munich-movie

Movies About Disasters

Fascination with disasters seems to be widespread as evidenced by the rapidity with which Hollywood picks up on so many, in many cases finding them extremely lucrative with a few hitting the top levels of popularity and income. One book listed more than a hundred successful disaster movies. Disasters engineered by terrorists have recently hit the screen.

Munich is one, based on the murder of Israeli athletes at the 1972 Olympics in Munich, and now come two from the disasters of 2001, The World Trade Center and Flight 93. Even China has decided to get into movies of this kind by reliving the horrors of Nanking in the 1930s. The problem with this kind of movie is that accuracy of detail is a victim.

Hollywood takes liberties with historical events, shaping them to fit the goals of the producer. For a book of this kind it is a particular problem. Many of the events documented in these two books have been the subjects of disaster movies and many people have seen them. It is important that readers recognize this disparity between the facts of the event and the additions and subtractions included by the film producer.


Honda-F1-Withdrawal-2008-2009

Honda F1 Withdrawal – 2008-2009

From the early 1990s Honda pursued high-profile success in the premier international motor-racing series, supplying engines to established teams in The Formula One World Championship with some success. But the mighty Japanese car maker eventually decided to ditch partnership deals and go solo, forming the British-based Honda team that performed well in 2006, though two disappointing seasons followed.

No matter, for 2009 promised to be a good year. Honda lured a giant of the sport in 2008, appointing Ross Brawn as team principal. The canny Englishman had enjoyed spectacular success with Benetton and Ferrari, and abandoned the lackluster 2008 Honda car to its lowly fate and threw the team’s efforts into developing a competitive car for 2009. But disaster struck.

Despite Brawn’s forceful assertion that the new car was a winner, Honda panicked and abandoned Formula One as global recession bit, writing off a billion-pound-plus investment that never quite delivered the glory, headlines and valuable exposure the company so desperately craved. To avoid losing face, Honda offered a trifling parting gift of S100 million that enabled Ross Brawn to effect a management buyout, secure an engine deal with Mercedes-Benz and enter the 2009 FI World Championship with the renamed Brawn GP team.

The rest is history. Brawn driver Jenson Button won the inaugural Grand Prix in Australia and went on to win five more, hotly pursued by team-mate Rubens Barichello. The Constructors Championship was finally clinched in Brazil, along with Button’s Drivers Championship. The reaction in Honda’s Tokyo HQ can only be imagined. The ultimate prize pursued at vast expense for a decade and more should have been Honda’s for the taking, but the company simply tossed it away – along with international publicity worth hundreds of millions. It was surely one of the worst business blunders of all time.

When: 2008-2009

Where: International

Toll: None. Fortunately, hara kiri is no longer mandatory in Japan in the event of humiliating failure, so the knives didn’t actually come out at Honda.

You should know: Honda’s marketing people may have missed the biggest showboat in history but shrewd entrepreneur Sir Richard Branson swiftly boarded with a cut-price sponsorship deal that put the Virgin name on fledgling Brawn cars, thus reaping the most handsome of dividends – securing brand exposure worth an estimated £40 million for a fraction of that sum.


Bernie-Madoff’s-Billion-Dollar-Ponzi-Scam-2008

Bernie Madoff’s Billion Dollar Ponzi Scam – 2008

It was inevitable that the fallout from the collapse of international banking and the global government bailouts would add the scum of fraud to the froth of scandal, bubbling to the top of the cauldron of financial disaster. Bernie Madoff is the Big One, but there is absolutely nothing heroic about his Slim Shady wheeling and dealing. Madoff was an unsophisticated, low-rent criminal. Running a Ponzi scheme – paying non-existent profits from an ever-widening circle of new investors, and creaming a bit of ‘personal’ off the top while it’s in your hands – is tacky stuff.

Madoff differs from your local flim-flam man only because of the colossal scale on which he eventually operated. The hugely sophisticated methods of concealing both his actions and the money were devised by paid accomplices, as motivated by greed as he was. It’s the scale that makes him interesting, and the celebrity world he moved in as a consequence. The combination made a story worthy of Aesop, if the wise old Greek had run a red-top gossip column.

Bernie Madoff’s personal take was $65 billion. After decades of deceit, his 150-year prison sentence probably feels like a holiday from it all. Still cushioned by his wealth (via his wife) he can literally relax while officials wrangle over the authorities’ failure to stop him. Theirs is a separate catalogue of cowardice prompted by personal and departmental ambition or greed. Many among his victims have remained quiet, too well aware of temptations and misgivings pushed to the back of their well-heeled minds. Across a great divide are the other victims, whose trust was sought and given and betrayed; and others still, employees of crashed businesses and their families, who won’t even get their wages, never mind million dollar repayments of all-too-willing investments.

There ought to be something funny about Bernie Madoff. But there isn’t.

When: December 11 2008

Where: New York City, New York, USA

Toll: The SEC (Securities 8t Exchange Commission) is planning far-reaching reforms which will have to pass Congressional and Senate hearings to take effect – but first the squabbling over the spoils and blame has to be resolved. The Madoff scandal will run and run.

You should know: Zsa zsa Gabor (Princess and national treasure!) has instructed her lawyers to argue an impertinent IRS (internal Revenue Service) tax claim for $118,000 on grounds of Bernie Madoff’s failure to pay her. If Madoff had ever had that kind of chutzpah, he might never have turned criminal.


Societe-Generale-Trading-Loss-2008

Societe Generale Trading Loss – 2008

The world now knows to its cost that the great investment banks lost all sense of disciplined prudence as they greedily grabbed glittering profits in deregulated markets. By developing ever-more sophisticated and complex financial instruments, sharp traders were able to make massive gains for their employers and earn huge cash bonuses themselves. But these flawed practices were a recipe for disaster, leading to the near-collapse of the international banking system in September 2008. For those with eyes to see, events at one of France’s most respected banks earlier that year provided a dramatic pointer to the trouble in store.

The Societe Generale trading loss is a tangled web that has never been unraveled, but there’s no dispute about the bottom line. Over three January days, at a cost of 4.9 billion euros, the bank closed out positions built up over time by a single trader named Jerome Kervie, in the process losing a staggering sum that would represent a respectable annual budget for many a small country.

According to the bank, Kervie engaged in unauthorized trades totaling around 50 billion euros – thus personally exceeding Societe Generale’s total market capitalization.

Kervie countered by claiming that the bank was aware of his complex wheeling and dealing but turned a blind eye because it was so profitable.

He added that others were doing similar business with management’s tacit approval. Kervie’s story was given credence by the fact that – while he expected a 300,000 euro bonus – he earned it by making a two billion euro profit for the bank and didn’t fraudulently divert any funds into his own pocket. In the end, despite the mayhem caused by his actions, Kervie admitted to no more than exceeding his credit limits and faced only minor charges of illegal access to computers and abuse of confidence.

When: January 21 to January 23 2008

Where: Paris, France

Toll: None (though Societe Generale’s reputation was hardly enhanced).

You should know: There were international repercussions when Societe Generale started the forced sale of Jerome Kervie’s complex positions. The bank’s action contributed to a sharp fall in European stock markets, which in turn led to an emergency cut in the US Federal Reserve’s inter-bank lending rate. It was the start of a steep and slippery slope leading to the global banking crisis.


Coca-Cola’s-Dasani-Water-2004

Coca-Cola’s Dasani Water – 2004

Five years after its 1999 launch in the USA, Coca-Cola had achieved a marketing miracle with its Dasani bottled water. It was time to ‘grow’ the brand in Europe. Early in 2004, the company spent £7 million introducing Dasani to the UK as ‘pure’ bottled water, meaning (as The Grocer trade magazine pointed out) water taken from municipal sources, purified according to Coca-Cola’s own process, and revived ‘for taste purposes’ with added mineral salts. It was tap water.

Worse, the ‘highly sophisticated purification process’ proved to be identical to that used in household-sized domestic water purifiers.

Half a liter from the tap cost 0.03p; half a liter of Dasani cost 95p. Underlying economic outrage gave an edge to cackling headlines like ‘Eau Dear!’, ‘Coke’s in Hot Water’ and ‘The Real Sting!’. But Dasani performed well in much of the world, and the company sniffily observed that the UK market for bottled water is ‘relatively immature’. If their intention was to ‘diss’ Britain for failing to subscribe fully to the ‘lifestyle choice’ of Coke’s superior branding, they provoked only more gales of laughter.

Mirth turned to irritation when UK trading standards monitors looked closely at Dasani. Analysis challenged its use of the word ‘pure’. It also dropped the bombshell that among Dasani’s additives there were illegal levels of bromate, a dangerous carcinogen. There was no bromate at all in the source water. Britain’s Food Standards Agency (FSA) announced that ‘Any increased cancer risk is likely to be small [but] presents an unnecessary risk’.

Five weeks after its glitzy launch, Coca-Cola withdrew all half a million bottles from circulation, and Dasani abandoned the UK. Coke had suckered itself with a PR disaster.

When: February to March 2004

Where: UK

Toll: Apart from its embarrassment and financial loss in the UK, Coca-Cola faced reviews of its water bottling procedures in many places, including the USA.

You should know: In the US, Dasani is promoted as ‘better than natural’ water. Among a series of ads using actors dressed in ‘what look like off-off Broadway animal costumes’ is one showing a ‘camel’ to suggest ‘natural’ means tasting like ‘sandy’ water; and a ‘bear’ to suggest ‘natural’ can mean ‘tastes fishy’. What’s not clear any more is whether it is the manufacturer or the consumer who is losing the plot.


Equitable-Life-2001

Equitable Life – 2001

Founded in 1762, the same year as Barings Bank, Equitable Life used to share the same reputation for probity. That reputation evaporated in 1999 when the insurance company went to court in an effort to renege on its promises to policyholders. It won a shameful judgement, but lost in the Appeal Court. By December 2000, unable to fulfil its £1.5 billion obligations, or find a buyer who would, it closed to new business.

That was just the tip of an iceberg of scandal revealed during the following decade, and marked by a series of stitch-ups involving the government, the courts and every regulatory body supposed to safeguard innocent consumers. The affair is still unresolved, and though all parties continue to use the euphemistic language of diplomacy and the law, it’s a saga of unremitting greed, vicious disregard for responsibility and evasion of the most straightforward truth. Claim has followed counterclaim in the cause of delay. Blame for ‘regulatory failure’ passes back and forth while newly sensitized financial services authorities alternately support and excoriate schemes to buy out arbitrarily selected groups of policyholders.

A 2008 enquiry found that a million people had lost half their life savings because the government painted ‘a wholly misleading picture’ of their investment risk. Or someone else did. Meanwhile some 30,000 policyholders have died, waiting. More poignantly, the other few hundred thousand need their money to live in the manner they saved so assiduously to achieve. Currently, Equitable Life presents itself as one of the hapless victims, and is visibly delighted that after so many years and 13 reports, it looks as though the company will not only survive, but won’t have to pay a red cent where it is due. Roll on the bonuses!

The ‘collapse’ of Equitable Life is proving to be as much a humanitarian disaster as a commercial one. It’s not as though it presents any moral dilemma.

When: 2001

Where: London, UK

Toll: Many thousands of Equitable Life’s policyholders have suffered greatly following its collapse and prevarication. Collaterally, the disaster has caused intense scrutiny of aspects of the insurance industry and other financial services; and further legislation is being drawn up to replace the interim, provenly toothless, reforms. Unfortunately, so far they don’t include a bill to outlaw the corporate and political abuse of legal nitpicking.

You should know: ln 2008 one of the many reports proposed an independent body to decide how much of the policyholders’ losses was caused by maladministration (as distinct from the company’s later market collapse). According to The independent ‘the Equitable Members Action Group (EMAG) suggests this amounts to £4.65 billion’.