PART 1 OF 2
CHAPTER 7
On the first day of March, a damp, cloudy Wednesday, Brovar Dortwist sat in his K Street office reading the Time story. When he finished, he flung the magazine on his desk with a mixture of outrage and apprehension. As a Julius Caesar buff, he was well aware that the Ides of March were rapidly approaching. He scowled at the handsome visage of Warren Beatty, which seemed to wink at him from Time's cover.
Big business was under serious attack, and it wasn't General Smedley Butler of the US Marines coming back from the dead for revenge. It was what Brovar feared most from his knowledge of economic history -- a revolt from within, a business rebellion against big business orchestrated by people who knew all the tricks of the commercial trades, all the vulnerabilities and fragilities, all the means big business employed to crush or coopt its adversaries. He could feel the danger, almost smell it. Most of his brethren discounted the signals coming from all points of the compass and thought the People's Chamber of Commerce was an object of mockery garnished with futility, but Brovar disagreed. That was precisely the mistake the liberals made back when they were dominant in the nations capital.
Brovar was not used to playing defense, to put it mildly. He hated defense down to the core of his being. Although he had some grasp of what he was about to fight, he didn't know whom he was fighting, other than a few wealthy and mostly retired executives. To complicate matters, he didn't entirely disagree with what they were doing, and this nuanced side of him was likely to get him in trouble, not only with his brethren, but with his paymasters and the White House. Still, he believed without immodesty that no one was better suited to lead the counteroffensive than he.
At ten o'clock on the dot, Brovar entered the Wednesday war room and nodded curtly to his pack of lobbyists and politicos. Dispensing with the usual assignments quickly, he said that he had a major presentation to make, and that it would be uncharacteristically tentative and vague, for reasons they would soon understand.
"You've all been reading the same papers and watching the same newscasts I have these last few weeks. Something is happening, something I haven't witnessed in my adult lifetime. The growing rallies in more and more cities, all the small claims litigation against big companies, the new militance of workers, the assertiveness of the renegade businesses that have joined the PCC, the arrogance of the anti-capitalist sustainable economy types, the resistance of social service groups that we used to mobilize so easily, the increase in anti-business reporting on some networks, the outspokenness of retired executives at the National Press Club, the brazenness of dozens of billionaires, their sudden attentiveness to electoral and corporate reforms, the huge publicity for Sol Price's attack on Wal-Mart and Peter Lewis's across-the-board charges against our many clients, the sense that the atmosphere in Congress is changing, the Patriotic Polly ads and the crude attempt to change the Pledge of Allegiance -- well, I'm sure you can add your own examples.
"The problem is that there seems to be no head, no ideology, no overall organization to it all. Yet it definitely seems to be more than the sum of its visible parts, and the visible parts seem to be perched on resources and determination far vaster than we've ever seen before. Maybe I'm making too much of all this. We've become so accustomed to weak or nonexistent opposition in recent years that I may be over-estimating what's simply one of the cyclical populist revivals that mark our country's history. So far, at least, there has been little discernible change in our control levels, though the forces arrayed against us appear to be gathering. I hope you're watching the Beatty gubernatorial campaign in California. He seems to be bringing the Reagan Democrats back into the left-wing fold, though it's a little early to tell. Arnold still has a few muscles to flex. In any case, I'd like to get some reaction from you on what I've been describing."
"My reaction is not to overreact," said a Chamber of Commerce lobbyist. "We have a full plate to get though Congress -- the extension of the tax cuts on capital gains and dividends, the repeal of the death tax once and for all, more business incentives, more opportunity zones that waive regulations and taxes, the drive to put Social Security on a business footing, the elimination of the more onerous federal regulations. Let us not be distracted by a few over-the-hill blowhards. Really, Sol Price, Jeno Paulucci, and Bernard Who? Give me a break!"
"I agree," said a representative of the Defense Industries Association. "Our antennae have picked up no movement against the defense budget or our military policies. We haven't applied our latest infrared technology to the rumblings you described, but none of the rhetoric, except for the Cincinnati rally of veterans, has even touched on our domain, which as you all know is pretty extensive in the economic, military, and budgetary spheres. So lighten up, Brovar. We respect your early-warning record, but maybe you're too early for our own good on this one, with due respect."
Ripples of laughter filled the room.
"Our number one priority ought to be tort reform, guys," a pharmaceuticals lobbyist said. "I think I speak for the drug companies, the medical device manufacturers, the doctors, the hospitals, and many of you in allied fields. The trial lawyers and the consumer, health, and environmental groups are all over us on Capitol Hill. We have to concentrate. At last we have the Republicans in charge of the Congress and the White House, and we have to seize the hour. Brovar, unless you're just giving us a heads-up before we resume our usual business this morning, your early alert may be a costly distraction. Which is it?"
Brovar's jaw clenched imperceptibly. "Remember the relentless growth of the conservative movement following our low point after the lopsided 1964 Goldwater defeat? The liberals kept themselves in sneering denial, calling us tools of business, saying we were not only wrong but stupid and dull. That smugness became their undoing. They kept ignoring the signs or interpreting them as aberrations or inconsequential flukes. They're now our doormat. I learn from history. I am cautious and anticipatory, and I have a sixth sense as to when the tides are turning." Here the pixie in Brovar toyed with saying, "The tides turn on the Ides," but he thought better of it. Very few of them would understand the literary allusion. "However, is it the consensus that enough has been said to put us on guard? Let me see a show of hands."
All but a few of the impatient horde raised their hands. Brovar sighed imperceptibly. "Okay, then it's back to business as usual, but keep your ears and eyes open in the coming days and report back next Wednesday about what you think needs discussion."
Whereupon the Wednesday Club commenced discussing high-level government positions that were open and that they wanted to fill with a prepared list of available corporate executives -- something that was indeed business as usual.
***
As the corporate lobbies were breezily failing to bestir themselves, Peter Lewis was preparing to testify before the Senate Commerce Committee. The scene in the large Senate hearing room was chaotic. More tables had to be brought in to accommodate the press corps. The seats in the audience were filled with early birds hired at $20 an hour by insurance lobbyists who would turn up to replace them at more leisurely morning arrival times. Representatives of consumer groups and interested policyholders, expecting first-come, first-served seating and not a payola racket, were outraged. Jostling and cries of protest attracted the Capitol Police, who instituted a rotation system like the one for the Senate visitors' gallery to accommodate the long lines waiting in the corridors. This upset the lobbyists to no end, but they had no choice.
Peter was the lead witness, with no time limitation. He had told the committee chairman, Senator Martin Merchant, that he had a lengthy case to make. He had also assured the committee that he would answer any questions the members cared to put to him. Senator Merchant was in an unaccustomedly tight reelection race and wanted headlines that would make him look like a champion of the insurance consumer, even though he had a reputation as the lobbyists' "business agent" in the Senate. Knowing this, Peter had informed him that the point of the hearings was to enact reform legislation and that he expected the chairman to demand the attendance, under threat of subpoena, of the CEOs of the top ten insurance companies in the health, life, auto, homeowners, medical malpractice, product liability, and workers' compensation sectors. Senator Merchant got the message and delivered the CEOs, who were now sitting not a little nervously in the front row behind Peter. He commenced his testimony after taking the oath to tell the truth.
"Mr. Chairman, distinguished members of the Senate Commerce Committee, I am here today to perform a responsibility that has been shirked for decades by executives of the insurance industry, including myself. I ask permission to insert in the record of these hearings the voluminous evidence and the internal reports and memoranda I've gathered to document my testimony."
"So ordered," intoned the chairman.
"Let me come straight to the point. The dirty secret of the insurers and their imperious reinsurers is their need for stable and slowly growing rates of death, injury, and property destruction, in order to scare tens of billions of premium dollars out of consumers, businesses, and nonprofits. Casualties are their inventory, and they like to keep their inventory growing as long as they can keep their premiums rising. Perhaps the dirtiest part of the secret, all the advertising about their concern for health and safety notwithstanding, is that they not only do little to reduce casualties but at times have actively discouraged efforts to save life and limb. In a few cases -- Allstate with air bags, liberty Mutual with rehabilitating injured workers -- the concern goes beyond propaganda and is actually translated into action, but these are lights in an ocean of darkness.
"Before I elaborate on this tragedy of tragedies, a short history of the ugly mutation of the property and casualty insurance industry is necessary. In the early industrial evolution of our country, boiler explosions and the ensuing fires were major perils in factories. They were terrible events. They were frequent. The industrialists were persuaded to take out insurance policies to cover the destruction -- hence the Hartford Boiler Insurance Company, among others. These early insurers derived their profits from premiums minus expenses, so it made obvious sense to demand safer boilers and inspect them regularly. The insurers did not wait upon the factories; they actually spent money on research to improve the boilers and develop more stringent safety specifications -- that is, they took an engineering approach to loss prevention. Ah, that sacred mantra of today's forked tongues -- loss prevention. For most of the nineteenth century, whatever less desirable sales tactics may have been employed, the coming of the insurance man meant the coming of a safety sentinel. You may wonder why our industry doesn't brag about this part of its past, doesn't publish books and encourage movies about some of the more heroic actions the early insurers took to reduce risks. The answer isn't far to seek. Today the transformation of insurers from essentially engineering-driven companies to financially driven companies is almost total, and the industry has suffered a convenient case of amnesia with regard to its own history.
"Let me illustrate current practice with a simple example. If a contemporary insurance executive were offered a choice between a $500 premium with a $250 payout or a $1,000 premium with a $500 payout, which do you think he would take? No question that he'd take the $1,000 premium, because then he'd have $500 to invest instead of a mere $250. Investment income is the honeypot of the insurance industry. They reserve not just for a rainy day but for a permanently expanding investment fund. Their dream is to have such a large reserve that it functions like an endowment and they can pay claims with the investment income on the reserve. And of course, the more they reserve, the more they can deduct from current income, which is why insurance companies have paid so little in federal taxes over the decades.
"A word about the federal tax code as it relates to insurance companies. The insurance section of the IRS code is more complex and inscrutable than any other section, so much so that an IRS commissioner once agreed with the proposition that fewer people understand it than understand Einstein's Theory of Relativity. When tax codes are inscrutable, they are not likely to be enforced, as the same IRS commissioner acknowledged. Where is the IRS going to find experts to explain the code in a court of law? The few who can already work for the industry. Besides, determining noncompliance is an exhausting task that the IRS doesn't begin to have the resources to pursue. Over the years, the industry's formidable phalanx of specialized attorneys, accountants, and actuaries has deterred the IRS from so much as peeping in their direction.
"The relevance of the tax code to the subject of this hearing is clear. By its very impotence, it facilitates all kinds of mechanisms the industry uses to swell investment returns from reserve funds that are greatly in excess of any actuarial necessity. The result is that people are overpaying for diminished protection while the pathetic state insurance 'regulators' fiddle and faddle until they receive job offers to work in the very industry they're overseeing -- that is, if they don't come from the industry in the first place. And state legislators with committee jurisdiction over the industry haven't just been coopted, they've been organized by the insurance lobby to protect the industry's interests actively and even defiantly, in what amounts to a form of corporate statism.
"Moving from the infrastructure of avarice and myopia to the business of sustaining a sufficient level of lethality, I direct your attention to an important case study in my appendixes relating to fires. Fire insurers need fires. Without a sufficient number of fires they can't sell as much insurance or charge as much for it. Per capita deaths by fire in this country are three times greater than in Japan and many Western European countries. Fire prevention is a well-established series of applied technologies and rules, from building codes to fire detectors to the location and equipping of fire stations. If we know that fires can be sharply reduced or at least limited in their damage through these means, why does our country lag so far behind?
"In the 1960s, the people at the US Bureau of Standards in the Maryland suburbs were astonished to notice the dampening stance of the insurance companies toward initiatives underway within the bureau to expand fire prevention research and development. The bureau's staff was disappointed but understood the motivation behind the resistance. Name any area of preventable death, injury, or disease, any economic activity involving risks that have not yet materialized fully or significantly, and you will not see a serious loss prevention presence from the insurance industry.
"Take the last century's death toll from motor vehicle crashes. There were two serious efforts at loss prevention in the postwar period. In the early sixties, a Liberty Mutual engineering vice president named Crandall rebuilt a conventional American four-door sedan with numerous safety features that we now take for granted, such as seat belts, padded dashboards, and stronger door latches. In the seventies, Allstate got a lot of good publicity for pressing the auto companies to install air bags as standard equipment. But such enlightened examples from within their own industry did not persuade the other insurance companies to match the efforts of these two safety-conscious firms. Think of the lives that could have been saved. That noble objective was not enough to make the insurers back their occasional verbal salutes to loss prevention with deeds. Or take motorcycle helmets, proven to reduce fatal head injuries in crashes. State laws requiring helmets -- laws that prevent some two thousand deaths and many injuries a year, often among younger Americans -- are being repealed with no real opposition from the insurers, except for two small industry-funded groups with grossly inadequate budgets.
"Whether it's hazardous household products, faulty truck brakes, phony vehicle bumpers, unsafe railroad bridges, pharmaceuticals with devastating side effects, toxic chemicals in the workplace or in consumer products, dangerous working conditions in factories, farms, and mines, or a host of aviation perils -- like thirty-plus neglectful years of penetrable cockpit doors and latches, from the spate of Cuban hijackings in the late sixties and early seventies to the easy cockpit break-ins by the 9/11 hijackers -- the same pattern repeats itself. Why, just insisting on simple roll-bars for tractors would have saved the lives of tens of thousands of farmers in the twentieth century. But when small, budget- squeezed consumer, environmental, and labor organizations were on the front lines exposing these perils, demanding federal and state action, and insisting on corporate responsibility, the giant insurance companies and their foundations and PR machines and lobbying associations stayed home.
"As if the abandonment of loss prevention weren't bad enough, there are junctures where the industry turns to active and vicious assaults on victims and their rights to legal remedies. Insurers have comfortable periods when claims are stable and premiums ample and investment returns robust, but every ten years or so, when interest rates and stock prices decline appreciably, the insurance companies find their returns falling and dust off the 'crisis con job.' They threaten skyrocketing premiums or withdraw coverage from selective markets, and then they point the businesses and professions they're gouging toward the legislatures. 'That's where the solutions are,' they tell their frightened and frantic customers, 'go there for relief, demand a rollback of tort law and restrictions on the amount of compensation that can be awarded for serious injuries in the courts of law.' Yes, get the money-greased absentee legislators to tie the hands of juries and judges, the only ones who see, hear, and evaluate these cases before an open court of law. With every passing decade, tort law, a historic form of quality control for our industry, has steadily been tipped in favor of big companies accused of harm. Even our ancient right of trial by jury isn't sacred in this financially driven crusade to shred judicial protections by legislative fiat. J. Robert Hunter, a former Texas insurance commissioner and federal insurance administrator, has reported on this callous pattern of attack on the innocent injured, when even the investment business has learned to live with cyclical stock downturns since the 1970s. His studies are in my appendixes for the record.
"It is well known how inimical insurance companies are to government regulation of any kind, even though without it they would have flirted with insolvency many a time by overextending themselves. What is not well known, apart from a mandated antitrust exemption, is the industry's lust for government regulation to eliminate, reduce, or subsidize the financial risks nominally underwritten by the insurers. This alliance with government produces a further mockery of their presumed loss prevention function.
"A good example is atomic power. In the fifties, no company would insure a nuclear power plant because there was no actuarial history, and because the little that was known sent chills up the insurers' spines. One radioactive scenario from the industry-friendly Atomic Energy Commission suggested that a meltdown at a nuclear plant would contaminate an area the size of Pennsylvania. So what did the industry agree to? The Price-Anderson Act, which severely limited the liability of utilities owning nuclear plants against claims from the devastated areas, and which is still the law of the land. Now, there are times when an activity or a technology is so risky that it is prudent for insurance companies to deny coverage. Denial of coverage can be an incentive to reduce risks to an acceptable level -- another form of loss prevention. Limiting liability by law does just the opposite, but Price-Anderson is what the industry chose to support.
"Another good example is medical incompetence, a silent epidemic that produces countless injuries and nearly a hundred thousand deaths a year, excluding the two hundred fifty or so people who die each day from hospital-acquired infections, as estimated by the Centers for Disease Control. So how do the medical malpractice insurers behave? They refuse to implement experience-loss ratings that would raise premiums for bad physicians and lower premiums for good ones. They also hike premiums by reclassifying medical specialties -- from three in the 1950s to more than twenty today -- to reduce the insurable pool per specialty per state. You've heard the outraged cries of physicians blaming their off-the-chart annual premiums on trial lawyers, juries, and the tort system. Don't believe it. There are some nutty verdicts, often overturned, but either way it's all a seedy cover to get you and the states to reduce liability and make it harder for plaintiffs to have their day in court than it already is, with ninety percent of medical malpractice victims not even filing claims. I'm reminded of what the famous architect Frank Lloyd Wright once told a convention of doctors: 'Unlike you, my friends, we cannot bury our mistakes.'
"Mr. Chairman and members of the Committee, I have only sketched in the briefest manner an industry that has turned grotesquely on its own history, its own mission as the nation's safety and health sentinel, and its own vested interest in reducing claims. Its unchallenged power has turned this former incentive into a perverse incentive for inaction, surrender, cowardliness, the cover-up of known safety defects, and an aggressive attack on deterrence and on the laws that protect millions of innocent Americans.
"The insurance business has rarely attracted the best and the brightest of executive talent. It is, after all, a fairly simple business, a business of large numbers -- money in, money making more money, less money out. Why couldn't the government engage in this type of routine transaction without the duplication, the massive overhead and executive salaries -- look at the chiefs of the big HMOs -- and the profitable waste built into such sectors as health insurance? It could. That's for you to decide." At this point, the ten CEOs sitting behind Peter blanched, all the arrogant composure of their exalted corporate status seeming to drain from them. "After all, you make flood insurance possible by guaranteeing it with the full faith and credit of the US government. You make crop insurance possible in the same way. More and more, the insurance lobbies are putting you in the position of reinsurance, making big profits while they lay the ultimate risk on Uncle Sam's shoulders. Best of all possible worlds, no? Uncle Sam, the all-purpose guarantor for more and more of the insurance economy. And that doesn't include the Washington bailouts.
"Another little-noticed aspect of the industry is the inbuilt conflict of interest between its big customers and its small customers. When insurers write policies for large industrial companies in, say, directors' and officers' liability, product liability, or workers' compensation, they knowingly place themselves in potential conflict with individuals they've insured, as in the case of an auto insurance customer injured on the highway because of a tire defect the manufacturer is responsible for. If you, the Congress, were in possession of all the files of the insurance underwriters regarding hazardous conditions, toxic exposures, product defects, reckless professionals, et cetera, almost none of which are being reported to safety and public health authorities, I'm certain that you would be outraged enough to take legislative action.
"In summary, the capitalist incentive that used to drive the insurance companies to reduce their costs by actively assuring safer conditions has been turned on its head. On its head! As long as they can increase their premiums and reduce their liability through legislative action, they will continue to ignore their health and safety responsibilities. Sure, they'll take out some ads to the contrary, their insurance agents will take part in community safety efforts -- say, safer crosswalks for schoolchildren -- but these are pittances relative to what this trillion-dollar industry could do for our economy and for the well-being of millions of people. By returning to their historic role of loss prevention, insurers could incur the gratitude of everyone except the funeral and hospital industries. They could reduce the immense costs of property damage. Merely by working for more protective vehicle bumpers instead of the chrome eyebrows used now, they could save lives and dollars. Three hundred people die every year in rear-end collisions with big trucks. In dense fog and on slippery highways, bumpers can stop cars from being submarined under the backs of trucks. Even though bumpers have been proven effective in the prevention of these cases, trucks are not required by law to have them. Billions of dollars in avoidable repair bills would be saved with seven-mile-an-hour bumpers on all vehicles. The industry knows this but by and large could care less.
"Thank you, Mr. Chairman, for your patience and interest in a situation that affects your constituents every day of their lives. They will be most pleased that you have taken this bold initiative. I look forward to your questioning and that of the committee, and I particularly look forward to your subsequent examination of my colleagues just behind me who have graced us with their presence here today. For the reporters in this hearing room, I recommend that you immerse yourselves in the specifics of the appendixes I've placed in the record, which will keep your investigative talents working overtime. Thank you again, Mr. Chairman."
"And thank you, Mr. Lewis, for making visible that tip of the insurance iceberg and the industry's perverse incentive, as you call it," Senator Merchant said. "My first question relates to you. In your long career building your own insurance company, have you been doing the same things you accuse your competitors of doing?"
"Yes, with a few notable exceptions here and there."
"Then with all due respect, why should we listen to you?"
"Because I have now chosen to do the right thing, which is to blow the whistle that could prevent the untold casualties and costs continually inflicted on the American people. To quote Martin Luther King, 'I am free at last, free at last.'''
"Is this new role you've fashioned for yourself going to be an advantage to your company?" the chairman asked.
"I hope it will be an advantage to all companies in all insurance lines. I hope we'll all be hiring more engineers and health specialists and fewer financial analysts."
"Thank you, Mr. Lewis. I have no further questions at this time. My colleagues will now commence their questioning."
"These advertisements you've been running in the newspapers and on television -- who is paying for them?" asked Senator Prune.
"I'm paying for them, Senator. You see, I'm a very rich man."
"If you had one bit of advice for your ten CEO friends sitting here, what would it be?" asked Senator Catskill.
"Reverse the perverse incentive. If you feel you can't, then ask the government to provide uniform requirements for the entire industry. If you won't, then quit."
"Very succinct, Mr. Lewis," said Senator Foxer. "Do you have proposed legislation to 'reverse the perverse incentive'?"
"Yes indeed. A comprehensive analysis, together with a proposed statute and a section-by-section analysis, is in the appendixes for your consideration. It foresees a new day for America in terms of health, safety, economic and taxpayer efficiencies, and the innovations prompted thereby. This is big, Senator, really big. I would be delighted were you and your colleagues to take the time to absorb the practicality of my proposals and their long-term beneficial consequences, including insurance industry leadership against global warming and other effects of fossil fuel technology that could have calamitous consequences at a period in our nation's future when you and I are pushing up daisies."
Senator Sunup raised his eyebrows. "Global warming? Mr. Lewis, aren't you going rather far afield? Aren't you really proposing an insurance industry that will be a health and safety Nazi vis-a-vis its customers? Isn't this just a new tyranny of a new bottom line?"
"Hardly, Senator. Already some European insurers and reinsurers are taking global warming very seriously and lobbying their governments for energy efficiency and energy conservation policies. A great economy adjusts to save itself as well as others."
"Well, Mr. Lewis," drawled Senator Bitter, "we've got a saying down where I come from in Louisiana, and after listening to you go on and on, I'll say it. This dog don't hunt. Are you going through an end-life crisis?"
"Our world is going through an end-life crisis, Senator. I want to use what time I have left to improve my country, to make it an example for other nations to emulate, to give all the world cause to say, 'God bless America.' Congress can help mightily to make that happen."
As Peter's words rang out in the hearing room, the audience sat mesmerized. The proceedings had reached an emotional pitch seldom seen on Capitol Hill. Some of the CEOs were wiping their brows with their monogrammed handkerchiefs, and not because the room was warm. In the press section, the reporters were licking their chops in expectation of the CEOs' imminent hari-kari performance. Peter's charges were humming on the wire services and over radio and cable TV even before the questioning got underway. The story was clearly going to lead the evening network news, barring some major tragedy.
At the back of the hearing room, the attorneys for the ten CEOs were huddling in great agitation. Fortunately for them, Chairman Merchant announced a ninety-minute lunch break, whereupon they hustled their clients into limousines and drove to a nearby corporate law firm on Pennsylvania Avenue. In a secure twelfth-floor suite, they ordered in sandwiches, soup, and drinks, and then the hoariest of the lawyers, a celebrated adviser to presidents, stood to address the CEOs.
"Gentlemen, this hearing is more than an embarrassment, more than a media riot, he declared in stentorian tones. "It is a grave danger to each of you personally. Without knowing the exact nature of Lewis's accusations, without having digested his hundreds of pages of appendixes that name names, places, and dates, we are able to counsel you only for your own legal protection, not for that of your companies."
"That's certainly an unusual statement by legal counsel, said the CEO of the country's largest health insurer. "I always like to think that the CEO and his company are the same for purposes of policy positions. To divide us from our companies is to open a huge can of worms that might lead to our compensation packages."
"Ordinarily you would be quite correct," said the hoary lead counsel, "but this isn't an ordinary situation. First, Lewis's charges are essentially unrebuttable in the setting of a congressional hearing. You can of course allude to some of the positive steps you've taken, but he has already anticipated and belittled them. Years ago, the auto company chieftains tried that before a Senate hearing in attempting to rebut a young critic who charged that they had done little to make their cars safer. The Senate committee handed them their heads. It was disastrous. Coercive legislation followed very quickly."
"There are times when the only advice is the least worst advice," said one of the younger lawyers.
"There are times when you have to be prepared for the worst by avoiding it," said another.
"The worst, gentlemen, is prosecution for perjury and imprisonment," said a third.
"What did you say?" chorused the ten CEOs.
"I am afraid, gentlemen," the hoary lead counsel intoned, "that this is the time for you to be afraid. You are about to enter an arena in which you are highly vulnerable. The chairman is going to play to the crowd. Our sources tell us that his questions are going to be CEO-specific and company-specific, and that three other senators are prepared to follow up. There are no time limits to this hearing. Once you are up there, there is little we can do to help you. We can confer with you at the witness table, but that irritates the committee and breeds suspicion among the reporters. It makes it seem that we have something to hide. As your attorneys, we have consulted among ourselves and come to the same conclusion as to what we must advise you to do."
"And what is that?" asked the CEO of one of the auto insurance giants.
"You must take the Fifth Amendment."
Cries of outrage filled the room: "What? You can't be serious!" "The Fifth Amendment? Are you crazy?" "We aren't criminals, sir!"
"Gentlemen," said the hoary lead counsel, "If you do not take the Fifth, you are asking for trouble. Permit me to explain. You will be under oath. The chairman doesn't want this to be a one-day hearing, so you may find yourselves testifying for days. The questions that will come at you are designed to make you perjure yourselves. We can show you some sequences if you like, but there is little time and this is our unanimous advice -- the best of a bad range of options. During the uproar after the hearing concludes, your counsel will address the press and explain that the hearing was booby- trapped and that you were not given the nature of the charges so you could prepare yourselves in due time. We'll play you as the victims of a witch-hunt by a chairman desperate to save his political career. In the coming days, we'll advise you about how to reach other members of the committee through lobbying and campaign contributions so as to abort further hearings requiring your presence. For now, you just have to keep a stiff upper lip. We'll provide you cover with the media as you're whisked out of the building to your limos.
"Now, here is exactly how you are to proceed when the hearing resumes this afternoon. You will make no opening statements. My associates are passing out copies of the script we've prepared for you once the questioning begins. Do not try to embellish, or you'll be deemed to have waived your right to take the Fifth. We have prefaced the actual plea with courteous remarks of a general nature, to convey your respect for the committee and your solemn obligation to your shareholders and employees. Please rehearse these words in the few minutes we have left so that you can declare them at the hearing with executive strength and forthrightness, on advice of counsel. This will shift the spotlight to us, and we know how to talk to the press in such situations. Some of us have represented organized crime figures before congressional committees, so we are not without experience. We are of course drawing no parallels here, merely reassuring you of our professional abilities."
It was fortunate that the CEOs had downed their lunch by this time, though to judge by the whiteness of their faces, there was no guarantee it would stay down.
Promptly at 2:00 p.m., Senator Merchant brought the hearing to order again. The CEOs were asked to take their seats at the long witness table, shoulder to shoulder. They were asked to stand. Then, with a dozen photographers clicking away, they all raised their hands and took the oath. You could have cut the suspense and tension in the room with a knife.
"Please be seated and commence with your opening statements, gentlemen," Senator Merchant said, "from left to right if you will."
"I have no opening statement, Mr. Chairman," said the first CEO.
"I have no opening statement, Mr. Chairman," said the second.
"I have no opening statement, Mr. Chairman," said the next.
By this time murmurs were coursing through the audience. Expressions of wonderment adorned the faces of the more seasoned reporters and guests, who knew just how unusual this scene was. As each of the remaining CEOs declined to make an opening statement, Chairman Merchant began to suspect that something was fishy. Business executives always had opening statements crafted to put their best feet forward, establish cordial relations with the committee, and anticipate the overall pattern of questioning.
"Very well, gentlemen," he said. "In that case, we can proceed to the questioning all the more quickly."
It took three or four questions per CEO, but inside fifteen minutes they had all taken the Fifth.
"Very well, gentlemen," the chairman repeated. "You've made your choice. You refuse to respond to charges from one of your industry's most successful executives. You'll have to live with the consequences. This hearing is adjourned!"
The audience was dumbfounded. The press raced to file the stunning story. For once, Peter was all but speechless, telling a clutch of reporters in the hallway, "I have no idea what they're up to. All I have are suspicions, which I can't share with you for just that reason. I guess we'll just have to wait and see."
And what of the chairman? He was basking in the sun of being the white hat, the good guy who launched this wave of criticism of the widely disliked insurance companies. Immediately after adjourning the hearing, he issued a statement to the effect that his staff would continue the investigation, but everyone who knew him understood that his words were pro forma. He'd milked the cow, and he had enough to last him until November, given the legs this controversy was sure to have and all the interviews he would be asked to give.
That evening the late-edition tabloids had a lot to scream about: "Top Whistle-blower's Barrage Provokes Insurance CEOs into Taking the Fifth," "New Merchants of Death, Charges Top Insurance Tycoon," "Insurance Industry Lets People Die for profits." All three network newscasts led with the story. No one who saw the coverage that night would ever forget the spectacle of the ten CEOs standing to take the oath and then taking the Fifth. It was as indelible a visual as when the tobacco executives swore before Congress that they did not believe that smoking cigarettes causes lung cancer.
Over the next few days, the specialized insurance press bored deeper. Since most of these publications were essentially house organs, they had no trouble contacting inside sources that would level with them about what was going on. What they were told was that the only way for the industry to keep this story from exploding was to ignore it and take the brickbats. An editorial in the Insurance Gazette argued that turning away from the controversy was a mistake, that the industry was underestimating Peter, just as it had when he was a small auto insurer. Hadn't he already spent big bucks saturating the country with his charges before the hearing? What made them think he would stop now because ten CEOs stonewalled a Senate committee?