CBS's performance today was bizarre. First, they put—off for more than six hours the promised issuance of a statement. Then the Tiffany network released a puzzling vague promise ('we believe we should redouble our efforts to answer those questions, so that's what we are doing') and misspelled the conceptually important word 'coroborating.'

What the heck is going on?

I have no inside sources, but I do have a pretty good nose for corporate intrigue. Here are the inferences I draw:

1. There was a fierce internal battle over what to say, and therefore over what CBS should do. The statement which was finally issued after 6 PM was obviously so hastily composed that nobody even bothered with spelling questions. One can imagine an intense, draining meeting coming to the conclusion something has to be said, and dickering over the wording of a statement which would make no specific promises. It was probably dictated and typed up at the last minute. Possibly on an IBM Selectric Composer typewriter being fruitlessly employed over the last several days attempting to duplicate the formatting of questionable memoranda.

2. The fact that one faction is hanging tough, refusing to formally admit there is the possibility of fraud, thereby requiring an outside investigation, strongly suggests that the identity of the source is explosive. The longer the implausible rationalizations of CBS are offered, the sillier and guiltier the network looks. Crisis management theory tells executives to fess up when caught in an error, because prolonging the agony only makes the PR consequences worse. Therefore, there must be something at stake even worse than looking bad.

3. The worse consequences could be either criminal liability, regulatory trouble, or political liability. Forgery of a federal document and of a federal official's signature are both potential criminal matters. People could end up in jail. CBS's parent Viacom is the license holder for numerous large market television and radio stations, licenses collectively worth billions of dollars. When Aerojet General Corporation was convicted of unrelated criminal offenses, the FCC stripped it of a Boston television station license worth hundreds of millions of dollars. CBS's licenses in most of the nation's top television markets are worth far, far more, and could potentially be taken away. Even worse, if CBS turns out to have received the forgeries from a party related to the Kerry campaign or the Democratic Party, it faces political liability for conspiracy to alter a presidential election by fraud. The firestorm which would follow would be unprecedented. Watergate would be small potatoes, comparatively.

4. The logical inference is that at least one faction within CBS is adamantly opposed to admitting the possibility of fraud, because once it did so, it could be ethically and legally compelled to reveal who gave it the forged documents. Rather than face the almost unlimited downside outlined in point 3, CBS prefers to become a laughingstock. At least for the moment.

Thomas Lifson  9 15 04