Jorge Lorenzo and Sito Pons: 3 lessons on reputation management in tax fraud litigations

Jorge Lorenzo and Sito Pons have more in common than their passion for motorcycles: a victory against the tax authorities marred by unquestionable reputational damage, the product of highly mediatic legal proceedings that have dragged on for years until being resolved with acquittals.

After being declared innocent of alleged tax fraud, Jorge Lorenzo even issued a public letter to the media where he denounced the media persecution of the Tax Agency, which according to the pilot, sought his “discredit in front of public opinion”, making him “appear in the media as a fraudster”.

Likewise, the former pilot tells how he had to advance the money they demanded “to avoid seizures and humiliating situations (such as appearing in the defaulters’ lists)”. A “real mockery” that, according to Lorenzo, had a huge impact on his personal life and professional performance.

Both Lorenzo’s case and that of Pons illustrate the huge reputational risks involved in a media judicial process in such notorious people, especially if it is for tax matters, where the technical complexity and the political component condition the story that is generated around the issue.

The reputational risk is increased in these cases because our legal system provides that, “The acts of the Public Administrations subject to Administrative Law shall be presumed valid and shall produce effects from the date on which they are issued” (art. 39.1 of Law 39/2015 of LPAC). In other words, a presumption of validity is granted to all acts of the Tax Agency, regardless of how the case is resolved.

The presumption of validity not only has a legal dimension, but also usually extends to public opinion, whose first reaction is to grant greater credibility to the arguments of the Tax Agency.

Therefore, in these cases it is particularly necessary to have a communication strategy that accompanies the legal strategy, defending the presumption of innocence of the affected party not only in court, but also before public opinion.

In this sense, cases such as that of the former pilots allow us to extract very valuable lessons on reputation management in legal proceedings for tax matters:

1. Coordination with legal strategy. LLYC’s Legal Issues Director, Alba García, an expert in litigation communications, explains that “it is necessary to align the communications strategy with the legal strategy to support the objectives of the affected party both in and out of court. Sometimes, even if an acquittal is issued at the end of the process, the shadow of doubt and the label of ‘fraudster’ prevails.”.

That is to say, even a legal victory is not enough to safeguard reputation.

“Conveying the position of the affected company or individual in an appropriate manner, at the appropriate times and channels, will be critical to balance the coverage around the case and protect the defendant’s reputation with each new milestone throughout the entire legal process,” adds Alba Garcia.

In addition, the technicalities and legal complexity of the regulations in these types of cases often make it difficult for the public to understand what is being judged. Likewise, the general lack of knowledge about the actions of the tax authorities gives the public the feeling that a mere inspection (such as the one that initiated the proceedings against Jorge Lorenzo), opening of a file or inclusion in the list of tax defaulters (in the case of Sito Pons) automatically means that there is fraud.

Sito Pons) means, automatically, that there is fraud.

Therefore, the work of the communication team is to translate these technicalities about the legal regulations and the procedure into a simple language, close and accessible to the public.

2. Preparation and reaction. This type of legal proceedings for tax fraud, and especially in the case of people with a high media interest profile, makes it inevitable that the media echo the accusations by the Tax Agency. In fact, the media pressure in these cases is particularly strong and, often, only the arguments of the accusation transcend. For this reason, the “no comments” strategy is usually not a good option. Otherwise, the “fraudster’s” story will prevail without any reply.

The case of Jorge Lorenzo is a good example. Although it is true that after his innocence was ruled the former pilot has given his version of events in an open letter to the media, Lorenzo kept silent for years. This vacuum caused that during all that time damaging information to his reputation continued to be published, some of which were not even related to the cause of his litigation.

The damage generated during several years of litigation is hardly compensated by a few news items that reflect the position of the affected party only at the end of the process. It is important to have a clear argument with which to respond to each relevant milestone from the beginning of the conflict in order not to be left behind in the narrative.

3. Recovery. Regardless of the outcome of the legal process, once the conflict is resolved, it will be imperative to work on the recovery of trust.

Even in the best of cases, when an acquittal is issued, it is possible that doubt or suspicion will remain in the collective imagination. In other words, winning a tax litigation is not enough; it is important to continue working on the communication level to recover from the reputational damage generated.

The public letter to the media by Jorge Lorenzo is a good example of a communication action aimed at recovering the reputational damage, whose communicative effectiveness is reinforced in this case by the legitimacy provided by a favorable court ruling.

On the contrary, Sito Pons limited himself, as is frequent in many of these cases, to giving his version only at the time of the trial. However, there are other milestones of important media relevance before and after the trial in which, often, the arguments of the prosecution prevail and negatively bias public opinion.

Therefore, once the legal process is over, it is essential to have a medium- and long-term communication plan to regain the trust of all our stakeholders.

On the other hand, it is important to work on the digital footprint. Even after the process is completed, search engine results will continue to return results with harmful news every time we enter our name or that of our company. Fortunately, there are several right-to-be-forgotten actions, in cases that end with favorable judgments, that allow us to remove, de-index or modify this type of information. But even in cases where these actions do not apply, it is also possible to move the negative content with the help of professionals in this field.

(Article written in collaboration with Ana del Pino, Young Talent of the Legal Issues area).

If you are interested in learning about the new risk factors that threaten the reputation of multinationals with regard to their tax activity, we invite you to download: “Taxation and reputation: multinationals in the spotlight.”

“Taxation and reputation: multinationals in the spotlight.