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The Trouble With "the Trouble With S Corporations"

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IN THE PAST, WE HAVE OCCASION-ally published articles about the hazards of dealing with outside experts. Now we have another such saga to report. It concerns a column by an outside expert that we ran in May, entitled "The Trouble with S Corporations." As it turns out, he had expertise in areas we never suspected.

We first heard of Douglas H. Forde last winter. He had written a book entitled Keep the Profits, which Viking Penguin Inc. was planning to publish, and his literary agent had sent us the galleys. According to the book's blurb, Forde came with good credentials, having held "executive positions at the Fairfield and Mount Gay Company, Ltd. in Barbados, the Xerox Corporation, and McGraw-Hill," prior to starting his own successful financial-consulting business. "From his offices in upstate New York," said the blurb, "he services his clients in the United States, Canada, the Caribbean, and the Far East."

Frankly, the book seemed pretty good. Forde appeared to know the subjects he covered; he understood the world of small, private companies; and he could express himself both clearly and compellingly. It occurred to us that he might make a worthy contributor to INC.

I proceeded to telephone his agent, who sang Forde's praises. He was a joy to work with, she said, a good writer who always met his deadlines. She gave me the telephone number of his office in Fairport, N.Y., but warned that he was seldom there. She would make sure he called, however. And one other thing: "There's something wrong with his long-distance service," she said. "It always sounds like he's calling from Singapore." Deregulation. You know how it is.

A couple days later, Forde did call and -- sure enough -- sounded closer to Bora Bora than Buffalo. Nevertheless, we conversed for the better part of an hour, during which we kicked around some article ideas, including one about the pitfalls of switching from C- to S-corporation status. I suggested he come to Boston. He said his schedule was just too hectic, but he would love to take a crack at the S-corporation piece. I told him to go ahead.

The article arrived as promised, and we liked it. Forde made a strong case against switching hastily to S status (as many companies had, we suspected, following tax reform). As is our normal procedure, we checked the piece's accuracy with another expert -- in this case, a lawyer with a prestigious Boston law firm. He saw only some minor errors, which we corrected.

Over the next couple weeks, an editor worked on the article, discussing changes with Forde, who called in from time to time. The connection was always so bad that the editor eventually asked him to call collect, and that seemed to help. Finally, the edited piece was again run by the lawyer, who suggested a few more changes.

A week or so later, Forde called with an unusual request. He said he had talked to his advertising agency, which had advised him that Douglas Forde was not a very memorable name for an author. What about Henderson Ford, with no e? That had a nice ring to it, and Henderson was, after all, his middle name. So he had decided to change his author's credit on Keep the Profits. Would we mind changing the by-line on the article as well?

In retrospect, I admit, this request should have set off some alarm bells. I mean, why would a practicing consultant want to publish a piece in a national business magazine under a pseudonym? At the time, however, we just dismissed the request: we were much too far along in the production process to make changes.

But alarms did go off after the article appeared in our May issue, and we began getting letters from accountants and lawyears saying that it contained errors. We investigated the specific points and discovered that, in several instances, the letter writers were correct. (See box.)

Then came a letter of a different sort. It alleged no inaccuracies but asked simply "whether [the] Douglas H. Forde who wrote this article is the same Douglas H. Forde CPA [who is] a financial planner from the Rochester, New York area." It was signed "David F. Gwynn C.L.U. ChFC." Our curiosity piqued, we telephoned Mr. Gwynn -- and came face-to-face with our worst nightmare.

Douglas H. Forde is a convicted felon, presently serving concurrent sentences of up to seven years on two counts of grand larceny, second degree. His "offices in upstate New York" are located in the Collins Correctional Facility in Helmuth, N.Y. We checked the number from which he telephoned us collect: it's a pay phone reserved for inmates. As for "his clients in the United States, Canada, the Caribbean, and the Far East," we can only hope they fare better than his New York clients, out of whom he bilked more than $280,000.

We belatedly did some checking into Forde's background and found that he had indeed worked for the various companies listed in his biography. It occurred to us, however, that we had not seen Keep the Profits in bookstores. When we called his editor at Viking, he told us that publication was being delayed because "there's a case in court pending against Mr. Forde. Some clients are making claims." When asked if Forde's agent was aware of the case, he said, "Oh, yes, she knew the whole story."

We then called the literary agent, who admitted she had known of Forde's legal troubles (although not his incarceration, she claimed) since March -- before his article went to press. She had neglected to inform us, she said, in the belief that he had already done so. "It was a mistake in judgment on my part," she said. "I'm sorry."

So here we are with egg on our face. There's little we can do about it now except admit our mistake and take steps to prevent it from happening again. We are doing both. Meanwhile, the experience has taught us some general lessons:

* Double-check expert opinions with expert advisers.

* Always check references -- even if you think other well-qualified people have checked them before.

* Don't blame every bad connection on the telephone company.

* Beware of writers who always meet their deadlines. They may have too much time on their hands.

Thinking back to my conversation with Doug Forde last winter, I recall another thing. He told me that he was working on a second business book, which he planned to call Caveat Emptor. We're looking forward to reading that one.

Last updated: Sep 1, 1987

BO BURLINGHAM | Staff Writer

Burlingham joined Inc. in 1983. An editor at large, he is the author of Small Giants. Burlingham is also the co-author with Norm Brodsky of The Knack; and the co-author with Jack Stack of The Great Game of Business.




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