It seemed like a good idea. Provide a local media outlet with a peek under the company’s hood—give a tour of the facilities, answer questions about operations, preview a few promising transactions. When the article ran, however, with facts misstated and statements taken out of context, it quickly turned into a very bad idea for the company and for its chairman and CEO, John Smith.
Within days, the company, its board of directors and Smith were caught in a media firestorm. Various news outlets raced to allege that Smith was engaged in self-dealing and conflicts of interest. Those stories suggested federal securities law violations, and an influx of civil actions for securities fraud and fiduciary duty breaches was ratcheting up the pressure. Attempts to correct the record only fanned the flames.
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