Is Blackmail A Board Issue?

Bezos allegations of blackmail against AMI, the parent company of the Enquirer are splashed across the news.  As a veteran of 28 public boards and many more private companies I’ve seen my share of drama and this situation makes me wonder, what are these two boards doing about it?

Had Jeff Bezos decided to keep the Enquirer’s blackmailing private, the board could have become embroiled in legal issues related to defending Jeff Bezos.  After all, he is a public figure because of his role as founder/CEO of Amazon.  Now that Bezos did decide to make the entire ordeal public, how does that impact Amazon?  Did he consult with his board before he took action that potentially affected Amazon’s image? Did the board know he was using Amazon resources, specifically, Gavin de Becker from his security team, to investigate the source of the texts? Bezos has admitted to having an extramarital affair. Here are a few possible BOD government questions. Does he have an employment agreement that includes language related to image and ethical behavior?  Is there any potential for claw back of bonus’ if Jeff’s actions embarrass the company?  It should always be on Jeff Bezo’s mind and on the board’s that any action can affect Amazon’s image.  Being the world’s richest man, founder and CEO of Amazon does not leave a lot of room for privacy and racy texts and photos.

The general consensus is that Bezos was right in outing the Enquirer and that he may have a case for extortion.  Extortion is defined as making a threat in order to force someone to take an action or give up something of value. The Enquirer was asking that Bezos end his investigation into how the Enquirer got ahold of his private communications.  According to Jeffrey Lichtman, a New York criminal defense attorney, the threat would be the Enquirer threatening to publish potentially embarrassing photos. So even though a threat and a corresponding action appear to be present, the case isn’t necessarily clear cut. “I think it’s a close call as to whether The National Enquirer’s actions make out an extortion,” Lichtman says.  Renato Mariotti, former federal prosecutor agrees, he says the Enquirer may have a number of strong defenses.

Neither option is a slam dunk decision.  No matter which way Jeff Bezos decided to go, keep the situation private or post the public blog on Medium as he has, he should have consulted with his board in advance.  If Amazon’s board doesn’t already have a succession plan in place, they should “create an option” and have a name for the envelope.

On the other side of the issue is the AMI Board.  Were they aware that their CEO David Pecker was making threats against Jeff Bezos?  AMI is already under significant scrutiny after the agreement they made with federal prosecutors that required AMI to keep its nose clean and “commit no crimes whatsoever” for three years.  That AMI agreement was made as part of an ongoing investigation into campaign finance violations involving Donald Trump’s 2016 presidential campaign and a Playboy playmate.  The federal agreement stipulated that AMI would not be prosecuted provided the organization committed no new crimes in the three years following the date of the agreement, which was signed on September 20, 2018.  Are the threats against Bezos considered a “new crime?”

Did the AMI board know?  When the Bezos scandal was revealed, the AMI board quickly responded stating that “it should promptly and thoroughly investigate the claims.”  Federal prosecutors are looking into the Bezos incident to determine if it impacts their prior agreement.  This could be significant for the future of AMI and certainly for David Pecker as CEO.  The AMI board should also be reviewing their succession plan ensuring they have a solid bench waiting to step in should David Pecker be personally prosecuted for violating his agreement.  This should be moving in conjunction with their independent investigation into the Bezos incident.  I would expect the AMI board is very busy these days.

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