Paul L. Caron

Wednesday, August 31, 2011

SC Johnson Responds to David Cay Johnston

SC Johnson Following up on Thursday's post, Johnston: SC Johnson Cleans Up by Dodging Wisconsin Taxes:  SC Johnson press release:

Late last week, Reuters editorial writer David Cay Johnston released a sensationalist piece about SC Johnson’s tax practices. Using questionable sources and twisting facts, he delivered a completely misleading article designed to persuade readers that SC Johnson is acting unethically and illegally. 

The company reached out to Reuters immediately, and Reuters indicated that they “cannot and will not offer a retraction or any corrections.” And of course, as all stories on the Internet do, this unfounded and irresponsible piece is spreading widely and causing further unwarranted damage to SC Johnson.

Mr. Johnston launched an attack on SC Johnson to drag us through the mud. He lacks the facts to draw the conclusion that he wants readers to make. This journalistic irresponsibility should not be tolerated, and I want to set the record straight. ...

There is important dialogue that should be happening in our country about taxes. But rather than discussing important tax issues – or even reporting facts – Mr. Johnston and his publishers appear to simply want a sensationalist and inaccurate “gotcha” story that will drive media traffic.

There is no “gotcha” here. SC Johnson is a law-abiding corporate citizen. To suggest anything else – particularly on the merits of the completely unsubstantiated argument that Mr. Johnston has put together – is dangerously lacking in integrity and responsibility.

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@ TexEcon,

I did not in any way "help" Mr. DeGuelle, as you suggest.

I did write one column about his case (at my previous job) because the 7th Circuit Court of Appeals thought his tax whistleblower case was significant enough to appoint a lawyer at taxpayer expense to represent him and to make sure the court heard the arguments. You can read the column at, if you wish. Look for the headline with "whistleblower" in it.

I take honor and integrity very seriously. I am careful with facts, study issues deeply and always honor my word in letter and spirit. I correct errors forthrightly and quickly.

Several weekends each year I also volunteer my time to lecture fellow journalists on ethics, as well as reporting technique. You are invited to attend any of my lectures on ethics.

Posted by: David Cay Johnston | Sep 2, 2011 7:42:47 AM

@Jim Harper: Beware companies that need a "reputation manager."

Thanks for the advice, as I am also going to beware Presidents with "reputation managers." Who has ever heard of such a thing?!

Posted by: Woody | Sep 1, 2011 8:38:00 AM

Reading the excerpt from the court decision it appears a "Mr. Johnston" was involved in helping DeGuelle. Also, to JH above, DeGuelle is not a lawyer so he could not be appointed counsel at the court of appeals. His lawyers in the trial court withdrew, a sure sign the client was either not paying them or he wanted them to do something contrary to court rules; he had to finish the case pro se. Read the transcript and the phrase "disgruntled employee" seems accurate. It really has nothing to do with taxes. D.C. Johnston should be embarrassed but I don't think that's possible.

Posted by: TexEcon | Sep 1, 2011 7:31:42 AM

The "rebuttal" in the Johnson press release isn't really rebuttal at all but a careful parsing of words in the Johnston article that must have taken quite a while to write.

Posted by: Justin the part time lawyer | Sep 1, 2011 6:14:45 AM

@Jim Harper "not too much in the way of factual rebuttal"

Did you read the full press release beyond what TaxProf excerpted? There's a lot of rebuttal in it.

And every company has "reputation managers" whether they call them that, directors of public relations, customer relations, information officers, etc.

Posted by: SoBa | Aug 31, 2011 1:59:07 PM

Beware companies that need a "reputation manager" I don't have a lot of patience with companies that adamantly refuse comment and then loudly complain the next day that they were treated unfairly. Lots of indignation on the part of S.C. Johnson's "Reputation Manager" not too much in the way of factual rebuttal.

Evidently the whistleblower is Michael DeGuelle or someone associated with him. His claims evidently have enough substance to get him appointed counsel by the court of appeals in a civil case, something that almost never happens.

Posted by: Jim Harper | Aug 31, 2011 11:10:17 AM

Ad hominum? Seems to be attacking Johnston and not answering the points he made. Of course, as is pointed out, their corporate tax department is just doing its job under the rules they are given.

Posted by: George W | Aug 31, 2011 10:03:45 AM

"The avoidance of taxes is the only intellectual pursuit that still carries any reward." - John Maynard Keynes

Posted by: Woody | Aug 31, 2011 9:53:34 AM

So far, the only people suggesting that SC Johnson broke the law are the unnamed whistleblower and SC Johnson. The thrust of the David Cay Johnston article is that SC Johnson isn't paying its fair share from a moral or ethical standpoint, regardless of legality. SC Johnson simply executed a corporate strategy that has been and is being used by numerous other large corporations to shift taxable profits from higher-tax states to lower-tax states. This has been going on for a long time. See eg. Geoffrey, Inc. v. South Carolina Tax Commission, 437 S.E.2d 13 (S.C. 1993) and Comptroller of Md. v. SYL, Inc., 825 A.2d 399 (Md. 2003). Multi-nationals also engage in this subterfuge in the transfer pricing gambit on an international level. But then, given the current libertarian-driven political discourse, should or do any moral or ethical considerations figure into corporate behavior?

Posted by: Publius Novus | Aug 31, 2011 8:16:18 AM

Using questionable sources and twisting facts, he delivered a completely misleading article....

Welcome to what readers here of D. C. Johnston's articles have known for years, except, may I add, with the addition of his lack of tax knowledge. His initials D.C. appropriately are the same as DC Comics, whose works are also entirely fictional.

Posted by: Woody | Aug 31, 2011 8:11:22 AM