Cheating

Bronx native, Vince Ferrari pulled off one the best publicity stunts of the year catching an AOL Time Warner representative on tape attempting to prevent him from canceling his AOL Internet account. Ferrari spent more than 21 minutes being left on hold or listening to flim—flam excuses from an insistent AOL Time Warner representative.

Getting this guy on TV was a no—brainer for the producers of the cable and morning talk shows. He came with his own props and all he had to do is jump on the number 6 train to get down to the studio. After kicking off with Matt Lauer, he made appearances on virtually every show in town. Ferrari helpfully chronicles his day in the spotlight over at his website with the self deprecating moniker.

A red—faced AOL Time Warner executive issued a boiler plate apology obviously homogenized and pasteurized in the AOL Time Warner Legal department. The executive insisted that AOL has zero—tolerance for customer care incidents like this and the employee in question violated their customer service guidelines and practices, and everything AOL believes to be important in customer care.

Is that so? Well, anyone who's ever spent more than 5 minutes in a call center knows this is a bunch of baloney. Call centers operated for national consumer products companies are very tightly controlled. Customer interaction is strictly scripted and closely monitored.

Contrary to their claims of zero tolerance, if the comments section in Ferrari's website are a valid indicator; it appears that this kind of cheating is an accepted business practice at AOL Time Warner. This comment from a reader identified as Mr. Freeze pretty much sums it up:

'Speaking of preying on tech ignorance: AOL loves taking advantage of old people. My grandpa tried to cancel his AOL account after his grandson moved out and the phone monkey lied and actually told him that he couldn't cancel it because the phone company wouldn't let them do it yet and that he should try canceling it in one year!!!'

Unfortunately, cheating is all too rampant in American business today. AOL Time Warner is far from the only business to be caught. Regardless  of the law this is still cheating in my book. Some of the more common and notorious schemes companies have been involved in recently:

 Cheating customers and deceiving shareholders by charging credit cards for non—rendered goods or services.  Typically, this done at the end of the quarter to inflate sales. By the time your customers catch up with the billing department the 10Qs are already filed.

 Insurance companies routinely deny policyholders claims when they exceed certain internally set limits. Say your business has a fire and you have a policy with a stated $1 million limit. In the course of adjusting the claim if it becomes clear the loss will be more than $300,000 but this exceeds the 'internal limit' of $200,000 the insurance company will make their customer's life a living hell to cheat him out the additional proceeds even though the loss was well below the policy contract limit.  At the end every quarter an order is given from on high to the adjusters: find any reason whatsoever to close 10% of the open claims reducing reserve requirements but cheating these policy—holders of their rightful claims.

 Last Month, the Office of Federal Housing Enterprise Oversight ('Offheo') issued a report documenting flagrant financial statement manipulation by the Officers and Directors of mortgage giant, Fannie Mae for at least six years to cover profit targets that triggered hundred of millions of dollars of bonuses to the executives. Thereby, cheating shareholders and endangering the safety and soundness of the national residential finance system and by extension the entire banking system. Offheo has ordered Fannie Mae to claw back the bonus monies and the S.E.C. and Justice Department are considering criminal referrals.
           

 In 2004, a large metropolitan daily was caught fraudulently inflating their circulation cheating advertisers and deceiving investors. The parent company reportedly settled this claim for $95 million.

 WorldCom's investment bankers underwrote $17 billion in bonds and failed to disclose the fact that the company intended to use the proceeds to fund operating deficits.  In other words, they were insolvent.

This omission cheated the bondholders and shareholders as well as stakeholders at other telecom companies like ATT and Sprint by compelling them to compete with WorldCom based on a lie. The bankers settled the claim for more than $3.5 billion.  Bondholders got less than 36 cents on the dollar.

Cheating is not especially more prevalent in any one business than any other. Anecdotal evidence suggests the legal system is far better equipped to police large but narrowly confined incidents of cheating such as WorldCom or the circulation fraud case. Policing systemic cheating perpetrated on a large scale against a large group of consumers is much more difficult.

Cheating is an especially corrosive form of corruption. One of the biggest reasons for the fall of Communism was because cheating became a way life. This is why companies that foster a culture that permits cheating put themselves in great peril. While some will always 'get away with it', eventually it will catch up with you.

Recently, Dell Computer ran into its first rough patch in the company's history. The main reason for the decline seems to be a breakdown in their customer service.

If AOL Time Warner had to resort to this kind of practice to salvage their Internet business, they should promptly reevaluate their strategy.  Alienating your customers by cheating them is a good way to lose them — for good — and in this case across platforms.  AOL Time Warner has a large stable of businesses with long storied pasts and less than certain futures. Ironically, AOL is the newest business in the group with the least certain future.