Radio Shack Knew of Monster Risk When Hiring Exec

 A few weeks ago, I wrote about the phenomenon of individual executives being held criminally liable for the acts of their employers. Now, we have a case that opens the possibility of the opposite happening: an executive who is the alleged wrongdoer putting the company at risk.

It’s the case of Radio Shack executive Dawn Callahan-Kettlewell, who has been indicted in Ohio on charges of fraud stemming from her work at the now-bankrupt InkStop. She was hired shortly before the indictment was handed down, but Radio Shack knew of her legal troubles (including several civil suits) before hiring her.

The Fort Worth Star-Telegram’s Mitchell Schnurman quoted me as being shocked that Radio Shack would take such a risk – particularly given how fiercely Texas businesses fought for and defended the state’s at-will employment doctrine. 

Texas employers have the right to fire employees for good reasons, bad reasons, and no reason at all. Under our criminal justice system, the accused is presumed innocent until proven guilty, but the employer does not have to take that risk.  Employers can, and often do, fire someone based on allegations long before a criminal conviction.  So it confounds me that Radio Shack wouldn’t fire someone based solely on these allegations.   

After all, according to the Star-Telegram’s Schnurman, “she was part of a group accused of cooking the books and now works closely with senior executives at a publicly traded company.” (For more background on this case, I strongly recommend reading Schnurman’s excellent article.)

Surely, in this economy, there must be someone with the qualifications to do this job who doesn’t face a fraud indictment.

Why do I find this case so troubling? Here are just a few of the reasons:

Morale issues galore: You would think that the rank-and-file workers at Radio Shack undergo criminal background checks, and it’s hard to imagine that some of them haven’t been penalized for much smaller offenses than what Callahan-Kettlewell is accused of doing. How do you say to the guy in the mailroom who got arrested for a bad check that, although there’s a Senior VP indicted for fraud, the mailroom guy has to go?

SEC issues: If Radio Shack were to ever end up on the wrong side of an SEC investigation, then the SEC certainly would be salivating at the notion of one of the company’s senior executives already having been indicted for fraud.

Shareholder lawsuits: What if, down the line, Callahan-Kettlewell commits fraud while at Radio Shack, and the company’s shareholders sue? Do you tell them “We knew that she’d been sued and indicted, but we thought we’d roll the dice on her”? Even the best defense lawyers would cringe at trying to make that case.

This is one of those cases that simply leave me shaking my head in disbelief – and when you’ve been a lawyer as long as I have, there’s almost nothing that will do that anymore.

I’m sure there’s more than meets the eye here, and I plan to stay tuned to see how it all unfolds.

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3 Responses to Radio Shack Knew of Monster Risk When Hiring Exec

  1. Joe Bush says:

    How many individuals have been tried in the press before ever reaching a judge
    or jury?

    Isn’t that what your and Mitchel Schnurman’s article advocate?

    I worked for this company from one month before it opened until the day
    it closed and although there were many unfortunate circumstances and perhaps
    decisions, most importantly the economic downturn and how the company
    chose to close, what you and Mitchel suggest is from ignorance or any
    firsthand knowledge.

    I was there. You reinforce what everybody says, “Don’t believe everything
    you read”.

    Joe Bush

  2. joe says:

    Joe: I completely agree and have seen numerous situations where people have been wrongfully convicted by the media even though in fact they were innocent. Of course Ms. Callahan-Kettlewell should be presumed innocent.

    This, however, isn’t about her guilt or innocence. This is about an employer’s right to take action against an employee for any reason or no reason at all. An employer can fire and refuse to hire for any reason (assuming they do not break the law by doing so on the basis of race, gender, national origin, etc.). They have no obligation to keep on someone even if they have been wrongly accused. It is about risk and exposure to the company.

    I question whether it is worth the risk. In my experience as an employment lawyer, I have seen that most employers don’t need much to fire someone. In fact they need nothing at all – because Texas is an at-will state. Employers can and do fire people all the time because of false rumors, speculation, and downright malicious manipulation of the facts. In the Callahan-Kettlewell case, we have a civil lawsuit and an indictment, which is much more than a rumor, so it seems extremely incongruent to me.

    Look at this as an investment. Let’s say I was thinking of investing a large sum of money in a small company. They have been sued for fraud, and indicted, but in fact they are innocent, and the charges are just the work of a competitor stirring up things for a competitive advantage (and yes, this type of thing happens). Would investors be scared off? Sure, and rightfully so, even though the charges are all false. Many investors might say it just isn’t worth the risk.

  3. Joe Bush says:

    Dear Mr. Ahmad:

    Thank you for your response. But do not separate your site from “the media”.

    I lived in Atlanta, Georgia during the Olympics and was at the Centennial
    Olympic Park the evening of the bombing. If you remember Richard Jewel,
    a guard was later accused. He was tried in the national press. He was
    a customer where I worked and only then did I know who he was, because
    of the news, their accusations and allegations. It took years and years
    but Mr. Jewel was cleared. Those who spoke loudest became silent.

    Your allegations are awfully loud and damning now Mr. Ahmad.
    Of course you, you have potential clients that you are trying to protect.
    But your method is suspect. Just like what happened to Mr. Jewel.

    Time will tell…

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