcell are alike. They think they exist in a protected environment.

Failing to understand how words travel from one audience to another, and how different audiences hear things in different ways cost Carty his job. Let's hope heads roll on Wall Street, too.

At American, the information, the words, from a fall 2002 Securities Exchange Commission filing which revealed that Carty, in his bubble, had created a $25 million fund to cover pensions and bonuses for a small group of top executives,. This information came to the attention of employees just after they had voted to accept enormous give-backs. On Wall Street, an "in the bubble" comment of Purcell's quickly caused a stir outside the "bubble".

Purcell's firm has been dubbed one of the Terrible Ten, the large brokerage and investment banking houses investigated by New York Attorney General Eliot Spitzer and, belatedly by the SEC. The documents and e-mails show that the firms' analysts issued misleading reports in order to gain investment banking fees. But Purcell told a large group of big investors, "I don't see anything in the settlement that will concern the retail investor about Morgan Stanley."

He's bubble-blinded. Morgan Stanley paid $2.7 million to analysts of other firms to issue puffy reports on stocks Morgan was bringing public to create the impression of broad excitement. As a small investor, I realize the The Terrible Ten neither admitted nor denied their guilt, but as a small investor, their guilt is clear to me.

In Morgan Stanley's 2002 annual report, Purcell claimed that "Morgan Stanley came through the investigations relatively unscathed." He must be studying with the same language coach who had President Bill Clinton quibble about what the meaning of "is" is.

What's more, Purcell believes we are too dumb to recognize the import of a document from their star analyst, Mary Meeker, who said in a 1999 now-public memo, "My highest and best use is to help" -- the firm -- "win the best Internet IPO mandates."

Does Purcell have any idea how angry we are and how much we hate him and his ilk?

In fairness, Purcell is not alone. In the bubble with him:

-- The New York Stock Exchange. In the midst of settlement, the NYSE asked CitiCorp Chairman Sanford Weill to join their board of directors to represent the public. They could hardly plead ignorance since this was after months of published e-mails disclosing how Weill had "asked" their analyst, Jack Grubman, to "take a fresh look at AT&T," a "look" that resulted in Grubman's now-famous increase in AT&T's rating. My company's profit sharing fund, like many investors, followed Grubman's comments and were heartened when he said he saw a brighter future for the company. We kept our AT&T shares.

-- Goldman Sachs Chairman Henry Paulson. As soon as the major settlement and wrist slap in the affair was inked, he sent a company-wide e-mail admitting they "could have done better." I'd sure like to see the performance reviews of these guys. What would it take for them to consider they had let down their customers?

-- Citigroup: Charles Prince, the chairman and chief executive of Citigroup's Global Corporate and Investment Bank, wrote, "We deeply regret that our past research, IPO and distribution practices raised concerns about the integrity of our company."

-- The retail brokers of Salomon Smith Barney, a division of Citi, apparently protested loud and long about what was going on. One broker referred to analyst Grubman in an e-mail as a "crook." And the record reveals not just one or two e-mails or protests that Prince might not have known about. There was a chorus of protests. And all Prince can say is he "regrets" that these practices "caused concerns."

-- Don Carty lost his job as American's CEO not for creating the $25 million fund, but for appearing to cover it up, and then for what he said when it was revealed. He wrote the bonuses were necessary because the executives had been offered lucrative job offers elsewhere.

If true, the message was that only money mattered, and that the executives believed it was perfectly acceptable to treat themselves differently from the rank-and-file. But worse, the employees didn't think it was true. In this economy, how many other airline jobs were there? So Carty appeared to be dissembling.

The bubble boys' comments about "regret" show us the only thing they regret was being caught. They show the only change they plan is to figure out the next way to game the system.

It's time to pop the bubble.

-- Merrie Spaeth, Director of Media Relations for President Reagan, is President of a Dallas-based consulting firm and is a regular commentator on public radio and television.