Wednesday, March 3, 2010

Will NASCAR Learn From US Fidelis Collapse?


This is our fourth season of talking about NASCAR on TV. We spend lots of time discussing what TV folks call the content or program portion of shows and races. Once and a while, we also talk about the commercials. This is one of those times.

It was June 20, 2009 when the TDP column titled "Trouble Brewing for Rusty Wallace and US Fidelis Sponsor" was published. Click on the title to read the column and the viewer comments attached.

We used content from the Today Show and many other sources to shed light on a tragic situation that NASCAR was making much more tragic. You might ask how NASCAR could be involved when it was only Rusty and Steven Wallace actually on the screen selling the product in 2009?

The answer is that perception sells when a product is associated with a known celebrity or athletic figure. The perception was that in the middle of a NASCAR race or a NASCAR TV program here were two NASCAR guys standing in front of a NASCAR Nationwide Series car telling you to buy US Fidelis because you are a NASCAR fan.

I bought Tide because Ricky Rudd told me to. I drove a Ford because Dale Jarrett did. I drank Bud because it was the official beer. Is Tide the best laundry detergent? Ford the best car? Bud the best beer? No. It's a choice I made because my perception was that I was personally helping NASCAR with my consumer choices.

Here is the news that came this week:

US Fidelis, once regarded as the nation's No. 1 seller of extended auto service, and a former sponsor with Rusty Wallace Racing, filed for Chapter 11 bankruptcy on Monday in U.S. bankruptcy court in St. Louis.

According to court documents, Rusty Wallace Racing is among the 20 creditors holding the largest unsecured claims against the company. Court documents show that US Fidelis owes Rusty Wallace Racing $535,439.18. US Fidelis was listed as the primary sponsor on Steven Wallace's car for 25 of the 35 Nationwide races last year and on teammate Brendan Gaughan's car in 10 of the 35 Nationwide races last year. (via Jayski.com)


Here is what I wrote at the time about Rusty Wallace's personal involvement:

All of this puts Wallace in a tough position. On one hand, US Fidelis is paying the bills or the company logo would have been removed from the hood long ago. On the other hand, Wallace himself is a brand and it is being tarnished every time a US Fidelis commercial airs.

ESPN is certainly an issue. Wallace has been trusted by ESPN as a multi-car team owner in the Nationwide Series to remain impartial on the air. Essentially, what Wallace says to the national TV audience needs to be regarded as honest and the truth.


Shortly after my original column aired, Rusty's secretary from RWR contacted me by email. Rusty wanted to speak with me right away. After getting some advice, I decided to turn down that invitation. Regardless of what Wallace had to say, the points in my column were valid and researched.

NASCAR watched Rusty and Steven Wallace sell US Fidelis on TV all season long. Just like Rusty, NASCAR itself is a brand. The sponsors in the sport used to fight over which was the best beer, the best motor oil or the best soft drink. Now, times have changed.

The Internet allows fans to see a NASCAR-themed commercial, dial-up the product and buy it instantly. Such was the fact with US Fidelis. We may never know how many Americans ultimately scammed by US Fidelis purchased the product after being told directly by Rusty and Steven Wallace it was the right thing to do.

Despite the fact that Wallace is owed money, there is something the folks at RWR can be very thankful about. Federal law recently changed where celebrity endorsement of products is concerned. Here is the new law being enforced by the FTC:

Both advertisers and endorsers may be liable for false or unsubstantiated claims made in an endorsement.

This would make both the Wallace father and son parties in the class action lawsuits now underway to recover damages from this expensive swindle. Luckily, the law was not put into effect until October of 2009, only weeks before this misguided headache came to a close when racing season was over. RWR seems to be in the clear.

Internet technology and new media expansion have altered the dynamic of NASCAR sponsorship. Now, websites are listed directly on cars, firesuits and TV commercials. The selling of a wide variety of products and services is being done direcly by the drivers and owners to the fans.

What has NASCAR itself learned from the US Fidelis collapse? Does it damage the credibility of the sport when a driver or team directly endorses a fraudulent product? Should due diligence of some sort be required before a team can bring a sponsor to the top levels in the sport? What are your solutions to keep NASCAR fans from getting burned again?

TDP welcomes your comments on this topic. To add your opinion, just click on the comments button below. This is a family-friendly website, please keep that in mind when posting. Thanks for taking the time to stop by The Daly Planet.

44 comments:

slander said...

Given their sponsor (Extenze), anyone think that Kevin Conway and Front Row Motorsports might be getting a bit nervous?

Jonathan said...

Extenze is next! Whats Jimmy Johnson going to do, that NFL guy who talkes about Extenze??? I never tried it dont need to lol but I heard its all phoney stuff. Def wont make u longer

Robert said...

Good info, John. I wonder if, since the celebrity endorsers can be held responsibly, could it be twisted to a point that team owners could also be held to account for allowing fraudlent activities to be advertised on their cars?

GinaV24 said...

Although I would like to think that personal ethics would factor into the decision as to what product/sponsor a celebrity or a company, endorses, I would not want to make bet money on it since MONEY is the name of the game in NASCAR. When I see broadcasters and drivers being what I consider shills for anything and everything NASCAR related, I just can't make myself trust their opinion so far that I would bet my life savings on ANY product endorsed by a celebrity unless I had done my own homework.

Caveat emptor.

IMO the answer to the question "will NASCAR learn ..." is no, but will the new law that you cited come into play with the sponsorships for companies that are "the official whatever of NASCAR"?

Anonymous said...

JD
While I agree with much of your opinion, in this case I must not.

In the dog eat dog world of racing and sponsor acquisition, you can hardly fault Rusty for being duped by a con artist.

I think its a stretch to expect a team owner to have to execute a due dilligence check on the business dealings of a sponsor, other than assessing the comapny's ability to actually pay the bills.

As for NASCAR, the teams are independent parties that are not-other than for rules compliance- controlled by NASCAR. If liquor, beer, "male enhancement" and other consumer goods pass muster, then why not an extended car warranty underwriter?

Rusty is not at fault here

Bray Kroter

JohnP said...

My best suggestion to Nascar fans is ignore the endorcements. I to fell into that "Nascar trap" of buying "Nascar Endorced" products. If the drivers are wearing their Nascar drivers suite, then in my mind it's also "Nascar Endorced". Not just driver endorced. But I don't do that anymore.

I bought Sprint cell coverage. Horrible coverage in my area. Didn't even work in my house. Can not count the number of conversations I had outside just to keep the signal. Many dropped calls. I complained to Sprint. No change. Changed to Verizon in fall of 2008. Not a dropped call since. Full service in the house.

Started following Nascar with Bobby Labonte. Needed new battery in my car. Bought an Interstate. Bought two more for my other two vehicles. None of them lasted more then three years. All "shorted" out and lost a cell. Crappy quality. To say the least, I'll never buy one again.

My suggestion, go to consumer reports, look at the quality, and make an informed decision reguardless of who is peddling the product. Nascar/driver peddling should be ignored. Find the facts out first.

glenc1 said...

I really have some mixed feelings about this. NASCAR (and the government) can only do so much to protect people from snake oil salesmen. I'm not exactly a libertarian, but...people have to educate themselves and not expect someone to regulate everything they do. Likewise, should NASCAR have to 'vet' a sponsor? You have a valid point that it's their name on the line as well, but that would require some effort on their part. And again, if it's a sponsor that's controversial in some other way, can they tell an owner no (or have they already?) Many objected to having to explain Viagra to their 10 year olds, and that actually is a valid product. It would seem from that new law that now Jimmy Johnson (the coach) & the Nationwide team be liable if someone proves Extenze is somehow dangerous (or just snake oil...as many experts have said.) All in all, I do believe the *owners*, desperate as they may be for sponsors, can't afford to be so desperate that they will take anyone...they ought to have a legal/financial expert to validate these companies.

And again--I think if 'fans' think they've been burned, they are the ones responsible. If I use a product only because it's a NASCAR sponsor without checking it out first, shame on me.

Ken said...

To me, this incident didn't damage the credibility of either Rusty or Nascar because to me, they didn't have any to lose. The Wallace brothers and the Waltrip brothers will say or do anything for a buck as will Nascar.

51 yr. fan said...

Great column JD. Everyone should
pass it along to friends and family. There is a "nest" of these
folks in the St. Louis area who
have been bred in this industry.
Just do a computer search on ALL of these extended warranty companies and it will startle you.

JoeS said...

NASCAR pushed tobacco on its fans and now does it with Alcohol, does anyone really think they care about the owners sponsors’???!! All that matters to them is that the owners can’t have one that conflicts with one of NASCAR “Official sponsor>>>>

Shayne said...

NASCAR won't learn anything. Brian France makes US Fidelis look like a bunch of amateurs in the "dishonesty" department. Brian France has been duping sponsors and fans alike. Yet, the mainstream media remains silent, too afraid to ask the tough questions.Rusty and Steve are merely a sideshow. Let NASCAR tell y'all what the truth is. Good luck.

Keith said...

P.T. Barnum was right!

Anonymous said...

Wow..with all the research you can do on a product or service, I would hope nobody would buy a product because it is on a race car or a driver pushes it??!!
Please be smarter than that, if you don't do your research it's your own fault..Buyer beware!

Sophia said...

advertising has never worked on me to "Buy" something. I buy a product due to the fact it worked, or heard about it from family and friends. Then I make my OWN decisions whether to buy said product AGAIN or similar one on sale.

There are some things I am partial to.

That said the fact that US Fidelis is having problems and this Extenze is being sold is as sanctimonious as it gets.

Medical products are legit. Some herbal things in the health food store are very good IF you know how to use the product.

That said, years ago some pills were sold to increase female body parts (they didn't work either) Why all this male junk -Legit or otherwise is all over tv, is maddening!!! My eye doctor detests these adds are all over tv and his sports talk radio. It's embarrassing.

But aside from that, thinking a pill will grow any "plants" larger is just laughable. This pill is the male equivalant of the Marc Eden Bust Developer from the 70's. However, it was a device you simply purchased once, not a scam to get your credit card.

MEden BD was good for buildiing shoulder and arm muscles but that was about it. There is a similar product sold late night now but I forget the name because I know it's junk.

So if NASCAR is going to be held accountable for "legit" sponsors, how in the WORLD can one of these rip off "pills" be ALLOWED?

And if so, Rusty Wallace has nothing to be worried about. NASCAR can't have it both ways by picking and choosing their illegitimate sponsors!

Heck in the grand scheme of things, this needs to be taken care of before the S&P situation that's been around for years.

The more low brow money dumped into NASCAR--no matter how desperate they are for cash, the more the sport will suffer. Kim Kardashian was a nobody who made an X rated movie, which made her a star, gave her a reality show and BUSINESSES endorse her now. WHAT?!?!

Oh, I still can't believe Jimmy Johnson does those commercials now...it looks like a spoof for the NFL pre game shows

Anonymous said...

I agree with Anon...You can Google anything with the word 'scam' after it and you'll find out quickly how legit it is. But, it is a shame who our 'heroes' will represent and promote for a buck. A prominent 'rent to own' franchise we hear about every race, a very shady buy here/ pay here national car franchise that was associated with one of our top superstar's dirt car for years, and sub-prime (very high interest) financial institutions are just a few more.

Chris said...

I certainly don't think Rusty should be held accountable for what this creep did. I do business with a lot of people whom I believe are honest but I really don't KNOW. I have to admit that when I was considering purchasing a warranty I was leaning toward US Fidelis. Not because I think Rusty is a good judge of warranties. It just seems like there are a lot of fly-by-night companies pushing this stuff and the fact that they put some real money into their advertising made me feel like it was on the up and up. Sure, you could check out consumer reports but before they actually filed for bankruptcy, I would bet that everything looked on the up-and-up.

Anonymous said...

This is much ago about nothing. I don't think Rusty Wallace had any idea what was going on -- and will he be held responsible in the minds of fans.

If tomorrow there is a giant scandal where NAPA auto parts was found to be repackaging old parts and selling them as new, and that the ensuing lawsuits brought the company to bankruptcy in a swarm of scandal and shame -- I wouldn't hold Michael Waltrip responsible. I would look at Waltrip as an innocent victim.

That's how I view Rusty Wallace. The man was looking for a sponsor. One came out of the woodwork, and Rusty read some pitch lines in their commercial. It's not like he was in on the conspiracy, and I hold nothing against him.

Anonymous said...

The Sprint Cup used to be called the Winston Cup. How many people smoked those cancer sticks and took years off their lives or got cancer because of NASCAR tobacco sponsorship? Do you hold NASCAR responsible for these deaths? No? Then you shouldn't hold Rusty Wallace responsible for what his sponsor did.

Darcie said...

When does personal responsibility begin with an issue such as this? I'm sorry, but I cannot agree with those who say Rusty and Steven are not culpable. Intelligent people usually do research of a product they are going to endorse, UNLESS they are just concerned with the dollar signs on the contract, and in this case, I believe that the Wallaces were only concerned with the bottom line, and that line has jumped up and bitten them in the butt. If they had taken some time and had their "people" research US Fidelis, they probably would have uncovered some red flags that should have sent them running. But I guess the $$$ attracted them more than any negative questions.

How gullible are we to believe everything we see on TV or advertised on the side of a race car? It's been proven that the king of informercials, Kevin Trudeau, is a charlatan, yet he continues to turn up on about 25 channels on Direct TV, peddling his phony wares. And how can any educated man believe that a pill is going to make his male parts bigger? Or how can a woman believe that a skin cream is going to take 20 years off her face? I guess the world is made up of many desperate people.

It's obvious these celebrity endorsers are only in it for the money, and have no problem if the product they're endorsing proves to be false. I guess they don't care if their reputation is ruined, as long at that check doesn't bounce. And it's obvious that Nascar and their teams will accept any kind of sponsorship despite the fact that some of those products are phony and maybe even potentially harmful.

But I can say, I lose respect for anyone or any entity who endorses a product that's proven to be fake, and if anyone is physically or personally harmed by products these celebrities peddle, the endorser should be as liable as the person who produces the product. It's the only way these celebrities will learn.

Tracy D said...

My brother in law bought from US Fidelis specifically because Rusty was pushing it on TV, and he wanted to support RW's race team. He's not stupid. He's computer savvy. But he fell into the "trap" of believing Rusty wouldn't align himself with a shady business.

If your personal reputation means so little to you, by all means forgoe an indepth study of the people with whom you're going into business. I wouldn't, no matter how good the money. Once a reputation for ethics in business is lost, you're toast in my books.

That Extenze deal is just too embarrassing to discuss. Shame.

Donna in FL said...

I'm gonna say this right out. If you endorse a product or service COMPANY that you KNOW is shady or even downright fraudulent, then you should be burned right along with them when the fire is lit.

Otherwise, why would anyone have reason to suspect that US Fidelis was any different from the other heavily advertised similar product, StopRepairBills.com on the NNS 11 (Brian Scott) or Mogi?

Products like Extenze or ANY energy drink are always questionable. Avalanche of personal endorsements there! How bout the whole Red Bull team??

51 yr. fan said...

I think many of the Planeteers are
ovelooking that JD's column from
June, 09; pretty much spelled
out what was happening. There had already been a class action suit filed and other Attorneys General
investigating. I guess Rusty took a gamble on getting his money. Do
your homework raceteams. There is
a world of information out there.

Richard in N.C. said...

The primary responsibility for oversight must rest with NASCAR since it also has the sport as a whole to protect. However, there is also another responsible party involved - the networks and other media outlets that carry the ads.

It does seem to me that this is much, much more involved and complicated than it might at first appear, and involves all professional sports, not just racing.

Anonymous said...

I bought Tide because Ricky Rudd told me to. I drove a Ford because Dale Jarrett did. I drank Bud because it was the official beer. Is Tide the best laundry detergent? Ford the best car? Bud the best beer? No.

Oh my, this might just be the saddest thing I have ever read.

Daly Planet Editor said...

Anon 2:40PM,

Could you tell us why that might be?

JD

David said...

Rusty employs an entire marketing department whose job in this case is to research the company and ensure they are not aligning themselves with a questionable company. There is a saying that not all money is good money, USF is a great example of that.

Thankfully Rusty just seems to be out a half million, which could have been worse when you consider just how many races USF was on the car.

I hope NASCAR and teams do learn but as others have stated this is a rough time to turn down any money, but for a higher end team like RWI it should be an eye opener.

Daly Planet Editor said...

If you would like to ask a question, just drop me a line at editor@thedalyplanet.tv anytime.

Anonymous said...

I have a few things to say about this. First, everyone is assuming that Rusty and his team did not investigate this company. It is simply bad business to align yourself with a shady company no matter how much money they are offering. So let me ask you, how could RWI prove to you that they did their due diligence to vet this company to see if it was legit? I am going to go out on a limb and say that at the time Rusty signed a contract with this company, they checked out. However, I am not sure when US Fidelis began sponsoring the RWI cars. Look at the employees of a company like Enron. The vast majority of the employees did not know what was going on. I am sure anyone who went to work for that company did some sort of research to see if that is the company they want to work for. So as employees, should they be held responsible for the actions of the guilty? I put RWI into the same boat.

Also, to my understanding, these teams sign a long term contract with their sponsors. Let’s suppose RWI found out after the contract was signed that US Fidelis was up to their ears in law suits. I would imagine that if RWI tried to back out of their contract with their primary sponsor, they would have been sued.

Next, am I reading the comments that have been posted right and that now everyone is calling for sponsor oversight by NASCAR??? How hypocritical is that? On blog after blog and comment after comment most posters think that NASCAR and Brian France have too much power as it is. Now, those same people are saying NASCAR should have the ability to decide who can’t and can sponsor a race team on a whim? (The Altel/ Verizon sponsorship is different because of contract agreements with Sprint.)

Finally, I have to say that I am surprised that no one questioned JD for not taking a call from Rusty. You put an unflattering article out on your site that bad mouthed RWI and then you would not even give him the decency of hearing his side of the story? I understand that this is a blog and as such, you do not have to adhere to the same standards that mainstream journalist do. But in my opinion, that is just cheap. And seeing as how both blogs that you wrote are questioning Rusty’s and RWI’s integrity, I think that it is ironic that the fact that you did not get his side of the story makes me question your journalist integrity.

Dot said...

I just want to mention that DJ turned down the Hooter's sponsorship back in the day. I don't remember who he was driving for. He didn't want to be associated with them.

I admire him for sticking to his beliefs.

Allison said...

NOT talking to RW was exactly the RIGHT thing to do. Rusty has surely heard all of this criticism and warning before TDP's column came out. He wasn't calling to say that he agreed with the content, he was going to put the pressure on and deliver excuses. "[media] should have no friends" - Jos. Pulitzer

Chris from NY said...

Who would like to see this company's name changed to "US Infidelis"?

Richard in N.C. said...

I believe that most sponsors are subject to NASCAR approval and NASCAR has an obligation to protect the sport and its business. This is a much more involved issue than it appears, and full of legal pitfalls. It is more than a matter of checking the internet once before a sponsor is accepted. Major sponsors need to be monitored to try to make sure they have not gone "bad" - such as Enron. At the same time, Enron's name was still on the baseball stadium when it imploded. NASCAR needs to protect its business, including monitoring sponsors, and it seems to me to make more sense for NASCAR to take the lead in monitoring sponsors than for every team to try to do it.

At the same time there is still the issue of the culpability of EESPN, SPEED, and numerous newspapers in continuing to accept advertisements from U.S. Fidelis.

Sicklajoie said...

Anon 5:56:
I questioned twice why JD didn't take Rusty's return call and neither of my comments have been posted. I have a feeling this one won't either.

Daly Planet Editor said...

Slick,

You did not leave a comment like the other poster did. If you have a question, email it.

If you have a comment and a question, then give your opinion and leave a comment.

Same format going on four years now.

Going to let comments flow for a bit before giving my answer on that.

JD

51 yr. fan said...

JD owed Rusty nothing. JD was
simply stating the facts and not
serving as a financial advisor or
marketing rep for RWI. Anyone but an ostrich could see what was coming. As far as NASCAR investigating; they still can't
figure out where Brian France resides.

Vicky D said...

JD, you saw this coming awhile ago. When sponsors are difficult to obtain in Nascar, I'm sure any owner would get involved in a company like this if they came knocking at their door waving money around. I'm sorry for Rusty but I don't understand the law regarding famous people endorsing companies and might be liable in class-action suits.

cdh said...

I am curious about what RW would've had to say if there had been some sort of interview, but I think I already know. Obviously he'll have to say he researched them and didn't find anything questionable. What else could he say? I don't care though because I don't buy things just because its on my driver's racecar.

Daly Planet Editor said...

Let me offer this on the Rusty Wallace issue that was disclosed in this column:

My original column was from June of 2009. This is merely a follow-up detailing that what I predicted unfortunately came true.

I included the fact I chose not to speak with Rusty as a part of my personal policy of always telling the truth. It was my opinion at the time that an angry Rusty Wallace would only dig himself a bigger hole.

Would I do the same thing again? Probably not. But that is what happened back then and I made sure to disclose it in this follow-up.

I hope that helps you with this issue. I never offered an opinion that personally criticized Wallace. Merely pointed out that endorsing something well known to be fraudulent could be a mistake.

As it turns out, it was for both Wallace and the many NASCAR fans that followed his advice and purchased the US Fidelis product.

Thanks for all the comments and opinions on this topic. Thanks also to the media folks who spoke with me and gave me advice behind the scenes.

JD

Anonymous said...

I included the fact I chose not to speak with Rusty as a part of my personal policy of always telling the truth. It was my opinion at the time that an angry Rusty Wallace would only dig himself a bigger hole.

A laughable response. You assumed enough to guess his answer, and chose one that fit your view. And then you frame it altruistically, as if you were trying to save Rusty Wallace from himself by not talking to him. What a joke!

RWar24 said...

This is what happens when Nascar failed to control costs in all series years ago. Before when times were good, Nascar didn't bother to cap the price to go racing and it ballooned out of control. Now that times are tough, the cost to be competitive is so high, that you have to scrape for every sponsorship dollar available. It's unfortunate for RWI and any Nascar fan that bought US Fidelis policies. But things like this happen. This is just a by-product of bigger issues.

Daly Planet Editor said...

Anon 8:54PM,

Did you miss this part?

"Would I do the same thing again? Probably not. But that is what happened back then and I made sure to disclose it in this follow-up."

JD

Anonymous said...

How do we know ExTenze is a fraud?

If it worked, they would have to give the same disclaimer as Cialis and Viagra:

"See your Dr. if an erection lasts more than 4 hours...."

ExTenze is just another fraudulent "supplement product" the Food & Drug Administration will not address.

Same with energy drinks - Hopefully Rusty gets paid BEFORE running a bunch of races with 5 Hour Energy Drink on Steven's car.

Richard in N.C. said...

I have never tried any energy drink, but it sure does appear that there must be an awful lot of Red Bull sold around the world.

I wonder where 5-hour and Extenze spend the most money - on racing sponsorship or TV and radio ads?

Anonymous said...

Hmmm... anyone heard of Stop Repair Bills.com. I believe that Scott drove that car this year? If you think USfidelis is a scam, check these guys out too!