In Roger Blackwell‚??s federal trial, it was his word against the statements of his ex-wife and a former friend. This time, the marketing guru and Ohio State professor couldn‚??t win over the toughest audience of his life.
Roger Blackwell was stoic as he stood facing members of the jury in the federal courthouse in late June. But as he heard them find him guilty on 19 counts of insider trading and related infractions, his face became redder and redder. When he is sentenced several months from now, he will be facing as many as 10 years in prison. Still ruddy more than an hour after the verdict, he told Columbus Monthly, "I just don't understand it."
Blackwell was the ultimate insider; a few years ago, he belonged to an astonishing nine corporate boards at the same time. The acclaimed marketer and Ohio State professor had spent his long and fabled career instructing people (from CEOs to students) on how to run their businesses and their careers. He had worked tirelessly to accumulate all the trappings of an abundant life: bestselling books, a multimillion-dollar net worth, a prominent OSU building named after him, a big Upper Arlington house, a vast array of admirers.
At the trial, it was basically his word-his reputation-against the testimony of two others: his ex-wife and a one-time close friend. These are people he once loved and trusted, and there they were, on the witness stand, under oath and with immunity, tarnishing his legacy and ruining his life. No doubt, he saw them as betrayers, each his own personal Judas.
Someone was lying, and the jurors, to Blackwell's astonishment, refused to believe the word of the marketing master.
No wonder he couldn't understand it.
In April, on the eve of the trial, Blackwell spoke to Columbus Monthly of his difficult past couple of years. In 2003, the U.S. Securities and Exchange Commission announced that after a lengthy investigation it had filed civil action against Blackwell (and others) for insider trading relating to stock transactions before and after the 1999 sale of Worthington Foods to Kellogg's. (Blackwell sat on Worthington Foods' board.) Then in the summer of 2004, Blackwell and five additional defendants were indicted on federal criminal charges. "This is a nightmare," Blackwell said. "I'm still waiting to wake up."
He said he had resigned from almost all the corporate boards he had been on. The list at that point added up to half a dozen, including Columbus-based Max & Erma's. One exception was Applied Industrial Technologies, a Cleveland distributor of industrial components. "The stockholders voted me back," he said, noting that 98 percent endorsed his continued service last fall. (Two days after the conviction, the company accepted Blackwell's resignation.)
Blackwell spoke of having received overwhelming support from friends and associates. But he said his first devotion had been to God, a faith reinforced since last September by weekly Bible study sessions with Loren Geistfeld, a professor of consumer sciences at OSU, and Howard van Cleave, associate director of the InterVarsity Faculty Ministry at OSU (a conservative Christian coalition).
Geistfeld, who has known Blackwell since 1978, says the sessions were "a chance to support somebody who's going through a difficult time." He would do a word search of the Bible to find passages that bolstered one's faith during a period of severe testing, and at 7:30 every Wednesday morning the three men would review and discuss the inspirational words.
Van Cleave says that over the weekly Bible study sessions he had seen changes in Blackwell. "I saw at one session how he became reflective over the difference between being arrogant and being confident. You know, he's so immensely popular and well known. And he got sucked into this vortex of 'Aren't I popular?' "
"Roger was emotionally stripped bare . . .," van Cleave says. "All he had was Christ."
During the several days the jury took to return a verdict, Blackwell commented that he thought the longest day of the year was the solstice. "But these days are longer." He camped out with his lawyers in the hall of the federal courthouse, waiting. The night before the jury brought in its verdict, he was hopeful. That was Father's Day; he had spent it playing with his three grandchildren.
Perhaps he also was reviewing his testimony, which was essentially his best chance to save himself. Blackwell built a good part of his fortune by hiring himself out as a keynote speaker; he was known for his passionate presentations. But on June 6, when he took the witness stand, he looked like someone backed into a corner. He was fidgety and nervous. When his attorney, Thomas Gorman, asked questions about his ex-wife, Tina Stephan, Blackwell couldn't resist making sardonic remarks about her, particularly about how she'd never used a washing machine before she'd met him.
At one point, special assistant U.S. attorney Gregory von Schaumburg said Blackwell's father had testified that Blackwell told him, "If I wasn't on the board [of Worthington Foods], I could tell you something about them and give you some information." Blackwell disputed the statement's accuracy. "I would never say, 'If I was'; I would say, 'If I were.' "
Also, his loquacious manner often led him to say more than he needed to. When he was asked about running into his longtime friend and business partner, co-defendant Arnold Jack, in a Monte Carlo hotel lobby in September 1999, he began his answer by saying, "This is the kind of thing" jurors might find "difficult to be true." Gorman, trying to rein in Blackwell, began including in his questions the phrase, "Just tell me the substance."
Blackwell had been waiting for his chance to testify ever since his trial started more than two weeks earlier on May 17. He had so much to say. He had heard his ex-wife testify that he'd told her about Kellogg's intention to buy Worthington Foods in August 1999, nearly two months before it became public knowledge, and they'd given her mother $20,000 so her parents could buy company stock.
The morning after Stephan's first day on the witness stand, assistant U.S. attorney Michael Marous reported to Judge James Graham that Blackwell had mouthed, "I hate you," to Stephan during several sidebars. Later, during a break, Blackwell denied doing so to Columbus Monthly. "I rolled my eyes," he said. "I would have liked to roll them a lot more." (During his testimony, he conceded to von Schaumburg, "It might be correct to say I glared at her. That might be true.")
He also had heard his close friend, Jack Kahl, testify he'd been tipped off by Blackwell about Kellogg's and had made a profit of $168,000 from trading Worthington Foods stock. Blackwell wondered if Kahl and Stephan were in collusion against him.
Throughout cross-examination by von Schaumburg, Blackwell remained steadfast. "I did exactly what I was supposed to do throughout this period," he said. "I wouldn't give any information to anyone because no one needed it to buy this stock." When Gorman asked Blackwell if he had tipped Kahl, he responded vehemently, "I would never risk my reputation or his. . . . I've worked hard for 40 years."
Indeed, Blackwell, who turns 65 this month, has worked hard. And he has prospered. He came to Ohio State in 1965 to teach marketing. Three years later, he co-wrote Consumer Behavior, a text that's going into its 10th edition. ("Nobody's ever got to the 10th edition before," Blackwell proudly says.) His publications are voluminous-hundreds of articles, dozens of books. In 1980, he founded Roger Blackwell Associates, a one-man consulting agency primarily devoted to arranging his speaking engagements at trade shows and industry conventions. Some years he has had more than 100, at fees as high as $20,000. Along the line he picked up the tag "marketing guru."
Blackwell became wealthy by exercising stock options as a corporate board member-for example, he is the largest individual stockholder of Max & Erma's, with a 16.6 percent stake-and investing much of his speaking income. His current net worth is upward of $20 million. Until his recent difficulties, his life had been an unbroken line of successes.
And Blackwell has never hidden his candle under a bushel. His illumination is more like a lighthouse beam shooting over the seas of commerce. His marketing genius is nowhere more apparent than in the ways he has marketed himself. One tool has been his website, www.rogerblack well.com, which gives all the good news about him and details how to purchase his books and services. There is not a word on it about his legal troubles.
This book is dedicated to
Kristina Stephan Blackwell
-From Mind to Market
Tina Stephan's first date with Blackwell was in December 1988. They had dinner together. She was an MBA student at OSU and Blackwell's teaching assistant. A month later, they were seriously involved. Blackwell was married at the time; he and Mary Blackwell divorced in August 1991, and in December 1991, he and Stephan were married. He was 51; she was 26. They built a million-dollar-plus, 8,000-square-foot house in Upper Arlington alongside the OSU golf courses, in which they entertained students, academic colleagues and visiting businesspeople. (Blackwell likes to mention he paid cash for the home.)
Stephan became vice president of Roger Blackwell Associates; over the next dozen years they co-wrote eight books. Every August, they left for their condo in Breckenridge, Colorado, returning in time for Blackwell to teach when the fall quarter began in September. In 2001, they pledged $7 million to OSU for a hotel and restaurant anchoring the Fisher College of Business. Practically overnight, the Blackwell became one of the best known buildings on campus. (After the guilty verdict, OSU released a statement saying it "is reviewing matters related to the naming rights associated with the Blackwell Inn.")
Early in 2003, however, Stephan separated from Blackwell and moved to New York City; she told Blackwell that the SEC investigation played a part in her decision to get her own residence. Stephan continued to work with Blackwell on the book that was published as Brands that Rock in 2004, but otherwise had little contact with him. The man in her life became Terry Lundgren, CEO of Federated Department Stores. She and Blackwell were granted dissolution of their marriage in August 2004, and by the end of last year she and Lundgren had announced their engagement.
Her testimony was difficult for Blackwell to endure. Besides giving her parents insider information and $20,000 to buy Worthington Foods, she said she also urged a cousin in Pittsburgh to buy the company's stock. Her parents and cousin acted on her tip and came out well ahead after the Kellogg's buyout, reaping a total profit of $25,000. (The parents were unindicted co-conspirators who, according to a government spokesman, had to place those stock earnings into a trust account the SEC controls. No legal action has been taken against the cousin.)
Stephan also testified that after Blackwell received a subpoena from the SEC in November 2000, they went to the office of Roger Blackwell Associates late one night. They deleted from an office database many of the names of Worthington Foods stock purchasers listed in the federal subpoena, along with an assortment of others. When Mary Hiser, the Blackwell Associates receptionist, discovered their tampering the next morning, she exploded in anger at Blackwell. "If your records are being subpoenaed," Hiser told him, "it's probably not a good time to be deleting records." Her printout of the deleted names became a key exhibit in the prosecution's case.
Before the trial, Blackwell had said, "I got a little distracted with Tina, doing things she wanted to do. Now I'm doing what I want to do." He had a lot of room in his trophy home for doing it.
I benefited greatly from other executives who read most or all of the manuscript in various stages of revision. These include . . . Jack Kahl, CEO of Manco, who acted as far more than a source of advice and encouragement, but also as a trusted friend.
-In the acknowledgements of From Mind to Market.
Blackwell met Jack Kahl, a Cleveland-area industrial entrepreneur and educational benefactor, in 1992. Over the next decade, they found many professional and personal reasons to spend time with each other. Kahl got Blackwell on the board of Manco, Kahl's company that grew beyond selling and manufacturing duct tape to marketing a number of consumer products. (Manco was sold to the Henkel Group in the late 1990s.)
While married to Stephan, Blackwell invited Kahl and his fiancée to his home during OSU football weekends to attend games at Ohio Stadium. When Blackwell flew to Cleveland in his plane, "Black Swan," Kahl would be at the airport to drive him to his meeting. The two formed a mutual admiration society.
On March 17, 2004, FBI agents questioned Kahl about the 15,000 shares of Worthington Foods stock he had bought in September 1999. He responded that he'd placed the order without insider information. But overnight he reconsidered, and the next day he called his lawyer to say that his statements to the FBI were false. Blackwell, he said, had tipped him off about the Kellogg's buyout.
When Kahl testified during the second week of the trial, he said, "Roger warned me not to buy too much. He said it was a thinly traded stock." Buying large lots would move the stock price up and draw the attention of the regulatory agencies. But what Blackwell considered big was not necessarily what Kahl, who routinely made trades in the millions of dollars, regarded as large. His $181,000 buy of Worthington Foods stock brought a profit of $168,000. "For me," Kahl said, "that was a small amount of stock."
Thou Shalt Not Deal with Washington Lightly.
Govern your industry and business dealings effectively and federal regulators won't have to.
-One of Steve Case's "Ten Commandments for Success in the Digital Arena," as quoted in Blackwell's Customers Rule!
The weeks of the trial wore heavily on Blackwell. He looked sallow; his step lost its spring. Confined to a chair at the defense table, he fiddled with his Dollar Store reading glasses while listening to the long parade of witnesses. At one point, after what he considered a favorable turn in the trial, he asked a friend seated in the public area, "Were you praying?" When she answered, "All the time," he smiled and said, "See? It works." During breaks while he was on the stand, he wondered out loud to those watching how he'd come across. After enthralling trade show crowds for years, he was facing his toughest audience-the 12 jurors and four alternates.
He had no good thoughts about the government prosecutors. He maintained that the SEC investigators and lawyers had incessantly badgered him and his family and disrupted their lives; he compared them to Nazis. During a break one day, he explained to Columbus Monthly, "You know, if you have a beautiful jigsaw puzzle on your desk, and somebody comes along and throws it on the floor and smashes it, it will take a long time to put it back together."
From the iron-fisted viewpoint of federal regulators, charged with maintaining the integrity of publicly traded stocks, such terms as "fiduciary duty" and "due diligence" are paramount. When Blackwell was asked on the witness stand to define fiduciary duty, he answered, "What it means in simple terms is to do what's right." Blackwell is convinced that whatever he said to anyone in August and September 1999 was doing what's right.
In fact, to this moment, Blackwell declares his innocence of all the charges brought against him. Regardless of the jury's decision, it is hard not to believe his sincerity. Indeed, why would Blackwell-near the end of his career-have risked everything on a stock buy he personally didn't directly profit from? To those who know him well, it doesn't make sense.
Perhaps a clue comes from Malcolm Gladwell's bestselling book The Tipping Point. He discusses a personality type he calls a "market maven," who, according to Gladwell, thrives on collecting information on consumer goods-where to go for the best products at the best price. But a market maven doesn't just collect this information. He also disseminates it. His greatest satisfaction lies in his belief that others have benefited from his knowledge.
This sounds a lot like Roger Blackwell.
He previously has declared that his avowed purpose is "to raise the standard of living a little bit in the world." In the April interview, pointing out he's designated the bulk of his estate to benefit college students, Blackwell said millions of dollars that should have gone to educational opportunities for future students had been spent on legal fees instead. He said, "That's really what I feel bad about."
During spring quarter, he told several hundred OSU students in his principles of marketing class that if they opened an IRA now-and made the maximum allowable deposit each year-they could expect to earn several million dollars when they retired. Then he said he'd give cash to a certain number of them if they could prove they'd opened an account. Not much later, Blackwell handed out 22 personal checks at $50 apiece for a total of $1,100.
At the end of his last class before the trial, Blackwell told his students that over his 40 years of teaching he'd heard numerous excuses about missing classes, including having to appear in court. But this time around, he had to make exactly that excuse himself. "He was pretty emotional," says student Chun Lai. Another student, Anthony Orlando, adds, "He said he was hoping to be back for finals, but wasn't sure he would."
The announcement took the class by surprise; no one seemed to have been aware of Blackwell's impending trial. Lai says the class gave Blackwell a standing ovation that lasted several minutes until "He thanked everybody and just left." Blackwell later said it was the hardest day of his life.
When Blackwell was found guilty on June 20, he immediately resigned his position at Ohio State.
Dennis Read is a freelance writer who contributes frequently to Columbus Monthly.
This story appeared in the August 2005 issue of Columbus Monthly.