The Pink Sheet Kool Aid BAR

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(Fortune Magazine) -- In today's dire financial climate, what exactly should a CEO say when it's time to hold that quarterly earnings call with analysts and the media?

On the one hand, he could try refreshing candor and say, "Look, let's be honest. This sucker could go down." The problem with this approach is that it tends to ensure that the company will indeed go down - that afternoon. The stock price will plummet, lenders will call in their loans, banks and customers will freeze the company out, credit agencies will downgrade it, and soon our commendably honest CEO will notice a half-dozen satellite television trucks - those modern-day vultures - double-parked outside the lobby.

Or there's Plan B. The executive could exude confidence and willfully paint a disingenuously rosy picture featuring lots of gilded lilies. The problem with this tack is that, while it might get the company through a rough patch, the executive is certainly committing civil fraud, and if the company crashes and burns anyway, he may also go to prison.

It's no defense for an executive who bends the truth to say that he did so only to prevent a run-on-the-bank-type situation, says one criminal-defense lawyer. (The lawyer requests anonymity because in this climate, he notes, such an on-the-record statement might lose him some business opportunities.) Even if the executive thinks that short-sellers are spreading lies about his company, he can't respond in kind. If he does, this lawyer says, "he's betting the farm. He's betting his life."

Today's crisis has placed under the forensic microscope scores of reassuring assertions made by CEOs and CFOs during earnings calls or "investor day" gatherings or breezy, on-camera flirtations with Maria Bartiromo that have proved, sometimes within hours, breathtakingly off the mark. Were the officials honestly relying on flawed business models - or lying through their teeth?

http://money.cnn.com/2009/01/05/news/newsmakers/parloff_payback.fortune/