Advertisement
News

How Strong should have apologized

DICK STRONG apologized to investors last month.

His words had all of the warmth and sincerity of a losing pro wrestler trying to say nice things about the slob who just kicked his butt. The apology - part of a settlement that more substantively saw Strong agree to a lifetime ban from the securities business and to personally pay more than $60 million in civil penalties and restitution - felt as staged as one of those wrestling matches.

Advertisement

According to New York Attorney General Eliot Spitzer, Strong and another official at the Strong Funds helped Canary Capital make market timing trades in order to lure other business from the troubled hedge fund firm. When Spitzer's investigation started, the company also suppressed information and delayed delivering documents, in no small part because those papers would have shown that Dick Strong's personal gain was about $2 million. When Dick Strong stepped down in December as head of the firm he started, he acknowledged making market-timing trades in his firm's funds on behalf of himself, his family and friends.

Strong's apology was supposed to bring a form of public shame and closure to the proceedings. But it went largely unnoticed in the announcement that his former fund family had ended its dispute with regulators and agreed to penalties amounting to $175 million. Within days, the Strong funds were being sold to Wells Fargo & Co., a deal that will net Dick Strong enough money to pay his fines about six times over.

Advertisement

But if Spitzer and other regulators intend to make a public apology a part of any future settlements - and indications are that Strong will not be the last to do this - they need to do better in getting the bad guys to fess up in plain, honest English.

With that in mind, here is the entire text of Strong's apology, broken down into what he said, what I think he meant and what regulators should have made him say.

What he said: The regulatory investigations of me and my company have been resolved, and I now want to apologize to the many thousands of shareholders of Strong Funds.

What he meant: The regulators are making me say this. Without it being forced on me, there's no way you'd be reading this.

What he should have had to say: I have owed you an apology for a long time now, from well before investigations started, let alone reached the settlement stage.

What he said: I created Strong and devoted most all of my business life to making Strong a safe, secure and prosperous investment vehicle.

What he meant: It was my private investment life that was the problem. That, plus me forgetting that the rules are supposed to apply to everyone, even the guy with the corner office.

What he should have had to say: Being good "most all" of the time is insufficient, and you deserved better leadership than I was capable of.

Advertisement

What he said: Mutual fund investing is core to the futures and needs of millions of American investors and its hallmark has always been and continues to be the safety and care of the monies entrusted to those who manage these funds.

What he meant: It has also made my family one heck of a lot of money.

What he should have had to say: If people still trust in funds, it's not because of anything done at my firm.

What he said: Throughout my career, I have considered it to be my sacred duty to protect my investors; and yet in a particular and persistent way I let them down. In previous years, I frequently traded the shares of the Strong funds, at the same time that the advice which we gave our investors was to do the opposite and to hold their shares for the long term.

What he meant: If I hadn't been caught, I'd still be doing this stuff and getting away with it.

What he should have had to say: I played fast and loose with your trust, and all of the bad things that have been said about me since these charges were leveled are true.

Advertisement

What he said: My personal behavior in this regard was wrong and at odds with the obligations I owed my shareholders, and for this I am deeply sorry.

What he meant: Now that this is over, I can sell my company and make hundreds of millions of dollars, even after I pay the fines. So I'm not really too sorry.

What he should have had to say: My story proves that no matter how rich or successful a guy can be in this business, there is no guarantee that they won't stick it to you, the shareholder, in order to make a few extra bucks.


Advertisement