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I'm not defending anyone who says Lueke shouldn't play baseball or shouldn't play in Seattle.  I am defending Geoff Baker, who has reported fairly, I think, and I am defending the notion that Z gets low marks for the initial acquisition.
If the point is that Institutional Seattle says Josh Lueke shall never play for the Mariners, I can't speak to that.  I'm not from there, and I just follow the baseball team.  But I am well aware of how that dynamic works in other places.  In this case, if Institutional Seattle is saying that, then it seems they've lost, or at least lost Round 1, becuase Z says in Geoff's very article: "We're moving forward and he's pitching for us."
But taking your point seriously: It may well be true that the Mariners have a higher level of sensitivity to the "community leaders" and that such an attitude may get in the way of what would otherwise be the best baseball judgments of the experts.  I just don't think that's the case here.
There are three stories here that need to be teased out:
Josh Lueke: There are lots of grey areas, obviously, in all these stories.  Your take is that Lueke's story has the same grey areas, but is being treated differently because it is Seattle.  My take is that Lueke's story has fewer grey areas than the standard "he said-she said," and might well be treated differently anywhere.  It's just impossible to know, especially since the story is so closely linked to the Zdurincik acquisition story -- and the internal Mariner story depends, to no small amount, on how you view the Lueke story.
So, the Z story makes the Lueke story that much more relevant -- and, in fact, requires Geoff Baker to delve into it more than, perhaps, he otherwise would. 
So we don't know how Lueke would have been greeted if not for the "Armstrong didn't know and Z apparently didn't do his homework" story, and we can't know.  You think Seattle, and pretty much only Seattle, would have made a big stink anyway.  I think the rest of the country would have had concerns, too -- even Texas.
Jack Z: Here is where you can't really separate the two stories.  If you view Lueke as just having bad judgment, then you can view Z as generally being within his scope of discretion, and Armstrong is out of line to have expected notice and more "due diligence."  But, here again, my reading of the facts is that there is less grey area in Lueke's case.  I think Z wanted him, knew he was undervalued, and didn't really want to drill down into the details in his short time frame.  So he fudged and hoped for the best, and it turned out to be worse than he had hoped it would be.  So it was poorly handled, precisely because the facts were there to be found, he just blew past them.
Again, I think that all 30 CEOs would view it as a negative mark, but not firable, which is pretty much what happened.  I'm just arguing against your notion that Z doesn't deserve any negative marks.
Carmen Fusco: I think, therefore, that it was legit for Z's boss to extract a cost for the errors.  But ...  Was Fusco too big a pound of flesh?  Probably.  Did Armstrong handle it poorly?  Yes.  I think we agree there.  Is that a unique Seattle thing?  Or just an Armstong ego thing?  Or maybe Fusco did make some kind of major fatal error that isn't being talked about?  I don't know.  But I don't think that it couldn't have happened in the other major league cities.