Funny story from the WSJ… Analyze This: Hoaxer Haunts Earnings Calls ‘Mr. Herrick’ Queries CEOs Using Jargon; The Question Is, Why? By BETSY MCKAY February 16, 2008 Some big companies have had a surprise during their earnings conference calls this quarter – and it has nothing to do with the weak economy. At least seven times just the past three weeks, a mystery caller has cleverly insinuated himself into the normally well-manicured ritual of the quarterly calls. As top executives of publicly traded companies respond to securities analysts’ questions about their balance sheets, he impersonates a well-known analyst to get called upon. Then, usually declaring himself to be “Joe Herrick of Gutterman Research,” he launches into his own version of analyst-speak. “Congratulations on the solid numbers – you always seem to come through in challenging times,” he said to Leo Kiely, president and chief executive officer of Molson Coors Brewing Co., on Feb. 12, convincingly parroting the obsequious banter common to the calls. “Can you provide some more color as to what you are doing for your supply chain initiatives to reduce manufacturing costs per hectoliter, as you originally promised $150 million in synergy or savings to decrease working capital?” ‘ACTUALLY, THIS IS . . .’ The so-called Mr. Herrick called into Molson Coors Brewing’s conference call earlier this week. Listen to his exchange with company executives, as posted on the company’s investor-relations site. Plus: The mystery caller was present during recent conference calls held by PepsiCo, Newell Rubbermaid, Dean Foods and more. Read clips from each conversation. Analysts say the caller’s questions, though credibly phrased, are too off-target for a real analyst. It’s more like “consultant-speak,” says a disdainful Bryan Spillane, a Banc of America Securities analyst, a victim of one of Mr. Herrick’s impersonations. Analysts deal with often-wonky financial details, but “savings per hectoliter” rarely comes up. But many CEO’s have had more trouble telling the difference. Most have gamely tried to answer the questions. Mr. Kiely and two other Molson executives stuck politely with the caller through three detailed follow-ups. Timothy Wolf, the company’s global chief financial officer, closed by telling him, “We think we will have some more positive encouraging things to share with you next month in New York,” according to a transcript of the call. A Molson spokesman said that to him the caller sounded legitimate at the time. Executives at PepsiCo Inc., Dean Foods Co., Newell Rubbermaid Inc. and others have had similar experiences since around mid-January. The caller first gives a familiar name to conference-call operators to earn a turn speaking in the calls – in which dozens of listeners can dial in, but typically just a handful of analysts known to the company get to ask questions. When he’s called upon, he corrects the conference-call operator and identifies himself as Joe Herrick (or Harrick in one transcript). He says he is from a firm called Gutterman Research, or in one case Vladimir Research, according to transcripts provided by Thomson Financial. Analysts and companies contacted about the caller are stymied as to who he could be. Searches using several potential spellings failed to turn up the name or firms on a Financial Industry Regulatory Authority database of registered securities firms and brokers, or on the Securities and Exchange Commission’s Investment Adviser Public Disclosure Web site. A Google search found transcripts of several earnings conference calls in which Mr. Herrick has participated. A New York City telephone number used by the caller to phone into one conference call, and obtained by The Wall Street Journal, disconnects immediately when dialed. Of course, Mr. Herrick could still pop up and prove he is for real. Meanwhile, annoyed executives and analysts are wondering why someone would want to play a game with dry business calls that normally follow a tightly controlled formula – unless the game is the whole point. They can’t figure out how the caller is getting any benefit from so closely mimicking them. “If he was spoofing I would hope he’d be funnier,” says Bill Schmitz, an analyst at Deutsche Bank Securities. Word of the impersonations has been slow to spread. Mr. Schmitz outed the caller on Newell Rubbermaid’s Jan. 31 call, having already heard him several times going back to mid-January. Yet the caller was still using other names to get access as late as Thursday, in a call with Jarden Corp. Yesterday, a caller gave a different name and firm, Mindful Capital Investments, on a call with Hormel Foods Corp., but sounded as if he were reading from a similar script. Mr. Herrick’s questions are usually narrowly focused on details of a company’s results from well-known cost-savings techniques such as “lean management” and Six Sigma, or else supply-chain issues. They’re virtually the same on each call, and he often follows up aggressively. In the Newell Rubbermaid call, Mr. Herrick asked the company’s president and chief executive, Mark Ketchum, to outline his “top initiatives regarding lean manufacturing” and Six Sigma. Afterward, Mr. Schmitz came on and warned the executives. “Hey guys. First, this guy, Joe Gutterman [sic], every conference call this quarter, he logs on as somebody’s name and asks these crazy efficiency questions,” he said. “So going forward keep in mind you should just disconnect him when he dials in. This is like the sixth call in a row he’s done that. It’s really annoying.” Mr. Schmitz speculates that Mr. Herrick is “some minion” at a consulting firm trying to do clandestine research on companies’ use of Six Sigma techniques. “Our quarterly earnings calls are key opportunities to us to interact with the investment community and to explain our results,” says a Newell Rubbermaid spokesman, David Doolittle. “Anyone who would come on the call and use some of that time unproductively is disruptive.” Some companies are now on the alert. Coca-Cola Co. executives listen to the calls of PepsiCo, and they heard Mr. Herrick bombard PepsiCo Chairman and CEO Indra Nooyi on her Feb. 7 call. So Coke gave select analysts a secret password to use to ask questions during its own call Wednesday – “Diet Coke” – according to analysts who participated in the call. A Coke spokesman wouldn’t comment on steps the company took beyond saying it was “prepared for this and had a contingency plan in place.” Coke’s caution was evident when Banc of America’s Mr. Spillane, the earlier impersonation victim, posed a detailed question about how much of the company’s currency-neutral operating profit growth was organic rather than coming from acquisitions or cost savings. “We hesitated on you for a minute because as we take these questions we are just trying to make sure that in fact you are who you say you are,” Coke’s chief financial officer, Gary Fayard, said before launching into an answer. “I am the real deal,” Mr. Spillane replied. PepsiCo, not to be outdone by Coke, says it’s tightening its screening process to ensure callers are legitimate. “If we find out differently they will be cut off immediately,” says a PepsiCo spokesman. While competition to get into the question queue is keen for a call hosted by PepsiCo or other large corporation, because many analysts and investors dial in, getting to ask a question on a smaller company’s call is easy. That makes some of Mr. Herrick’s impersonations even stranger, says Bill Pfund, vice president of investor relations for WMS Industries Inc., a slot machine maker in Waukegan, Ill. “It’s an open forum,” he says. “If you have a question, just come in under your name.” It’s also unusual for someone to participate in calls for such a broad swath of industries, from beverages to slot machines. In WMS’s conference call Feb. 6, Mr. Herrick asked president and CEO Brian Gamache about “operational improvement initiatives revolving around lean and Six Sigma,” according to a transcript. “You always [seem] to come through in a very challenging time,” he made sure to say in conference-call style, applauding the company’s “good results.” Mr. Herrick’s continued appearance on conference calls is becoming a running joke in the analyst community, says John Faucher, a beverage analyst with J.P. Morgan, whose place Mr. Herrick took in the PepsiCo call. Mr. Faucher, who has been keeping tabs on the caller by instant messaging with clients, took a sort of revenge by spoofing Mr. Herrick in a research note following Coke’s earnings call on Wednesday. “The only real disappointment on the Coke call was not hearing about their 6 sigma and RONA policies,” he wrote. Mr. Herrick is giving analysts another reason to look forward to a big conference many of them plan to attend in Boca Raton, Fla. next week. Says Mr. Faucher: "One of the big questions is, will Joe Herrick from Gutterman Research show up?