MANAGEMENT COMMUNICATION - Pearson Learning Solutions

Chapter 3 ● Communication Ethics 79000200010270582216CASE 3-2A Collection Scandal at Sears,Roebuck & CompanyIt was just 8:30 A.M. on a Sunday morning.While most of Chicago was either stillasleep or out retrieving the morning paper,Arthur C. Martinez was meeting with adozen of his company’s top executives attheir headquarters building in suburbanHoffman Estates. For a few moments,the room grew quiet as Martinez triedto digest what he had just been told. Lawyersfor Sears, Roebuck & Company wereexplaining how employees had secretly violatedfederal law for nearly a decade.Martinez couldn’t believe what he washearing: Sears attorneys and credit employees,according to a bankruptcy judge inBoston, had for years been dunning delinquentcredit card holders who had filedfor—and had been granted—bankruptcyprotection. The newspapers and cable televisionnews channels didn’t have the story yet,but it would only be a matter of hours beforethey would. The company that Martinez, aformer Saks Fifth Avenue executive, hadstruggled to turn around would quickly bemired in the worst legal and ethics scandal inits 111-year history.The United States Department ofJustice was already considering not only civilpenalties, but also criminal prosecution.Worse, this wasn’t simply a rogue operationor an honest misinterpretation of the law:Sears appeared to have been violating therights of many of its customers systematicallyand intentionally. The company, the lawyerswere suggesting, may even have put the illegalpractice into its procedures manual.How could such wrongdoing have goneunchecked for years? Martinez wanted toknow. “Not one phone call about this? Ever?”he demanded. According to at least one participantin the meeting, it was a “sickeningmoment.”A “Half-Billion Dollar” Handwritten LetterAs an extensive investigation would laterreveal, Sears struggled—first to understandand then to deal with criminal charges andan ethical lapse that would cost the companynearly $500 million. According to Sears’senior vice president Ron Culp, the collectionscheme began to unravel in November1996, when Francis Latanowich, a disabledsecurity guard, hand wrote a letter on a yellowlegal pad, begging the BostonBankruptcy Court to reopen his case.Although Judge Carol Kenner had wiped outhis debts, Sears later asked Latanowich torepay the $1,161 he owed for a TV, an autobattery, and some other merchandise. Butthe monthly payment, he wrote, “is keepingfood off the table for my kids.”Sears, it turned out, had mailedLatanowich an offer. In return for $28 a monthon his account, the company wouldn’t repossessthe goods he had bought with a Searscharge card before he went bankrupt. Thepractice of urging debtors to sign such deals,called reaffirmations, is legal and relativelywidespread in the retail credit business, butmany judges view them as unethical practicesthat keep people from getting a fresh start.Moreover, every signed reaffirmation must befiled with the court so a judge can reviewwhether the debtor can handle the new payment.Sears, Roebuck & Company hadn’tfiled this one with the court and Judge Kennerwanted to know why not.At January 29, 1997, hearing, a Bostonattorney working for Sears offered a convolutedtechnical excuse for not filing. Kenner’sresponse: “Baloney.” According to Newsweekmagazine, there were hints from prior casesthat Sears, both praised and feared nationwideas the most aggressive pursuer of reaffirmations,wasn’t filing many of them with theManagement Communication: A Case-Analysis Approach, Fourth Edition, by James S. O'Rourke, IV. Published by Prentice Hall. Copyright © 2010 by Pearson Education, Inc.