The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [363]
Buffett told Olson that he wanted to pursue a novel strategy.10 Already staggering under the near-mortal blow to its reputation, Salomon could not, in his view, survive a criminal indictment.11 It was like a late-stage cancer patient. To save it, Buffett felt, radical techniques must be applied, even if it left the patient in a weakened state. The therapy he thought was Salomon’s best hope of avoiding a criminal indictment was to show extreme contrition. He would surgically dig out every last cell of the cancer and, with scorching radiation, cleanse the firm and burn out any trace of a recurrence.
On Olson’s first day on the job, he was sent to see Otto Obermaier, the U.S. Attorney for the Southern District of New York, who would make the decision whether to criminally indict Salomon.
“The argument we made to Otto Obermaier was that we would set an example. This was going to be an example of the most extraordinary cooperation that a target has ever given, and the outcome would have an effect on the behavior of future defendants and how the justice system worked.”
Olson had to make an extraordinary pledge. On the spot, he waived Salomon’s attorney-client privilege, which shielded communications between the firm and its lawyers from prosecutors. He said that whatever MTO found in its investigation, Obermaier would know it as soon as MTO knew it.12 In plain English, this meant that MTO, on behalf of Salomon, had volunteered to act as an arm of the government.
Obermaier was “incredulous,” Olson says. “He thought we were some Midwest aw-shucks group, come to sell him a bill of goods.”13 He could not believe that any company would make an offer voluntarily that was so against its own best interest. After all, Salomon was in no imminent danger of indictment. It would have months to prove its case. Clearly, this was more than a lip-service promise to “reform.”
Then Olson flew to Washington and told Breeden at the SEC—who was “equally skeptical”—the same thing.14
Initially, it was not clear what waiving the privilege meant. Frank Barron, an attorney from Cravath, Swaine & Moore, one of Salomon’s other law firms, was put in charge of negotiating what this extraordinary gift would mean to the Justice Department. Negotiating terms was difficult, since the commitment had already been made. Salomon had little leverage. The Justice Department pressed hard for a broad interpretation of the commitment and largely got its way.15 The agreement put the firm in a peculiar and paradoxical situation of prosecuting its own employees. The more evidence that MTO found that employees were guilty, the more proof it could show that Salomon had cooperated and cleansed itself. The employees, meanwhile, must cooperate or be fired, their statements to investigators unprotected by the normal attorney-client privilege.16
Asked to help Buffett prepare for upcoming congressional testimony, Gutfreund and his lawyer met with Olson a few days later. Gutfreund had volunteered to cooperate, but when his lawyers tried to lay down ground rules for the conversation, Olson refused to accept them. In the end, Gutfreund and his lawyers walked out.17 Olson reported back to Buffett that he had been “stonewalled.”18
Everything at Salomon was turned topsy-turvy as the new culture of openness went into effect. A couple of days after meeting with Obermaier, Olson and Buffett walked into a room at 7 World Trade Center for a meeting. Someone, acting on autopilot, had hired a new public-relations firm. Around a large square table, two dozen people sat waiting for them. Some worked for Salomon, but most were public-relations people and lobbyists who were billing by the hour. Buffett listened for fifteen minutes as they described how they wanted to manage the crisis. Then he stood up. “I’m