Markets

Stabbed in the Back: J&J CEO Blames Retiring Chairman for Tylenol Crisis

By Jim Edwards

Updated on: September 17, 2010 / 1:43 PM EDT / MoneyWatch

Johnson & Johnson (JNJ)'s worldwide chairman Colleen Goggins has announced her retirement, giving CEO William Weldon the senior management scapegoat he needs to make it look like he's taking the Tylenol recall seriously. Check out the details of the announcement. After praising Goggins, Weldon says:

Colleen is among the group of executives that have led the effort to formulate and implement the remediation plan regarding the quality issues at McNeil [the J&J unit that makes Tylenol].

That sentence essentially ties the Tylenol crisis directly to Goggins. Weldon doesn't stop there. He continues:

In light of Colleen's decision to retire, I am pleased that we have a clear remediation plan in place [for McNeil] and we will work together to ensure a smooth transition of her responsibilities.

So Goggins' exit is part of the remediation? Could Weldon be blaming Goggins any more clearly?

Certainly, Goggins did herself no favors when she testified about the Tylenol recall to Congress. Under oath, she told Capitol Hill that she did not know that J&J had authorized a phantom recall of substandard Motrin, in which a J&J vendor secretly bought all the Motrin it could find from convenience storeshelves. She said:

I can't tell you right now what they were instructed to do or not, sir.

She also said that J&J had not been deceptive about the Motrin recall:

There was never any intent to deceive or hide anything.

But those statements turned out not to be true. The people closest to the effort described it as a secret mission where the entire point was to deceive store owners as to what was going on. This J&J vendor email calls it a "'silent' recall." In the same email set, McNeil's compliance president Bob Miller called it a "soft market withdrawal."

This vendor email gave instructions on the Motrin black-ops mission:

You should simply "act" like a regular customer while making these purchases.
THERE MUST BE NO MENTION OF THIS BEING A RECALL OF THE PRODUCT!

And an email from Rob Small, director of field operations and transporation at Inmar, a J&J contractor, instructed staff to behave as if they were "mystery shoppers":

Some stores will not care, others will ask specifically what we are doing. Initially, we are going to buy all product as mystery shoppers.

Goggins is scheduled to testify again to Congress on Sept. 30, where she will be asked about the phantom recall again. She will either have to say that Miller, McNeil president Peter Luther, and J&J's own vendors had not informed her of the phantom recall, or she must confess that she was not describing the truth accurately when she testified earlier that she didn't know what was going on. Either way, it's not going to look good. That explains why J&J is currently saying that Goggins might not show up to testify:

Her participation is still being determined.

To give you an idea of just how far between her ribs Weldon's knife is jammed, consider that Goggins was a candidate to succeed him as CEO of the company. Although Goggins has been at J&J for 30 years, she's just 56. Weldon made a veiled reference that Goggins' departure had indeed complicated the succession question in his announcement:

We will make a timely announcement of succession plans for this critical position for the Company.

Don't shed too many tears for Goggins. Whether she's being unfairly used or is genuinely the head from which the fish was rotting, Goggins leaves a wealthy woman. On Sept 9 she cashed in $2.97 million of her shares. She retains 105,922 shares; JNJ is currently trading at $61.24.
Related:

Image by Flickr user Steven Depolo, CC.

More from CBS News