In our zeal to safeguard the integrity of our firm and its blog, we rushed an apology last week to The New York Times and reporter Alex Berenson that now appears to have been premature. The S&A post in question was based on a story that appeared on Portfolio.com earlier in the week. When the Times sent us a statement saying that the original story was “incorrect”, we took the newspaper at its word and felt compelled to retract some of our comments.

Well, it turns out the story wasn’t incorrect. In fact, one could argue that, for the most part, it scored a bulls-eye. The Times insisted that a misdirected email from one of Eli Lilly’s outside attorneys wasn’t responsible for Mr. Berenson’s page-one scoop that the pharmaceutical giant was close to reaching a settlement with federal prosecutors for $1 billion. But Mr. Berenson subsequently admitted on NPR radio, and to the editor of the Pharmalot blog, Ed Silverman, (see his comment on my apology post) that, well, it kinda was.

We could have a field day with the disclosures that have surfaced since our last blog on this topic, but we will stick to the high road and to these two thoughts:

1. We owe an apology to Portfolio.com for unjustifiably discrediting its story. While some might argue that the misdirected email Mr. Berenson received didn’t have the depth of detailed information about the proposed settlement as the website hinted, by Mr. Berenson’s own admission the details it did offer provided the confirmation he needed to run with the story;
2. This ongoing email saga illustrates clearly that there is truly no such thing as off-the-record. Once a reporter has their hands on a piece of sensitive information, they will finagle ways to use it, despite any handshake agreements not to. As we are forever telling clients, if you don’t want to see something attributed to you on page one of your local newspaper, it’s best you keep it to yourself.

One final thought: For all the blather about the capriciousness of bloggers and so-called citizen journalists, it is interesting to note how quickly those commenting online about this topic last week were quick to issue corrections and clarifications when it seemed their information was wrong. If nothing else, it’s encouraging to see the old-school principles of fairness and accuracy given the primacy they deserve.

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When we launched this blog, there was unanimous internal agreement that we would adhere to the highest standards of fairness and accuracy. We demand nothing less from ourselves, clients, and the media with regard to the work we do every day, and the content of this blog is no exception.

With that in mind, we naturally became concerned yesterday to read a post on the Drug and Device Law blog that the Portfolio.com story upon which we based our own post Tuesday may have been inaccurate. The item in question reported that The New York Times reporter Alex Berenson was able to break the recent page-one story about a possible $1 billion Eli Lilly Zyprexa settlement because he had mistakenly received a confidential email about the talks from an attorney at Eli Lilly’s outside law firm Pepper Hamilton that was intended for a co-counsel colleague at Sidley Austin also named Berenson.

The D&DL post said that Mr. Berenson had denied that the errant email was the initial source of his scoop (Portfolio.com said he had declined to comment). Above the Law, a well-regarded and extremely popular website, also wrote about the wrong-Berenson email mistake, linking to our post and to the original piece on Portfolio.com. They, too, issued a subsequent clarification once Mr. Berenson’s denial was on the record.

And now it is our turn.

We contacted The New York Times spokespeople directly yesterday to determine if a correction or clarification was indeed warranted. We received the following statement from Catherine J. Mathis, a spokeswoman for the newspaper:

Mr. Berenson did receive a misdirected e-mail from Pepper, but that e-mail did not contain a detailed description of the status of the settlement talks. Mr. Berenson had known independently about the settlement talks for some time, and he obtained the details he published in the Times from sources other than Pepper.

The Portfolio version was incorrect.

When a newspaper the stature of The New York Times publicly discredits the reporting of another publication, we clearly take it seriously. It now appears that we inadvertently republished erroneous reporting in our blog yesterday, and for that we apologize to both the Times and Mr. Berenson.

Yet…

If Mr. Berenson knew about the settlement talks for “some time” and had received details of the settlement talks from “sources” (plural) other than Pepper, we can’t help but wonder why he then sat on the story. Doing so meant taking a huge risk of getting scooped by a rival on a story that he has pretty much owned. After all, as the Times itself reported, if the $1 billion figure was right, it would be the biggest penalty ever paid by a drugmaker for inappropriate drug marketing activities. Major newspapers typically require only two independent sources to confirm an unattributed story, which Ms. Mathis suggests he had in hand.

And therein lays a very big question. So who were these non-Pepper sources?

We can appreciate why someone on the government side might leak that settlement negotiations were underway. But we would expect that Mr. Berenson’s editors would insist that he get confirmation from someone at, or very close to, Lilly with first-hand knowledge of the talks. It’s fairly safe to assume that Lilly didn’t offer any confirmation, officially or on background, given their reported statement to the Times saying in part, “…we regularly have discussions with the government. However, we have no intention of sharing those discussions with the news media and it would be speculative and irresponsible for anyone to do so.”

Mr. Berenson’s scoop is extremely damaging to Eli Lilly. If the company does indeed settle for $1 billion, the Times will again undoubtedly give the story some pretty prime real estate and repeat all the damaging allegations regarding Zyprexa. And with the figure now public knowledge, it would seem difficult for prosecutors to accept a settlement for less than $1 billion without it appearing that they had blinked.

It will certainly be interesting to see how this fascinating story plays out.

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Update 2: Alex Berenson admits some truth on NPR and The New York Times‘ comments had an element of spin.

More about Alex Berenson.

The New York Times‘ pharmaceutical industry reporter Alex Berenson scored a heck of a Page One scoop last week when he revealed that Eli Lilly was looking to reach a settlement with federal prosecutors over the company’s alleged inappropriate marketing of antipsychotic drug Zyprexa. A staggering “mea culpa” settlement figure of $1 billion or more was mentioned.

This was a big story, no question about it. Eli Lilly is a publicly traded company and the $1 billion settlement would be the largest ever paid by a drug company for improper drug marketing (so said the Times).

In the piece, reporter Alex Berenson cited sources who requested anonymity “because they have not been authorized to talk about the negotiations.” He also included a statement from an Eli Lilly representative saying, in part, “…we regularly have discussions with the government. However, we have no intention of sharing those discussions with the news media and it would be speculative and irresponsible for anyone to do so.”

So how did Mr. Berenson get the scoop? It turns out that it wasn’t through any tried-and-true gumshoe reporting techniques taught at j-school. He simply had the fortune of having the same last name as one of Eli Lilly’s attorneys.

According to a story posted today on Portfolio.com, one of the drugmaker’s outside attorneys at Philadelphia-based Pepper Hamilton had mistakenly emailed detailed, highly confidential information on the settlement talks to the reporter instead of Bradford Berenson, the intended recipient (co-counsel at another law firm).

The email gaffe, unquestionably one of the greatest fears of everyone handling sensitive information, is apparently the result of very similar email addresses: Mr. Berenson, the reporter, simply goes by berenson in his email address while Mr. Berenson, the attorney, goes by bberenson.

We can’t honestly fault the Times or its reporter for breaking this story. I would have done the same thing back in the day. But Mr. Berenson mislead by omission. He should have been upfront with readers about how he learned of the settlement talks. Since there was no official confirmation from either side, doing so would have gone a long way toward letting readers judge the credibility of the story for themselves. Mr. Berenson quotes Nina Gussack, a Pepper Hamilton lawyer representing Eli Lilly, as saying she couldn’t comment on the case. Judging from Eli Lilly’s own statement, it doesn’t appear that anyone alerted the company’s spokesperson as to how Mr. Berenson got the story.

Mr. Berenson’s earlier reporting on this topic has been called into question before. According to a respected federal judge, Mr. Berenson was “deeply involved” in an “illegal” scheme that effectively amounted to “stealing” documents. (Neither the Times nor Mr. Berenson have ever publicly explained the extent of his involvement.)

Eli Lilly is reportedly sticking by Pepper Hamilton, and I applaud the company for its loyalty. That said, I can’t help but wonder why an attorney at Pepper Hamilton had Alex Berenson’s email address in her email database in the first place. As I’ve argued before, reporters and attorneys are best left in separate corners. Especially when the latter specializes in high-profile, high-stakes crisis work. By any measure, Eli Lilly’s PR handling of allegations of wrongdoing regarding its Zyprexa marketing has been a debacle. If its attorneys are driving the media relations strategy, it’s easy to understand why.

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Our relationship with Darryll began nearly four years ago when he was a newly minted attorney about to hang out his first shingle in Charlotte, NC. The law practice was a second career for him; as Darryll openly discussed, he decided to go to law school only after being blackballed from the securities industry for being a whistleblower.

A former bond trader with NationsBank, a predecessor to Bank of America, Darryll in 1995 filed a wrongful-termination suit against NationsBank claiming he was fired after warning company executives about accounting irregularities devised to hide trading losses. NationsBank initially claimed the standard he-wasn’t-a-team-player disparagement and blamed his “overly aggressive trading style,” but soon after The Wall Street Journal got wind of his lawsuit the company settled with him for more than $500,000.

Fighting his wrongful termination taught Darryll a painful lesson about the perils of taking on North Carolina’s Establishment. Virtually all of the employment attorneys he approached shunned his case as they were on retainer or had business dealings with either NationsBank or one of the other major financial services companies in the area. As Fortune Small Business wrote, Charlotte is “a town where connections between banks and lawyers run deep.” Although he garnered a lucrative settlement, he was unable to land a comparable bond trading job like the one he had had at NationsBank. He had been labeled a troublemaker.

Recognizing there was a void of top-flight employment attorneys willing to take on the small but extremely powerful coterie of Charlotte-area companies, Darryll attended law school and set up shop as a securities arbitration and employment law attorney. It didn’t take him long before he made his presence known: Within two years he was working on cases against many of the big corporate names in Charlotte, including Bank of America, Wachovia, TIAA-CREF, Philip Morris, and NASCAR. By design, many of his cases involved whistleblowers.

Darryll couldn’t afford to retain a New York City PR firm for an extended period, but we kept in touch with him over the years and helped him out whenever we could. Many of his clients were individuals from low or middle rungs of corporate ladders who had been made scapegoats for others’ blunders and transgressions, or like Darryll, had dared to sound warning alarms about perceived wrongdoing by their bosses.

Darryll never let the emotional aspects of his cases cloud his legal judgment and, despite representing the corporate downtrodden, he never held himself out to be a crusader. Indeed, he was soft spoken, genteel, and extremely gracious. Those who know him on a more personal level have since talked about his kindness, his sense of humor, his optimism and his hands that seemed forever extended to someone in need. We regret that we never had an opportunity to meet Darryll in person. His kind doesn’t come around often.

Darryll called us a few weeks ago to let us know the Charlotte Observer was planning a feature on him and that we might be getting a call from a reporter. Tragically, the story they ran was his obituary.

Darryll Walter Bolduc was only 47 when he died. Our most heartfelt sympathies go out to his family, friends, colleagues, and clients.

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• What’s in a Name? Alex Berenson vs. Bradford Berenson
• All the News That’s Fit to Spin
• Journalism’s Shameful Little Secret

The New York Times vs. Eli Lilly

One of my favorite Saturday morning rituals is to pass the early hours with a steaming cup of overpriced coffee and an ambitious pile of newspapers. Call me old school, but I prefer paper to pixels, relying on printed news sources over the online variety to keep me informed of the Big Picture stuff. As a former journalist, newspaper ink still runs through my veins.

The never-quite-dormant reporter in me was jarred awake two weekends ago as I sat in my local java joint, reading The New York Times‘ business section. Buried on page two was a brief item about Dr. David Egilman, an “expert witness” hired by the plaintiffs in a legal dispute with Eli Lilly regarding its antipsychotic drug Zyprexa, who was now ‘fessing up that he had indeed given selected confidential documents, as alleged, to an Alaska attorney, who in turn gave the documents to Times reporter Alex Berenson. The story reported that Dr. Egilman had agreed to pay $100,000 to Eli Lilly to settle the case, and that he had acknowledged in a court filing that “there was another side to the Zyprexa story” that wasn’t represented in the documents that had been given to the Times.

The story piqued my curiosity. I recalled the Times had previously run a series of damning page-one articles by Mr. Berenson reporting that Eli Lilly had failed to inform doctors that Zyprexa could cause excessive weight gain and diabetes, a not-so-insignificant unwanted side effect that sparked thousands of class action lawsuits. If an expert witness involved in those cases was now publicly admitting that “there was another side of the story,” the disclosure certainly deserved considerably more prominence than a brief mention, particularly as Zyprexa accounts for nearly one-third of Eli Lilly’s profits.

There were other signs that something was radically amiss. There was neither byline nor attribution to a wire service, and the article made no mention of any attempts to contact Dr. Egilman or Eli Lilly for comment, all of which are otherwise standard for the Times. And most curious of all, the story quoted Times attorney George Freeman defending Mr. Berenson’s articles as being “newsworthy and accurate.” Hmmm… like most top-tier publications, the Times would typically offer up its editors to defend the newspaper’s editorial judgments when questioned. Was there some behind-the-curtain legal impetus driving Mr. Freeman’s involvement in this piece? I grew increasingly intrigued and started digging into the story myself.

Turns out my hunch proved correct. A respected federal judge in February accused Mr. Berenson of being “deeply involved” with Dr. Egilman (and the attorney to whom the latter had turned over the confidential documents) in an “illegal” scheme that effectively amounted to “stealing” the documents. In an impassioned decision [PDF] simmering with outrage, senior federal district Judge Jack B. Weinstein also warned that the documents obtained by Mr. Berenson “are segments of a large body of information, whose selective and out-of-context disclosure may lead to confusion in the patient community and undeserved reputational harm” to the drugmaker. Judge Weinstein went so far as to declare Mr. Berenson’s conduct “reprehensible.”

While the Times did carry a concise report on Judge Weinstein’s decision (albeit on page C7 unlike Mr. Berenson’s extensive page-one pieces), it was Mr. Freeman who officially commented, stating that the decision “vastly overstates Alex’s role in the release of the documents” (thereby suggesting that he did indeed participate in some capacity). Company spokeswoman Diane McNulty echoed the statement almost verbatim to other news outlets. The Times has yet to offer its version of the actual extent of Mr. Berenson’s involvement.

Exactly how Alex Berenson obtained and reported on the Zyprexa documents should be of critical concern to all corporations and anyone concerned with privacy rights and the integrity of the judicial system. The documents in question were among reams-worth of evidence furnished by the pharmaceutical company to expedite the settlement of some 30,000 personal injury suits relating to its drug. According to Judge Weinstein [PDF], they included “a substantial amount” of sensitive information, including individual patient medical records and proprietary trade secrets. Among other reasons, they were sealed by the court to protect litigants “from the embarrassment and oppression that would result from the unnecessary pretrial disclosure of their private information.”

First Amendment champions will no doubt continue to defend Mr. Berenson’s alleged zealousness and say the public’s right to know was well served by his reporting, even if it was based on an incomplete set of documents. Predictably, even the Times itself went down that road, albeit in a roundabout fashion. Others will speculate that the information disclosed by Mr. Berenson likely was responsible for Eli Lilly agreeing to settle the scores of Zyprexa lawsuits for more than $1 billion and that his means were justified by the end.

But it’s difficult to argue that Mr. Berenson was solely driven by the pursuit of a noble cause. After all, according to testimony by James Gottstein, the Alaska attorney who gave the Times the documents, Mr. Berenson insisted he wouldn’t publish the story [PDF] if Mr. Gottstein followed through with his original plan to disseminate them widely to other news organizations. Apparently what’s good for the Times carries a teensy more weight than what’s good for the public.

So Who is This Dr. David Egilman?

Dr. David Egilman, a Massachusetts doctor and a clinical associate professor of community health at Brown University, is a physician on a mission. Citing the influence of his father, who was interred in a German concentration camp, and the 18th century philosopher Edmund Burke, Dr. Egilman says he has “devoted” considerable time and resources studying and reporting on the effects of silence on public health. “Silence can injure and kill,” he recently posted on a website. “For public health, the sound of silence is the funeral dirge. I have not and will never play that tune.”

Dr. Egilman’s vocal orchestrations have afforded him a lucrative sideline. According to one report, he has earned millions – as much as $25 million – testifying as an expert witness at about 100 personal injury trials; another report pegs the number at about $2.5 million. His exact expertise is difficult to discern: he has been identified in one news account as “an expert on occupational lung disease,” but he has testified on subjects requiring a much wider range of medical knowledge including cardiology, obesity, and diabetes. Indeed, just a few years ago, he was involved as an expert witness in a case filed against Merck by a widow claiming her husband died of a Vioxx-related heart attack. A Merck attorney characterized Dr. Egilman as someone who “is prepared to testify to just about anything,” noting that his expert designation had been filed with the court prior to him reviewing any documents relating to the case.

Dr. Egilman is no stranger to controversy. In February 2005, he repackaged a proposed bylined article for the Journal of Occupational and Environmental Medicine as a paid advertisement after it was rejected by the editorial board, thereby bypassing the peer review process. Later that year, jurors in a landmark Colorado toxics trial were instructed to ignore Dr. Egilman’s testimony after the judge learned that he had violated a gag order and posted “scurrilous and inflammatory” information about the trial on his website. The judge ruled that Dr. Egilman was “not objective, reliable, or credible.” The doctor subsequently sued two prominent law firms for allegedly gaining improper access to his password-protected website, which was how the court had learned of his postings. After a judge ruled against him, Dr. Egilman declared: “The legal system is designed to benefit people in power. That is why courts said it was legal for blacks to be slaves or ruled it legal to deny women the vote.”

Dr. Egilman’s relationship with The New York Times dates back to at least the early nineties. After being rebuffed by 60 Minutes and other news organizations, he claims to have been responsible for a page-one story the Times ran that year about the Atomic Energy Commission being warned that it could ultimately face criticism for using human subjects to conduct radiation experiments. Dr. Egilman’s hometown newspaper wrote a story about his advocacy work, noting his media placement efforts among others (the feature presumably placed with the continued help of his publicist).

Mr. Berenson has quoted Dr. Egilman multiple times, including a 2003 story about how trial lawyers planned an onslaught of lawsuits against drug manufacturers for failing to disclose the “hidden” dangers of their medicines.

Judge Weinstein’s Perspective

Based on various testimonies, Judge Weinstein concluded that Dr. Egilman tipped off Mr. Berenson that there were some damaging documents about Zyprexa under court-ordered seal, and that the latter inappropriately acted to obtain those documents. These excerpts from his 78-page opinion [PDF] speak for themselves:

“…Alex Berenson was aware of the protective order. He discussed with plaintiff’s expert, Dr. David Egilman, means of escaping the order’s restrictions and obtaining protected documents in the expert’s possession…even though Egilman had agreed in writing to be bound by the order…”

“…Both Berenson and Egilman were cognizant of the fact that the (protective order) took account of the possibility that the protected documents could be subpoenaed by courts or executive agencies. So Berenson provided Egilman with the name of an Alaska attorney, James Gottstein, unconnected to the instant litigation, who might be willing to employ a pretense to subpoena the documents and help disseminate them in violation of the protective order…”

“…To carry out the scheme for obtaining and disseminating the protected documents, Gottstein intervened in a state case in Alaska wholly unrelated to Zyprexa. In that case, he then subpoenaed from Egilman confidential documents he knew to be under the protective order which bore no relevance to the Alaska litigation. The subpoenaed documents were sent by Egilman to Gottstein pursuant to an expedited amended subpoena about which Lilly was deliberately kept in the dark so that it would be unable to make a timely objection…Gottstein immediately sent the confidential documents on to Berenson and others…”

“…Intending that they be published extensively, Gottstein distributed the sealed documents to various organizations and individuals. No distribution to newspapers other than The New York Times was made because of Berenson’s explicit warning to his co-conspirators that if the Times was not given “an exclusive” on the story, it would not publish anything at all about the documents…”

Judge Weinstein emphasized that “this is not a case of a newspaper obtaining, with clean hands, documents provided to it by government employees, whistleblowers, or protesters. Acknowledging the Times‘ and Washington Post’s famed publication of the “Pentagon Papers”, he noted there were no allegations that those documents “were purloined” by either newspaper. “Affirmatively inducing the stealing of documents is treated differently from passively accepting stolen documents of public importance for dissemination.”

Much of Judge Weinstein’s opinion is substantiated by testimony given by Mr. Gottstein. Dr. Egilman declined to testify about his role in the “conspiracy,” invoking a Fifth Amendment privilege against self-incrimination (so much for the sound of silence being a funeral dirge!) The Times declined to allow Mr. Berenson to testify about his role citing a “long-held principle” that “it would be inappropriate for any of our journalists voluntarily to testify about news gathering at the Times.”

The New York Times Responds

When I inquired why the story was published without a byline and why it quoted the newspaper’s attorney, aforementioned Times spokeswoman Diane McNulty explained in an email that the article was “assembled by editors” (emphasis mine) because “wire services on the subject did not include a comment from the Times.” As for the decision to insert a quote from Mr. Freeman, Ms. McNulty said: “The settlement did not throw into question any editorial judgment of the Times, which is why the article quoted a lawyer for the Times rather than an editor.”

I cannot help but note the irony of the newspaper of record trying to spin a public relations executive. No byline because the paper relied on wire services? Ok, then why weren’t the wire services credited? At the risk of sounding combative, I thought “attribution” and “fully sourced” were the buzzwords in the Times‘ post-Jayson Blair newsroom. And as for the latter comment, how can the Times‘ editorial judgment not be called into question when it fails to fully cover the fallout from a series of page-one articles it published earlier based on court-sealed, ill-gotten documents leaked with the assistance of a controversial source who now admits they did not “represent the entire set of information?”

In any case, given the significance of Dr. Egilman’s declaration and the prominence given to Mr. Berenson’s damning stories, it’s noteworthy that the Times chose to rely on wire services to cover the settlement story and seemingly made no attempt to contact him or Eli Lilly for comment. The pharmaceutical company had issued a statement on the settlement, but it was not cited in the coverage. Eli Lilly’s news release references Judge Weinstein’s decision and specifically claims the Zyprexa documents were obtained “illegally.” It seems to me that a Fortune 500 company claiming to be a victim of illegal activity is deserving of mention.

Clearly, I was not the only one who had issues with the Times story. A few days after the blurb ran, a correction was issued. I leave it to you to read between the lines:

“An article in Business Day on Saturday about the settlement of a legal dispute in which a doctor was accused of leaking confidential documents to The Times from the drug maker Eli Lilly, left an incorrect impression about the admissions that the doctor, David S. Egilman, made in the settlement. Dr. Egilman acknowledged that Lilly had a different view of the safety of its schizophrenia drug Zyprexa than was portrayed in the documents. He did not admit that he accepted Lilly’s view that Zyprexa was safe.”

Here is a copy of the full declaration by Dr. Egilman [PDF]; take from it what you will.

Afterword

Let’s be clear: I have no idea why Dr. Egilman settled with Eli Lilly, nor can I determine the sincerity of his self-professed public health crusade. All I know of him and his activities are what I’ve read and researched, and the picture that doing so presents. It’s quite possible he simply settled to avoid the time and financial costs of a prolonged legal battle with the Big Company with Much Deeper Pockets. Then again, the same time/cost benefit analysis could just as easily apply as to why Eli Lilly settled with its class action plaintiffs.

For those who automatically assume the worst about drug companies, particularly with respect to drug safety disclosures, an op-ed in last week’s Wall Street Journal by Dr. Scott Gottlieb, a former deputy commissioner of the FDA, offers perspective worth considering. The reality is that drug companies don’t have carte blanche freedom to add risk information to drug labels; that’s the FDA’s call, believe it or not, and they’ve told drug companies in the past to scrub warning language that it deemed superfluous. And now Congress is considering legislation that would make it even easier for trial lawyers to belly up to the “undisclosed risk” trough.

In the case of Zyprexa, Lilly maintains that the labeling provided to physicians identified “the potentially clinically-significant weight gain that was observed in more than half of all patients treated long-term with Zyprexa, as well as the diabetes-related adverse events observed in clinical trials, including diabetes, hyperglycemia and diabetic ketoacidosis.” Perhaps the real issue is that physicians are simply relying far too much on aggressive sales reps to tell them the ups and downs of a drug, rather than actually taking the time to independently read its FDA-approved label. I’m not sure which scenario scares me more…

Eli Lilly quite understandably does not appear to be seeking any legal retribution from the Times, which is probably the best course of action for them. It’s generally accepted as a given in public relations that it is foolhardy for a major company, particularly one in an “easy target” industry that is held in low public esteem, to aggressively attack a powerful newspaper that buys ink by the barrel. Doing so would only heighten awareness of the damaging charges Lilly seeks to rebut and further exacerbate its reputational damage.

There are a great many legal and ethical themes at play in the Eli Lilly/Dr. Egilman/New York Times saga, but at the crux of it all are issues of transparency and accountability – on all fronts. While the media has done an impressive job in recent years guard-dogging the public’s interests by demanding more clarity and less concealment from our corporate leaders, it must also be willing to sound a similar clarion call when other members of the Fourth Estate totter in living up to the exacting standards they so rightfully advocate.

As the saying goes: “If you’re going to talk the talk, you’ve got to walk the walk.”

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Like a writer who keeps random plot line ideas and bits of dialogue scribbled in a notebook kept by the side of the bed, I’ve kept the Daily News‘ infamous “Ford to City” headline in the back of my head, just waiting for the right opportunity to rip it off. Thanks to Apple CEO Steve Jobs latest orchestrations, the moment finally arrived.

The technology impresario announced yesterday that Apple would slash the price of its iPhone by some 33%, but denied that lower-than-expected sales were the reason. As he told the New York Times: “It’s very clear we have a breakthrough product on our hands, but it’s also clear that many can afford it, some can’t. We’d like to make it affordable to even more folks going into this holiday season.”

So exactly when did Apple become a philanthropic organization for the tech gadget-deprived?

I don’t know about you, but if I was one of the Apple diehards who camped out overnight a mere 10 weeks ago just for the privilege of coughing up $600 the next morning to get their mitts on an iPhone, I’d be pretty ticked off right now. And I’d go into orbit after reading Jobs’ dismissive comment to USA Today about the brand-worshipping customers who paid full price: “That’s technology. If they bought it this morning, they should go back to where they bought it and talk to them. If they bought it a month ago, well, that’s what happens in technology.”

Can you imagine the fallout if, let’s say, BMW suddenly slashed the cost of its highly popular 3-Series cars by more than 30% just weeks after they were introduced? Or if Rolex slashed the prices of its watches by 30%? The brands would be forever damaged. But the traditional rules of branding and public relations don’t seem to apply to Steve Jobs, and his fire sale discounting of the iPhone is only the latest example.

Take Apple’s exclusive partnership with AT&T. The telecom company has one of the slowest wireless networks around and a solid reputation for bad customer service. Apple offers superior technology, and while its customer support has deteriorated somewhat, it’s still way better than its competitors. The pairing of the two companies is as mismatched as Armani entering an exclusive distribution agreement with Sears.

Then there is the iPhone’s inconvenient replacement battery requirement which, with the exception of the New York Times‘ Joe Nocera, has been largely ignored by the mainstream media. Like all cell phones, this one’s battery will eventually need to be replaced (Apple says the original one will last 200-400 charges, approximately 12-14 months). The kicker is that is must be sent back to Apple, however, leaving people without their beloved iPhone’s for an estimated 10 days. I’m hardly a heavy cell phone user, but being without my phone for just one day would cause me some angst – and mine doesn’t have all the fancy bells and whistles that the iPhone does! A couple of lawsuits have already been filed regarding Apple’s battery replacement policy, but they have received scant media attention.

The cost to replace the battery will be approximately $100, or roughly one quarter the cost of the newly discounted iPhone. My guess is that Jobs will have the next generation model out within a year and he’s banking that a good number of iPhone owners will decide they’ll get better value for their money by replacing the whole phone with the latest version instead of just getting a new battery.

Truthfully, I’m somewhat in awe of Steve Jobs. I give him credit for his unparalleled ability to get away with sticking it to his most ardent customers, for getting the technology media to dance for him like puppets on a string, and for creating an aura that he is not someone driven by profits and personal wealth. P.T. Barnum has long been regarded as the greatest showman on earth, but I suspect even he would agree that Steve Jobs is in a league by himself.

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In case you haven’t been following the saga, John Mackey wants to buy rival Wild Oats Markets, but the FTC wants to deep-six the deal. Mackey wants to deep-six the FTC. He has questioned the agency’s legitimacy and accused it of being “hostile and adversarial towards Whole Foods.”

Well, Mackey’s got that right. The Rahodeb disclosure was contained in a footnote of a document made public by the FTC late Tuesday and reported late yesterday by the Wall Street Journal Online. I can’t imagine where the little birdie came from who told the Journal to look for the footnote. Government bureaucrats can be awfully touchy when a CEO they are challenging publicly questions their ethics and integrity.

But let’s give Mackey his due. Wal-Mart reportedly pays Edelman some $1 million a year to come up with such ideas as the infamous “Wal-Marting Across America.” It appears that Mackey concocted and executed his deception all by his lonesome at no cost. Whole Foods’ shareholders gained further value for the $1 a year Mackey takes in salary.

From a crisis communications prospective, I also give Mackey credit for choosing to post a statement on Whole Foods’ website, rather than granting an interview to the Journal � he would no doubt have dug himself a deeper hole. But his unnamed spokeswoman did him in instead. “(Mackey’s) comments weren’t illegal” she told the Journal. Yes, but that begs the question, “does he still beat his wife?”

Mackey isn’t the only one with egg on his face (organic or otherwise). Ethisphere Magazine, a national magazine “dedicated to illuminating the correlation between ethics and profit” in May named Whole Foods “one of the world’s most ethical companies.” Step seven in the magazine’s methodology is to screen their pared-down list of companies through a Who’s Who of corporate watchdogs including The Business Council for Sustainable Development, The Center for Business Ethics, and several for-profit consultants and investment firms like The New Alternatives Fund, SustainAbility, and Winslow Management Company, among others.

Hmm… I look forward to seeing how a magazine focused on ethics handles its own public relations crisis.

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I’ve always been dubious about the “taken out of context” defense. It’s like the proverbial dog-ate-my-homework excuse. Sure it’s a possible explanation, but nobody really buys it.

Merrill Lynch gave it a shot when it first became public that its once-high-profile analyst Henry Blodgett was singing the praises of certain stocks publicly while privately referring to them in emails as “crap” and “pieces of s***.” Ouch. Merrill, to its credit, came clean a week later and acknowledged that the analyst’s e-mails were “unacceptable” and “inappropriate and well below the standards that Merrill aims to achieve.”

Flash forward to this year and you have former Wal-Mart marketing executive Julie Roehm giving the “taken out of context” defense a whirl. Roehm was fired for various alleged improprieties, including an inappropriate relationship with an underling. She claims that some of the risqué comments in a series of lovelorn emails to subordinate Sean Womack are “easily explainable” and don’t prove that she violated the retailer’s policy against employee fraternization. If that’s the case, I’d love to see the rest of Wal-Mart’s HR manual. I just can’t figure out any scenario under which “I think about us together all the time. Little moments like watching your face when you kiss me…” could possibly be deemed appropriate corporate-speak.

Don’t get me wrong – I am hardly declaring Goliath victor over David in this PR battle. Wal-Mart has had plenty of its own missteps in the public handling of this affair – ahem, no pun intended – but we’ll leave that Monday morning quarterbacking for another day.

So back to current headlines and more people with context issues. This time it is John Mackey, founder and CEO of Whole Foods Market, who is waving the “taken out of context” flag. At issue are some seemingly damaging comments he made in emails and other correspondence that the FTC subsequently cited when issuing its rationale for blocking the retailer’s proposed acquisition of rival Wild Oats Markets. Among the remarks was a discussion about how the acquisition would enable the company to “avoid nasty price wars” that could harm gross margins. Hmmm, that sure smells of antitrust aroma to me.

Here’s the kicker: Turns out Mackey’s comments really were taken out of context and “easily explainable” as well (eat your heart out, Julie Roehm).

How do I know? Rather than ask the general public to blindly take their word for it, Mackey and the folks at Whole Foods took the bold step of posting the alleged damning documents and other related materials – including a confidential memo to the board of directors outlining the rationale for the Wild Oats acquisition – to its website. And you know what? Mackey makes a pretty convincing business argument why the Wild Oats acquisition isn’t anticompetitive.

While Whole Foods certainly gets some positive points for backing up its claims of comments being taken out of context with tangible evidence, they are offset by demerits earned for two negative outcomes generated by their transparency play.

First, Whole Foods’ leadership lets its collective frustration get the better of themselves by launching a highly questionable and very vitriolic attack on the FTC as part of its posted defense. Questioning the legitimacy of the agency and the ethics of government bureaucrats before whom you have significant business dealings is not a smart negotiating tactic.

The second related cringe-inducer is from a PR standpoint: As shared in his blog, Mackey argued that Whole Foods faces formidable competition from mainstream supermarkets, not just ones specializing in natural foods. He is especially passionate about Wegmans Food Markets, an upscale Northeast supermarket chain with legions of fans, including one of my colleagues, who lives for its chocolate chip muffins.

To wit: “Wegman’s (sic) operates huge stores with excellent quality of perishables and low prices and it is difficult for us to effectively compete against them“. (emphasis mine).

If I were Wegmans, I’d have my advertising team working on full-page advertisements with the following headline: “Even Whole Foods Raves about Our Excellent Quality and Low Prices.” John Mackey has already written the ad copy.

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