The ‘Goodfellas’ Principles at Work in the Boardroom

Michael W. Peregrine, a partner at the law firm McDermott Will & Emery, advises corporations, officers and directors on issues related to corporate governance, fiduciary duties and internal investigations.

Keeping secrets, no matter how small, can sometimes cause a boardroom shake up. That’s the surprise corporate governance lesson from this week’s Best Buy controversy.

The internal investigation commissioned by the Best Buy board, released on Monday, reaches two thoughtful conclusions. First, that Brian J. Dunn, the chief executive, violated company policy and used poor judgment in engaging in an inappropriate personal relationship with a female subordinate. We get that one.

But it’s the second conclusion that’s likely to have lasting governance implications. The board’s chairman was also determined to have acted inappropriately when he became aware of the chief executive’s conduct but failed to share that information with the audit committee.

According to the investigative report, the chairman, Richard M. Schulze, did confront Mr. Dunn about the written allegations from an employee, and Mr. Dunn denied them. But that’s where it ended. There was no follow up.

Neither the board nor the general counsel was informed. And an opportunity was lost to address the problem at that moment. The board eventually did so in March, when it finally became aware of the allegations. In response to the investigative report, the chairman chose to step down and assume the honorary role of founder and chairman emeritus, while serving out the remainder of his term as director.

This unfortunate story should cause a stir and serve as a reminder that in the boardroom and C-suite, there aren’t any secrets; loyalty to your friends only goes so far. The Best Buy board has, commendably, sent a strong message about the obligation of fiduciaries — board members and senior executives — to fulfill their compliance oversight obligations by both word and deed.

The problem is that this obligation violates “the Goodfellas Principles” that often exist among executives and board members. In the film “Goodfellas,” Robert DeNiro’s character recites the famous line about the two great lessons in life: “Always keep your mouth shut, and never rat on your friends.” Or, in the Best Buy case, your chief executive.

It’s a fundamental tenet of corporate responsibility that officers and directors must disclose to the board information known to them that is relevant to the board’s decision-making and oversight responsibilities.
Richard Schulze stepped down as chairman of Best Buy after an internal investigation.Best BuyRichard Schulze stepped down as chairman of Best Buy after an internal investigation.

The operating principle for board members should be if you see something, say something. That would include, as the investigative report concluded, information about a chief executive’s affair with a younger employee.

Best Buy’s action draws a sharp exclamation point that no one, not even a founder and chairman, is immune from compliance responsibilities to make proper disclosures. This goes to the essence of maintaining the “tone at the top” for compliance and ethics purposes.


Finish reading HERE

Best Buy's surprisingly insecure approach to new PC setup
Somewhere in the march toward "easy," security got blindsided.

A basic rule of password-based security is "don't write down your password." A second rule might be "don't train people to write down passwords." And a third rule, which few follow, is "don't adopt password policies that lead to people writing their passwords down" (over-aggressive change requirements often have this effect, for instance).

Best Buy hasn't received the memo, apparently. This past Friday I came in contact with a surprisingly bad password policy in action as I shopped with my brother for his new computer in Scottsdale, Arizona. He had settled on an HP Windows 7 machine and was in the process of paying for it when a Best Buy employee handed him an 8.5” by 11” sheet of paper labeled “PC Recommendation Worksheet.”

Emblazoned with the familiar Best Buy and Geek Squad logos, one side contained a “new computer setup” form, where you can select antivirus software, Geek Squad tech support, data transfer services, Microsoft Office, and so forth. The other side had more of the same—along with a request for my brother’s e-mail and password, right below the fields for name, address, and phone number. Anyone reading this form would interpret it as a request for your e-mail address and e-mail password. And less-sophisticated users will fill it in, no questions asked. But we balked.

“So, why do you need my password?” my brother asked. The Best Buy employee quickly said, “you can just ignore that.” Intrigued, I asked the employee if I could have a clean copy of the sheet and he graciously complied. It’s good, because the sheet my brother filled in—without his password, of course—was taken by the Best Buy employee. You can see a scanned copy at the top of this post (click the image to get a larger view). Even though we were told to ignore it, my curiosity was piqued. Who and what is this meant for?

Best Buy's official spokespeople tell Ars that they collect the passwords so Geek Squad technicians can set up the user's preferred password for logging into their new PC. In other words, this field is where users put in a desired password for their new (Administrator-level) account. This strikes us as unwise, even if it is not a cardinal security sin. Best Buy also tells us that our inquiry has triggered a review of the form and that a revision is forthcoming. We don't know exactly how the forms will be changed, but we're glad Best Buy is working to fix the problem.

Given the placement of the password field underneath the e-mail address field, it certainly looks like Best Buy is asking for the password to a Yahoo Mail, Gmail, or similar account. More important, however, is the simple fact that asking users for their preferred password to set up their user account on the machine is bad security practice.
The proper way to set up a new user in Windows 7

PC sellers helping customers set computers up isn’t unusual—but asking them to write their passwords down in plain text on a sheet of paper to be handed to the store employee is obviously questionable from a security standpoint. It's also unnecessary. Windows lets third parties set up a PC with a temporary password and provides a self-explanatory option titled "User must change password at next log on." This was a missed opportunity for Best Buy to help users become more responsible for their security. Instead, the big box retailer misses the mark and does nothing to boost the security consciousness of its customers.

-----------

Finish reading at the link on the top of the page.

Best Buy Chairman steps down after CEO probe

Best Buy's founder Richard Schulze is stepping down as chairman of the beleaguered consumer-electronics chain after the company's investigation revealed that he failed to alert the board of directors when he learned that the CEO was having an inappropriate relationship with a female employee.

Best Buy Co. said Monday that a probe it launched in March determined that former CEO Brian Dunn, who resigned last month, violated company policy and showed poor judgment by having a "close personal relationship" with a subordinate.

The inquiry also found that Schulze, who first heard about the relationship in December when another employee gave him a written statement regarding it, acted inappropriately by not telling human resources or the company's board about the allegations.

"I confronted him with the allegations (which he denied), told him his conduct was totally unacceptable and contrary to Best Buy's policies and everything I, and the company, stand for," Schulze said in a statement on Monday. "I understand and accept the findings."

The latest revelations are part of a scandal that couldn't have come at a worse time for the 46-year-old retailer. The company, which has more than 1,400 U.S. locations, is struggling to regain its footing as it faces increased competition from online retailers and discounters. Customers have all but abandoned buying at so-called "big box" stores like Best Buy.

Best Buy reported in March that it widened its net loss to $1.7 billion, and the company announced a major restructuring. That included closing some of its big-box stores, cutting 400 corporate jobs and trimming $800 million in costs in addition to opening 100 smaller, more profitable locations.

Later that month, Best Buy's board learned about the allegations that Dunn was having an inappropriate relationship with the employee after they were brought to the attention of a senior human resources executive -- several months after Schulze questioned Dunn. Best Buy's board then hired an outside law firm to investigate the allegations.

The company probe found that although Dunn did not misuse company resources or aircraft related to the relationship, he and the employee were in significant contact for no identifiable business purpose. For example, during one four-day and one five-day trip abroad in 2011, the CEO contacted the female employee by cell phone at least 224 times, including 33 phone calls, 149 text messages, and 42 picture or video messages.

Both Dunn and the employee said the relationship was a close friendship but not romantic in nature. Still, the relationship has claimed the executive roles of two long-time Best Buy executives.

Dunn was a 28-year company veteran who worked his way up from being a sales associate to head of the company in 2009. He will receive a compensation package worth $6.6 million, which includes a 2012 bonus of $1.1 million, stock grants of $2.5 million, a severance payment of $2.9 million and more than $100,000 for unused vacation.

Schulze created the company by opening his first store called the Sound of Music in St. Paul, Minn., in 1966. He was CEO for more than 30 years, overseeing it through decades of steady growth before relinquishing that title in 2002.

Finish reading HERE

-------------------------------------

When I first discovered this site, I was somewhat agitated that it existed and amazed that this many issues were already posted.  I honestly didn't believe a lot of them.  After being there some time though, none of it is even a little surprising.  Some of the same issues happen in my store, and I have even found myself on the side of the business, thinking the customers were unreasonable.  This is no longer the case.  After countless times of screw up after screw up, I almost wish I'd never been hired there.  The only reason I'm still there is because I can't find work anywhere else and as much as I hate it, I cannot afford to be unemployed.
 
I find myself day in and day out having to clean up the mess of a lot of other people.  I've been berated by angry customers (who I empathize with) because I'm the only outlet that will let them vent their frustration.  Sales staff don't care enough to put in the effort to make sure the customer (which is them at any other stores and that confuses me) gets what they want.  The management will literally use underlings as a human shield so they aren't spotted by angry customers and won't have to deal with them anymore because of a fault of ours.  I've asked for help on a lot of issues that I've exhausted all resources and avenues available to me and am still treated like a moron for even asking, and rarely get any help.  I understand they want me to do my job to the best of my ability, but there is a limit where I have no where else to turn and need someone with more clout to assist me.  And I don't receive it.  I've been labeled a traitor for informing on fellow employees who have violated not only company policy but state and federal laws.  The systems put in place that enable me to do my job often go down without any warning, explanation or estimated time of resolution.  Occurances of product failure that was no fault of the customers is brushed off by the store, using the "outside of return policy" excuse rather than extending an olive branch to assist a loyal customer.  The CEO resigning in disgrace and getting 6.6 MILLION DOLLARS in severance.  I could go on for hours of how this company that I once held in higher regard than any other retailer has fallen so far from graces that I will never shop there again the moment I have other gainful employment.
 
I plead with anyone considering going to their local Best Buy to consider ANY other option first.  The prices may be attractive, but that is the only thing going for the company.  Amazon.com has better deals, customer service, options and availability then they ever will.  I forsee it being nothing more than a memory within 5 years time.  They are circling the drain.  If they somehow manage to bolster themselves up, it will be out of sheer desperation or a miracle.  I hate working there.  I hate my coworkers.  I hate my superiors (I use that term very loosely).  I hate my job.  I hate Best Buy.

Unhappy with Best Buy

Now, we go to the story of Bob and Joyce Deslierres and their troubles with Best Buy. The couple purchased a TV and surround sound system back in December. From the start, they say there were problems with the sound system.

For some reason the TV would suddenly shut off sometimes right in the middle of the news. Joyce told Ruth to the Rescue, "Like Dr. Frank McGeorge for instance- he's say "and this is the reason you should never take this particular and it would diem and you would lose it."

Joyce says there were several calls to the Geek Squad and they thought the problem could be resolved. This month when they realized they couldn't take it anymore, they say Best Buy told them it was too late to return the system for a full refund.

"Actually the phone conversation became rather heated on both sides," Joyce told us.

That's when Joyce contacted the Ruth to the Rescue squad and we contacted best buy on the couple's behalf. They tell us within 48 hours they had returned the sound system, had a full refund, and the situation was resolved.

"It's a miracle! Thank you Ruth to the Rescue," Joyce said happily.

Ex-Marine’s ‘Best Buy-cott’ gathers steam over radical Muslim ties
---------------
"evidence pointed to the group being a front for radical organizations"
---------------

In April the Minnesota branch of the Council on American-Islamic Relations announced that retail giant Best Buy had become a “Platinum Sponsor” for its fifth anniversary banquet. And former U.S. Marine James Canning decided to do something about it.

In a YouTube video, the Iraq and Beirut veteran demonstrated his frustration with “one of his favorite stores” by cutting his Best Buy “Reward Zone” card in half.

“Because of this support Best Buy has been giving the Muslim Brotherhood and CAIR, I can no longer conduct business with Best Buy.”

In an interview with the Daily Caller, Canning explained how his protest video came about.

“I read a news article on it on my Facebook page,” Canning said.  “So I made my video. It was kind of a spur-of-the-moment thing.”

“When you’ve got a company that supports an organization that supports terrorism,” Canning said of his boycott, “it’s kind of, in my opinion, asinine to do my business there.”
Ads by Google

In an email, Best Buy spokesman Damon Gammon confirmed the company’s contribution to CAIR.

“Over the past two years,” Gammon said, “our Inter-Faith Employee Business Network, a group of employees focused on promoting diversity and inclusion at Best Buy, has supported CAIR-Minnesota with $1,450 in total contributions to support an annual banquet.”

Ryan Mauro, a national security analyst at the Clarion Fund, a group that “produces and distributes documentaries on the threats of Radical Islam,” told TheDC that the relationship between the electronics giant and the Muslim advocacy group is a dangerous one.

“It legitimizes an organization that shouldn’t be legitimized. It funds a group that shouldn’t be funded,” Mauro said.

“It helps CAIR parade as a moderate force and it helps the group claim to be the representative of the Muslim community. Best Buy has done a disservice to anti-Islamist Muslims who are tired of having groups like CAIR talk on their behalf.”

According to the Middle East Forum, Best Buy’s public relations department has declined to rule out future support for CAIR — despite reminders of CAIR’s relationship with terror groups like Hamas and the Muslim Brotherhood.

CAIR is one of only three prominent Islamic organizations to be named unindicted co-conspirators in a case alleging criminal conspiracy to support Hamas.

In 2009, the FBI severed its own institutional ties with CAIR when evidence pointed to the group being a front for radical organizations operating within the United States. In one case, CAIR executive director Nihad Awad was shown to have participated in planning meetings with officials who had been convicted of funneling $12.4 million to Hamas through the now-defunct Holy Land Foundation.

Canning says the link is unambiguous. “CAIR and the Muslim Brotherhood are connected, and they’re both funding and supporting Muslim extremists.”

Best Buy investigation of ex-CEO widens

Best Buy Co. Inc.'s investigation of alleged misbehavior by its former CEO has expanded in an effort to determine whether some top leaders within the company improperly withheld information from the board of directors, the Star Tribune has learned.

Brian Dunn abruptly resigned as chief executive last month after the company informed him that it was investigating allegations that he used company resources to carry out an improper relationship with a female employee.

The company's investigators already have spoken to the 29-year-old woman, and she has retained a lawyer, according to a source close to the company.
Ads by Google

"If leadership was found to suppress legitimate grounds for an investigation, then that would warrant discipline," said Jacob Frenkel, who leads the white-collar crime practice at Shulman Rogers, a law firm in Maryland.

Best Buy's investigative team -- led by former U.S. Attorney Tom Strickland and William McLucas, a former director of enforcement for the Securities and Exchange Commission -- also are looking into whether Dunn used company-leased aircraft in connection with the alleged improper relationship, according to a source with knowledge of the investigation.

Best Buy leased airplanes and chartered aircraft services from Minneapolis-based Best Jets International over the past five years for $3.56 million, according to SEC documents. Best Jets is owned by Richard Schulze, Best Buy's chairman and founder.

Company officials declined to comment about the Star Tribune's report.

"As we have said, the investigation is ongoing," said Greg Hitt of H&K Strategies, a spokesman for the company. "The board's findings will be made public and appropriate action will be taken if warranted."

When Best Buy announced Dunn's departure in April, company officials said Dunn left by "mutual agreement." Best Buy later issued a statement that the board's audit committee was investigating Dunn's conduct and vowed to take "appropriate action" if warranted. Analysts criticized the company for not being more forthcoming.

Best Buy officials quickly pledged to disclose the results of the Dunn inquiry in a "matter of weeks." The company released its annual proxy statement on Wednesday, but the document shed little light on the probe.

Best Buy will hold its annual shareholder meeting on June 21.

If the allegations against Dunn are true, Best Buy could seek restitution from Dunn, perhaps by demanding the former CEO reimburse the company for the use of corporate jets, Frenkel said.

Dunn, who is married with three children, also stands to lose quite a bit of his compensation package. The company didn't pay Dunn his annual performance bonus, "pending the results of an ongoing independent investigation by the Audit Committee of the Board into Mr. Dunn's personal conduct," the proxy statement said.

Based on the performance money Best Buy paid to other top executives, Dunn would likely earn anywhere between $1.05 million and $1.13 million. Also at risk is Dunn's severance package. Upon his resignation, Dunn stood to receive $3.13 million in cash and stock awards, according to the proxy statement.

Frenkel said Dunn and the board are likely negotiating what, if any, severance the former CEO will receive.

"Unpaid compensation is often a negotiating point in the separation of an executive from the company," Frenkel said, especially if it relates to personal conduct vs. business performance.

At Least I Tried To Buy A Vacuum From Best Buy
----------------------------
Gregg ordered a new Dyson vacuum this past weekend, and used a Best Buy gift card toward the purchase. When he arrived at the store, his order wasn't ready, even though the exact item he had ordered wasn't on the sales floor. They couldn't rush the online order process, couldn't give him back the $30 from the gift card for his in-store purchase, and couldn't do much of anything useful. So he waited for a refund and bought the same item from Lowe's. The notification e-mail never did come through.
----------------------------
    Given the 20% off that Dyson is running through Mother's Day, the wife and I decided to get a Dyson vacuum. It was May 5th, and we were preparing for a Derby party at our house. I found the vacuum that we wanted a Dyson DC24 Animal at Best Buy for $359.99 and it was available for pick up at my local store, so I ordered it at 3:45pm.

    The web site stated that most online orders are ready within 45 minutes, so I went to the store 1 hour later to pick up my vacuum. I was told that I was unable to pick up my vacuum (which they had in stock, I found it on the sales floor) since my BestBuy.com order had not yet hit their system. They advised me to wait until I received the confirmation e-mail. Not being one who likes to wait to purchase mundane items like vacuums, I suggested that since the vacuum was in stock (at this point I had it in my hands at the customer service area) and I was actually at the store to pick it up, if they could just cancel the online order and then sell me the vacuum so I could be on my way.

    The difficulty was that I had purchased with a $30 Best Buy gift card, and wanted to use that $30 towards the in-store purchase, but it would be days before the gift card got refunded. So I was in the store, with the gift card and payment for the remaining amount, the vacuum in hand, and yet I was unable to get the vacuum. I cancelled the order the following day, and purchased the vacuum at Lowes.com, picked up in-store within 30 minutes of ordering, painless.

    I did wait all night and half of the following day for the "your item is ready to be picked up" e-mail from Best Buy, but it never arrived. Likewise I never received an e-mail notifying me that my order was cancelled. Just another story of great Best Buy customer service.

This article isn't exactly the worst thing BB has done, but it is a bit amusing. You will have to go to the link to read it though since i'm too lazy to port over the pics....

Best Buy Loses 4th Key Executive, Let The Worrying Begin

Growing up in the Baltimore/Washington area my first experience with big consumer electronics stores was Luskins. That was quickly followed by many a night and weekend day spent at Circuit City. I could have easily been that little kid who wanted to get the difference back on my headphones. Then there was Best Buy, where I actually spent some time as an employee and eventually sales manager.

As Circuit City began to unravel, and later CompUSA, there was always Best Buy. The world would be ok because Best Buy was there and if I needed something I often bought it at Best Buy.

When rumors started surfacing about 6 months ago that things were amiss at the nation’s largest electronics retailer I was in complete denial. There’s no way that mega electronics giant Best Buy would succumb to the deaths of CompUSA and Circuit City. I was also confident because Brian Dunn was the CEO and when I was a Top Gun (yeah I’m dating myself) Best Buy employee Dunn was our regional manager and he was tough and good.
I didn’t panic when I heard that Best Buy was going to re-organize by closing 50 stores. I was okay when I learned those 50 stores would be closed by the middle of this month. Then Dunn resigned. My main problem with the Dunn resignation was that he resigned on a Tuesday, the day before that he had made a public statement that he was there for the long haul to re-organize the company. We see how well that went.

Now Best Buy has lost another three key executives. Geek Squad founder Robert Stephens left before the mess started. Stephens left back in March, reportedly to work with startups in California.

Then there was Dunn who exited last month, he resigned, and we hear it was under a cloud of suspicion.

Chief Marketing officer Barry Judge left last Wednesday. Now, Dave Deno President of Best Buy’s Asia region and Chief Financial Officer for Best Buy’s International operations has left. Deno has joined OSI the company that owns Outback Steakhouse, Bone Fish Grille and Flemings to name a few.

Sure these other executives left for better opportunities but if Best Buy was on solid ground there wouldn’t be the need to leave.

I don’t think Best Buy will close in the next few months or maybe even the next few years but something is amiss at Big Blue and it needs to be worked out. Best Buy is losing their ass in media. In their big box stores media; cds, dvds, and video games take up a lot of real estate and there is no margin in these items.

Best Buy had said they were going to open more short form stores like Best Buy Mobile. Last year the company bought back the 50% stake the UK’s Carphone Warehouse had in the Best Buy Mobile locations. This paves the way for Best Buy to add other departments in their mall and shopping center stores.

We’ll see what happens.