On AT&T’s, Novartis’ Response to Revelation of Payments to Trump Lawyer

Thom Weidlich 05.17.18


It was revealed last week that AT&T and Novartis had separately hired Michael Cohen, one of Donald Trump’s lawyers, to advise them early on in the new administration on how to work with it. The payments were embarrassing — though not necessarily illegal — and the two companies were forced to respond publicly and to employees. The situation was bad enough that two executives lost their jobs.

Even the way the news was disclosed was embarrassing: It was announced by Michael Avenatti, the lawyer for Stephanie Clifford, the porn star who says she had a one-night stand with Trump and was paid to keep mum about it. That’s not something with which Corporate America aspires to be associated.

Add to that the messiness of hiring someone for such political advice or connection, and that Cohen’s firm, Essential Consulting, was the entity through which Clifford was paid. It’s clear what AT&T and Novartis regretted was getting caught. Pushing out an executive was a way to show the situation was being dealt with.

On Wed., May 8, AT&T — which paid Cohen’s firm $600,000 — put out a terse statement: “Essential Consulting was one of several firms we engaged in early 2017 to provide insights into understanding the new administration. They did no legal or lobbying work for us, and the contract ended in December 2017.”

The controversy continued to swirl and AT&T CEO Randall Stephenson wrote an email to employees (it leaked, naturally). Stephenson was forthright about the problem, right from the first two sentences: “Our company has been in the headlines for all the wrong reasons these last few days and our reputation has been damaged. There is no other way to say it — AT&T hiring Michael Cohen as a political consultant was a big mistake.”

While nothing done was illegal, Stephenson said, the company’s vetting process failed, and hiring Cohen was “a serious misjudgment.” He said he took responsibility for that, yet Robert Quinn, the top lobbyist who led the office that hired Cohen, was forced out (Stephenson wrote that Quinn “will be retiring”).

Taking Action

So Stephenson, once the cat was out of the bag, didn’t downplay the situation, made a head roll to show the company was taking action, (sort of) took responsibility himself, and said the company would try harder.

Once caught, Novartis was also transparent.

On Thursday May 9, the drugmaker issued a fairly meaty press release. It tried to put in context why it hired Cohen’s firm: “With the recent change in administration, Novartis believed that Michael Cohen could advise the company as to how the Trump administration might approach certain US healthcare policy matters.”

To its credit, while the Avenatti documents showed a Novartis payment of $400,000, the company admitted the year-long contract was for $1.2 million. Novartis met with Cohen once, in March 2017, and decided he couldn’t help. Unfortunately, it was on the hook for the full amount.

The company did turn to a tried-and-true tactic to absolve itself: It blamed previous leadership. The engagement “predated Vas Narasimhan becoming Novartis CEO and he was in no way involved with this agreement.”

The drug company ended: “Novartis considers this matter closed as to itself and is not aware of any outstanding questions regarding the agreement.”

‘Expects More’

But it wasn’t over, at least as far as communications were concerned. The next day, May 10, Narasimhan (pictured) sent out an employee email that opened: “Yesterday was not a good day for Novartis.” He understood that many employees “will feel disappointed and frustrated.” He himself admitted he “went to sleep frustrated and tired,” adding: “We made a mistake in entering into this engagement and, as a consequence, are being criticized by a world that expects more from us.”

But then Narasimhan’s missive sadly fell into purple prose about the company’s mission (“But I woke up this morning full of determination. Determined to fight for the transformative medicines we create and the patients we serve”).

“This moment will pass and we will learn,” the CEO said.

Some will learn harder than others. Just yesterday, Novartis said General Counsel Felix R. Ehrat “has decided to retire from his position in the context of discussions surrounding Novartis’ former agreement with Essential Consultants, owned by Michael Cohen.”

Ehrat was quoted in the press release: “Although the contract was legally in order, it was an error. As a co-signatory with our former CEO, I take personal responsibility to bring the public debate on this matter to an end.”

We’re sure both companies hope that the public debate has ended.

Photo Credit: Novartis

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