Legal Commentary

The faux-analyst

By Tom Kirkendall

One of the funniest things I read from this past weekend was this W$J article about the earnings conferences calls being crashed by a faux-analyst named Joe Herrick:

At least seven times just the past three weeks, a mystery caller has cleverly insinuated himself into the normally well-manicured ritual of the quarterly calls. As top executives of publicly traded companies respond to securities analysts' questions about their balance sheets, he impersonates a well-known analyst to get called upon. Then, usually declaring himself to be "Joe Herrick of Gutterman Research," he launches into his own version of analyst-speak.

"Congratulations on the solid numbers -- you always seem to come through in challenging times," he said to Leo Kiely, president and chief executive officer of Molson Coors Brewing Co., on Feb. 12, convincingly parroting the obsequious banter common to the calls. "Can you provide some more color as to what you are doing for your supply chain initiatives to reduce manufacturing costs per hectoliter, as you originally promised $150 million in synergy or savings to decrease working capital?"

Analysts say the caller's questions, though credibly phrased, are too off-target for a real analyst. It's more like "consultant-speak," says a disdainful Bryan Spillane, a Banc of America Securities analyst, a victim of one of Mr. Herrick's impersonations. Analysts deal with often-wonky financial details, but "savings per hectoliter" rarely comes up.

But many CEO's have had more trouble telling the difference. Most have gamely tried to answer the questions. Mr. Kiely and two other Molson executives stuck politely with the caller through three detailed follow-ups. Timothy Wolf, the company's global chief financial officer, closed by telling him, "We think we will have some more positive encouraging things to share with you next month in New York," according to a transcript of the call. A Molson spokesman said that to him the caller sounded legitimate at the time. [. . .]

[On the Coca-Cola earnings conference call], Banc of America's Mr. Spillane, the earlier impersonation victim, posed a detailed question about how much of the company's currency-neutral operating profit growth was organic rather than coming from acquisitions or cost savings. "We hesitated on you for a minute because as we take these questions we are just trying to make sure that in fact you are who you say you are," Coke's chief financial officer, Gary Fayard, said before launching into an answer. "I am the real deal," Mr. Spillane replied.

All of which prompted the following crack from Mr. Juggles over at Long or Short Capital:

. . . the best part is that Joe Herrick asked questions that many companies tried to answer because, well, they were the same kind of inane crap questions that they EXPECT from your typical sell-side analyst.

Full post as published by Houston's Clear Thinkers on February 20, 2008 (boomark / email).