Integrity

CustServ: How Big O Tires Convinces Its Customers Never to Come Back

Unless I'm paying compliments, I usually don't include the actual names of the people or companies I'm writing about. However, in this case, it's necessary.

The company involved is Big O Tires.

I was visiting a friend of mine recently when her son, while borrowing her car, got a flat front tire. AAA came out immediately (props to AAA) and changed the flat for the so-called 'donut' (I remember when spare tires were real) - so my friend knew that she was going to have to do a quick turnaround in getting either the flat repaired or a new tire purchased. She also knew she'd probably replace the other front tire at the same time as it was showing enough wear to warrant replacement.

We went early in the morning to her local Big O Tire store. Now, to be frank, I didn't want her to go there. I wanted her to go to Costco - because I trust Costco.  In earlier years, I had used Big O - as well as other tire dealers - but once changing to Costco, consistently found that my tire experiences were great, both during the process and in their after-care (so props to Costco, too).

My friend had used her local Big O's services over the years, so she figured they were convenient and she could trust them.

She was wrong. She couldn't.

I won't take your time by going into the long details (do write a comment if you're interested in hearing them - because I'll be happy to let loose), but the upshot was:
  • They gave her - and charged her for - services she specifically told them she didn't want.
  • They rotated her old and new tires such that both new ones were front and back on the same side of the car.
  • Upon going back and confronting them with the facts, the store manager as good as told her it was all her fault.
  • He then, upon giving her the refund for the services she didn't want, opted to pay her in cash (she had paid with her credit card) and shorted her on the amount he gave her (which, you'll notice, also means he was stealing from the company).
So, to cut to the chase, the Big O manager:
  • Provided bad service
  • Put her and anyone else in the car at personal risk and then, to top it off,
  • Stole her money.
You gotta love these guys. Or not. Definitely, not.

The 'after-care' was so bad that - even before she realized that the manager had stolen her refund money - my friend had opted not to have them touch her car to put the tires in the right place. She didn't trust them even to perform that service.

So, bye-bye Big O. As my friend told the store manager, "You don't want my business" - and she was right. He couldn't have cared less whether she - or any other customer - came back again. Otherwise he would have ensured that he and everyone on his staff was providing the best, most honest and trustworthy service possible.

All of which leads us to what you can learn from this. Ask yourself:

Are any of our products or services convincing our customers that they don't want to come back to us as their preferred provider?

If the answer is yes - even to the most infinitesimal degree - it's time to take action. Otherwise, not only will your business get the same decision my friend made - but you'll get me and others happy to tell everyone else about it.

Leadership: Libor, Barclay's and Executive Accountability

I have been fascinated as I've read the reports on the investigation into interest rate manipulation by Barclay's and other banks, the resignations of that bank's Chairman and CEO and, particularly, the "spreading of blame" that's now occurring as everyone who knew better is figuring out a way to run for cover.

Here's my take on this from the leadership perspective:

For all that Mr. Diamond explained to the Parliamentary Committee that his people had been asking the US and UK regulators questions about what they were doing/could do - and being given no specific guidance regarding their actions - they knew better.

People inside an industry - or holding any particular job, for that matter - know and understand better than anyone else the nuances and consequences of their actions and decisions.  That's why they take those actions and make those decisions.

Because, one way or another, those actions and decisions serve them.

So...

Should there be more and better regulation - particularly for those industries that are supposed to exist not only for profit but also to support the society in which they operate?  Sure.

Will regulation ever address all the agendas and actions of the individuals within any industry?  No.

Does it then fall upon the most senior executive to make clear - to the point of termination - that any action that could conceivably mar the reputation of the organization is unacceptable and will not be tolerated?  Yes.

And that's where Mr. Diamond and his colleagues continue to go wrong.  They're happy to say, in retrospect, that what was done "sickened" them - but that doesn't do anyone any good.  In fact, that, too, is self-serving.

Ultimately, this becomes about you - not them.  If there are reputation-risking actions and decisions going on in your organization, you either know who or where those are taking place.  That makes it your responsibility to stop those actions - now.

This is about morals and ethics and integrity.  Not business.

It's time for leaders to lead.

Leadership: Broken Promises

I've been on a tear lately. I admit it. And my poor, hapless customers have been the recipients.

I've been holding them to their promises.

When I was a little girl, I learned from my father - an entrepreneur in his own right - that your word was your bond. That you didn't say anything that you didn't fully intend to deliver on.  That a handshake was as good as a contract - better, in fact, because a handshake was you putting your integrity on the line.

You kept your promises.

If you didn't you were a liar. Sometimes a cheat. Always someone not to be altogether trusted.

Not now and, possibly, not going forward.

That's why I've been on a tear. It bothers me that:

  • Executives say things to their employees that, in their heads, they think they're going to do - but, in reality, know that they won't.
  • Customers say to their suppliers that they're doing a deal - and then renege on it, whether in whole or in part or in any way at all.
  • Compensation Committees on Boards promise shareholders that they'll ensure that CEOs are fairly paid for their accomplishments - and then give the CEOs far more than they deserve.

Most of all, it bothers me that those on the receiving end - whether employees, suppliers or shareholders - feel that they can't do anything about the situation.

You're wrong if you feel that way. And you're wrong if you don't do something about it.

After all, in your personal life...

When you promise that you're going to do something - or even that you'll do your best - you keep those promises, don't you? And...

...when someone gives a promise to you, you expect them to keep it, don't you?

This is no different.

Because when someone breaks a promise to you in your personal life, you question whether you want to have them as part of your life any longer. From friends to your local dry cleaner, it's the same thing. Promises made and broken lead to decisions that end friendships and ensure you'll find other providers of services that you can trust.

So, if you're making promises that you know you can't or won't keep - stop it.

If something has changed, let the person on the receiving end know. Chances are, they'll understand.

If you're on the receiving end of promises that are consistently broken, go on a tear. Hold the person who's making those promises to their word - even if it's just by reminding them that they said what they did.

It's time for honesty and integrity to come back into vogue. It's time for everyone to keep their promises.

Genius or Sucker? The Dilemma of Being a Goldman Sachs Client

So there you are - a bazillionnaire. Or, possibly, someone responsible for overseeing the bazillions of others. Like the investment manager of a pension fund.

You're always being approached by the Big Boys - from investment banks to private equity houses. They want your money. And why wouldn't they? After all, their job is to turn your money into more.

But for whom?

That's the big question - now more than ever - if your bazillions ever touch the corporate shores of Goldman Sachs.

All because of Greg Smith.

If you've missed the excitement, Mr. Smith resigned from Goldman in a big way. Fifteen minutes after emailing his resignation to management, his NY Times Op-Ed piece was published.

That one little piece of personal journalism led to media hordes over-crowding outside Goldman's portals, innumerable articles being written on every conceivable platform and medium and commentators of all kinds (yours truly included) talking about the lessons learned and yet to be learned.

Which brings us back to our bazillionnaire Goldman client - because, let's face it, Goldman only deals with bazillionnaires. Even the low end of the 1% isn't that interesting to them.

The question for this person, based on all the media coverage, is: So? Are you a genius or a sucker for doing business with these guys?

Why that has become just as compelling a question as the hue and cry that Mr. Smith's writing raised is because it makes one wonder.

Here's a company that has been indicted and settled with the Government (to the tune of $550 million) as a result of their 'questionable' practices toward their clients. Like selling an investment instrument to their clients that another client developed specifically to bet against the suckers who were doing the buying.

Nothing like having your cake and eating it, too - especially because Goldman was making money on all sides of the deal.

And that's just one case. There are others still pending.

Because what everyone learned is that rich people are just as big suckers as everyone else when they get just the right pitch from just the right person. Or company.

Which leads us to the clients - anonymous and otherwise, individual and institutional - who are telling anyone who's willing to listen that they know what Goldman is doing. That they've known it all along. That there's no surprise there.

And that means, of course, that even as they were doing business with Goldman, they didn't trust them as far as they could throw them.

Or so one hopes - especially if that client is a fund manager who has just dumped a good portion of what will be your retirement into Goldman's - or, to be fair, most any other investment bank's or broker's - hands.

Where does that leave us?

The answer is: With a system that is gamed by the institutions that pay big bucks to hold the cards by pushing legislation exactly where they want it to be. On their side. With no accountability in sight.

Until that changes, all the Greg Smith's and unhappy bazillionnaire clients will just have to take it as it comes.

As suckers.

[This article was published on Technorati.]

The Dangers of China - Critical Insight from @thereformedbroker

The following piece, written by Josh Brown, is one of those periodic posts that goes beyond deserving attention.  It's a critical warning for anyone currently doing or thinking about doing business with China.

It follows in its entirety.

The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations.

We are under attack.

Chinese corporate criminals and their US-based enablers are committing Capital Genocide against American investors.  We're not talking about "a few bad apples" or "a handful of exceptions", we're talking about a full-blown epidemic.  Subterfuge and malicious avarice are simply the tools of the trade when many Chinese companies do business with outsiders.

This undeniable Red Collar Crime Wave is larger in scope and financial consequence than any other international criminal enterprise in the history of the world.  We are talking about hundreds of millions of dollars, possibly billions should the Yahoo - Alibaba revelation prove itself to be a harbinger of shocks to come.

At the low end of the spectrum, corrupt representatives of sketchy or even non-existent Chinese companies are conniving their way onto US exchanges via backdoor IPOs, reverse mergers and SPACs.  They are slithering through every exchange and regulatory loophole they can find to raise money and establish their fraudulent beachheads here.  The penalties for Chinese nationals fudging numbers on a local exchange could range from exile to imprisonment to disappearance.  The penalties they face for pulling that stuff here in the US?  I don't know, a letter in the mail?  "Don't ever do it again"?

Mainland Chinese fraudsters are untouchable, they can only be barred or banned from US exchanges once caught, and so they will get away with whatever they can as long as there are investors here who are stupid enough to capitalize them.  And so the ownership of one factory in China becomes the ownership of three for the purposes of a quarterly balance sheet calculation.  The ticker symbols will be cutesy and clever while the names of the companies will almost always include the word "China".  After all, let's not forget that the name of this game is the exploitation of Americans who "want to play the growth".

It has become an absolute free-for-all.

For a nation that was so economically backwards and pathetic that it could barely feed itself 15 years ago, China's executives have certainly come a long way.  They're employing every scam and dirty trick in the book against American corporations and investors while we say thank you and send even more opportunity and cash their way.

I've held my tongue for the last 9 months, watching one scam after another appear on our exchanges.  I've said nothing as these financial landmines have been detonated beneath the feet of whichever unfortunate shareholders happened to find themselves in the wrong place at the wrong time.  No longer.

We'll limit the scope of my rage here to corporate fraud.  For the purposes of this post I'll leave out the Chinese poisoning of America-bound toothpaste, pet food and toys at their manufacturing operations.  I'll also leave out the FoxConn factory at which all the Apple products are assembled, a workplace so abusive and abhorrent that the employees must take an oath that they won't kill themselves.

But no, let's not get distracted here, we should simply focus on the accounting chicanery and falsified filings with which Chinese companies are daily relieving US investors of their capital.

The reverse mergers are by far the most insidious manifestation of the contempt that Chinese companies have for our exchanges and rules.  Working with American law firms and shameless stock promoters, these companies have found a financial engineering solution that lets them steal on our shores.  They've been able to subvert the more highly scrutinized public offering process that would normally have weeded them out.  By "cleaning up" shell companies, which should not be trading or available to begin with, the disease gets a foothold first on the pink sheets and then onto the American Stock Exchange where the real grifting can begin.

White Collar Crime columnist Walter Pavlo has collected a slew of recent examples on his blog at Forbes, including:


  • China Electric Motor – Shareholders lawsuit filed claiming underwriters violated federal securities laws by issuing materially false and misleading information.
  • China Natural Gas – Class action lawsuit alleges directors and officers issued materially false and misleading statements.  CFO of company resigned in late 2010.
  • Duoyuan Printing – SEC investigating company for fraud, NYSE delisted April 4, 2011
  • China MediaExpress Holdings, Inc. – Deloitte quit as auditor because “no longer able to rely on the representations of management”.  CFO resigned. Stock trading halted March 11
  • China Agritech – Shareholder lawsuit pending.  Dismissed its auditor Ernst & Young.
  • China Sky One Medical – Under investigation by SEC.
  • Orient Paper, Inc. – Reauditing previous financials due to license issues with previous auditor (Davis Accounting Group).

The full list is actually quite larger, it includes some of the higher profile blow-ups you may remember with stocks like RINO International and China Green Agriculture - spectacular flame-outs complete with massive insider selling prior to the denouement.

Where are the regulators, you might ask?  They are finally getting involved.  The SEC's Mary Schapiro is aware of the epidemic and is now on the case...

From Barron's:

Since March 2011 alone, she noted, more than 24 China-based companies have disclosed auditor resignations, accounting problems or both – following the auditors' inability to confirm the amounts of cash or receivables shown on the companies' balance sheets. The SEC has recently suspended trading in three Chinese businesses that "reverse-merged" into U.S.-traded shell companies.

The smarter thing to do would be to halt the entire shell company process in its entirety right this minute until we can get the rules up to a standard that will protect investors outright from these foreign liars and thieves.  Capital formation can wait fifteen minutes while we get our act together and crack down on this disgusting shell syndicate.

An even more disturbing development of late is taking place in the large cap arena, in full view of the world's media and the global investor class.  With the success of Baidu and Sina, Chinese technology companies are now finding themselves as the Belles of the Ball.  In at least one case that we are aware of, they are also finding that they can easily mislead their Western partners and shareholders.

Here in the deep end of the pool, newly-minted billionaire Chinese executives are violating contract law, globally accepted corporate best practices and fiduciary responsibility to shareholders.  They are disclosing things when and as they choose.  They are "on the level" in their own government's eyes so long as they are playing fair with their fellow Chinese investors.  This isn't a brand new phenomenon but as the companies involved get bigger, the danger grows.

This week's still-unfolding fiasco involving Yahoo being tricked out of their Alipay subsidiary by Alibaba, a company in which they hold a 43% stake, is just the latest and most outrageous example of what we're dealing with.  Here's what Jacob S. Frenkel, a former SEC enforcement lawyer who is an expert in securities law matters and a partner at Shulman Rogers in Potomac, Maryland had to say (via iChinaStock):

"Yahoo! is a victim, plain and simple.  With all the negative attention that US-listed Chinese companies, this action by Alibaba only makes worse an already difficult situation.  It creates the unfortunate appearance that executives in China may totally disregard their contractual and fiduciary obligations to shareholders.  The important message to US partners and owners is to review the effectiveness and enforceability of contracts under both US and Chinese law."

Yahoo will attempt to sue, but they have lost the asset at the end of the day, an asset whose potential was a big part of the investment thesis for the company to begin with.  US shareholders were pummeled over something that took place in secret seven months ago, escaping everyone's notice.  If major shareholders like Yahoo and Japan's Softbank can be scammed in front of everyone, what chance have any of us got?

The Red Collar crime wave is beguiling American investors both large and small.  These crooks are laughing at our securities laws and manipulating their own.  None of us are immune:

Not the savviest and most seasoned asset managers - see Glickenhaus & Co watch $4 million evaporate as China Agritech blows up.  (Bloomberg)
Not Yahoo, a player in Asian web properties since the late 90's - listen as Alipay's Jack Ma regales us with his tale of how he bitch-slapped the "declining" web portal company.  (iChinaStock)
Not even the diligent Warren Buffett can sleep soundly with his Chinese investments - see how the car company he invested in there (BYD) is essentially a counterfeiter playing games with the rules of the Chinese court system to get away with it.  (Reuters)

Can American investors trade and hold Chinese stocks?  I suppose they can...but they can also practice juggling with live hand grenades and roaring chainsaws...just because you can do something, doesn't mean you should.

I've disagreed with almost everything Donald Trump has had to say during his part-Presidential run, part final humiliation speech circuit this spring.  But where Trump and I do find common ground is in our distaste with how the Chinese do business and the lack of regard they show our companies and investors from almost every perspective.

As long as Chinese corporate officers and executives are going to blow cigarette smoke in our faces as they take advantage both here and on their home turf, I'll gladly sit out.  Until I get the sense that they have an ounce of respect for our investors, I'll watch the pickpocketing from the sidelines and focus my capital and attention elsewhere.

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