Markets

Was N.Y. Post's Carlucci the Reason for News America Marketing's Settlement With Floorgraphics?

By Jim Edwards

Updated on: July 18, 2011 / 3:43 PM EDT / MoneyWatch

One of the mysteries from the Floorgraphics v. News America Marketing trial is why the case settled after only a couple of days of testimony. One theory is that it had something to do with Paul Carlucci, the current publisher of The New York Post and still chairman and the former CEO of News America. (Both are owned by Rupert Murdoch's News Corp.)

UPDATE: Inside News Corp.'s (Alleged) U.S. Computer-Hacking Scandal

Two witnesses testified about meetings they had with Carlucci, and both left the impression that his tough-guy approach is in part to blame for why News America is beset by suits from rival direct marketing agencies. News America settled with Floorgraphics right after those witnesses.

UPDATE: Wolves Circle Piers Morgan as CNN Stays Silent on Phone Hacking Links

One witness testified that Carlucci threatened to "destroy" Floorgraphics because the owners didn't respond to an impromptu offer made over lunch to buy the company; the other testified that Carlucci told employees that if they were "bed wetting liberals" concerned about "doing the right thing" he would have them "out-placed."

Carlucci did not return two calls for comment.

One of those witnesses was George Rebh, the former owner of Floorgraphics, who claims that News America broke into his company's computers and stole his business by spreading lies to his clients. Rebh recounted a lunch meeting he and his brother Richard Rebh had with Carlucci in July 1999. The meeting took place at A Dish of Salt (pictured), a now-defunct Chinese restaurant not far from News Corp. HQ on 47th Street in New York. Here's how Rebh described it, according to a trial transcript (click to enlarge image of transcript):

A: At a certain point in the conversation Mr. Carlucci turned to Richard and said, "So, I understand your â€"-" words to the effect, "So, I understand you're here to sell your company?"
Q: And was there a response?
A: We were â€"- I was surprised to hear that, and Richard's response was, "No. That's not why we're here. We were really here to meet you, and to discuss the possibility of doing joint promotions."
Q: What happened after that?
A: ... he followed that by saying, "But from now on, consider me, us your competitor, and understand this, if you ever get into any of our businesses, I will destroy you." And he said, "I work for a man who wants it all, and doesn't understand anybody telling him he can't have it all." And that ended his discussion.

Q: How did you respond to this?
A: We were shocked, to say the least, because having not gone to this meeting expecting this kind of reception I processed what he had just said, and I said to him, "So, let me understand, make sure I understand. You can get into our business and compete with us, but if we get into your business you will destroy us?"
Q: And what did he say?
A: He said, "That's right."
Q: And what happened after that?
A: There was, I would say, a nervous kind of end to the meeting where we said goodbye, and even there was talk of perhaps following up the meeting, but we left the meeting shortly thereafter.

Floorgraphics was later invited by A&P to get into ads for supermarket shelves and carts -- News America territory -- and News America went to town on them, setting up a rival program "Floortalk," and sending out false press releases about Floorgraphics' ability to serve its clients, Rebh claimed.

The second witness was former News America employee-turned-whistleblower Robert Emmel, who fell out with his former bosses after they altered his work duties. He later took internal News America documents to Congress, claiming they exhibited antitrust practices.

Emmel testified that he listened to a Carlucci conference call in June of 2001, when Carlucci informed his underlings that News America wasn't making fast enough progress against Floorgraphics (click to enlarge image of transcript):

Q: What did he say to express his displeasure?
A: One vivid comment that I recall that he said to express his displeasure on the call was that if there were individuals that were concerned about doing the right thing, bed-wetting liberals in particular was the description that he used, then he could arrange for those individuals to be out-placed from the company.

This stuff would not normally be of note, except that it is not the only instance in which Carlucci and his lieutenants have behaved in a heavy-handed manner.

Fortune recently reported that News America president Chris Mixson cornered Emmel in the courthouse bathroom during the trial and said "Nice job telling lies on the stand" to him in a "very menacing" way.

That incident came after a separate suit, filed by another rival direct marketer, Valassis, claimed Carlucci asked his employees to look to Al Capone for inspiration. The complaint states that Carlucci showed his sales force a video of the baseball bat beating scene from The Untouchables, in which a man's skull is fatally crushed, as inspiration.

The Valassis case comes to trial later this year, followed by a similar one from Insignia Systems. More Carlucci anecdotes to come, perhaps?

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