Understanding RICO 2.0

November 8, 2007

This morning, the Washington Times carries an op-ed from the Center for Union Facts. In our piece, we explain the burgeoning trend of employers fighting back against union’s allegedly extortionate tactics. Here’s a bit:

… as times have changed, so has the style of union extortion.

These days, it’s less about how a company unloads goods at a port than it is about how the company is perceived in the world of the Internet. With competitors and customers just a click away, billion-dollar brands can be shattered overnight. As older and slower union officials stalked their prey in mature heavy industries, their younger counterparts began devising ways to use leverage in the new world of business by exposing companies to new electronic-harassment campaigns.

Union officials have set up Web sites mocking company names, and blogs regurgitate any blip of bad news. They use social-networking sites and text messages to coordinate demonstrations. They plaster YouTube with one-sided, and often misleading, videos of their protests and complaints.

The latest RICO cases, filed recently by the Wackenhut Corporation and Smithfield Foods, allege that union bosses have used new media tools to carry out a new style of attack: multiyear, multimillion-dollar campaigns targeting company brands and causing a steady stream of trouble for employees and shareholders alike.

The threat has been building for years, but the response is just underway now. Employers and policymakers alike will need to keep a close eye on these lawsuits.

UPDATE: More evidence that execs are increasingly fed up with this style of reputational warfare. Reuters reports that a top private equity official is calling SEIU’s rhetoric for what it is:

A large union’s efforts at criticizing Carlyle Group and its purchase of nursing home Manor Care is aimed at unionizing employees and not improving patients’ health care, Carlyle Co-Founder David Rubenstein said on Wednesday.

Rubenstein’s comments will likely fan the flames between the private equity giant and the workers union, which have grown in recent weeks as the union steps up its protest of the firm and the entire private equity industry.

“The SEIU is not happy that 60,000 workers at the company aren’t unionized. They’re campaigning and saying the health care will not be adequate. That isn’t true, in my view,” Rubenstein said, speaking at The Deal’s 2008 M&A Outlook conference in New York. “It’s really an effort to increase unionization, and not so much to worry about patients’ health care.”

Understanding RICO 2.0

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