Wednesday, June 14, 2006

A Great Idea -- But Don't Screw it Up

I was delighted to hear about the new investigative journalism blog being started by a terrific reporter named Chris Carey, who wrote award-winning stories on global stock fraud for the St. Louis Post Dispatch. Carey's new blog, sponsored by Dallas Mavericks owner and blogger Mark Cuban, will focus on an area neglected by the media -- stock fraud.

It is a brilliant idea. So I was distressed to read an AP story that quoted from an item in Cuban's blog some weeks ago. In it, he said that he would profit from information uncovered by the new blog before the articles come out.

Here's what he said:

Business is an easy place for me to start because the fraud and sithlord wannabes uncovered can not only create great stories of interest for the webite and HDNet World Report, but also allow me to buy and the sell the stocks of the company. A journalistic conflict you say ? Not any more. Not in this world. It will be fully disclosed and explained. This site is for the profit of its owners and we will buy and sell stocks that are discussed, before they are made available on the site. So make any decisions based on this information accordingly.
A journalism conflict I say? Yes, it is a journalism conflict. A big journalism conflict. In this world or any other.

A bedrock principle of journalism, what distinguishes journalism from stock research, is that you carry out sleuthing for public enlightenment and only public enlightenment, not private gain. Sure, you can make a living at it, through advertising or subscriptions, if you can. But you don't trade on the info. Ever. It is not even at the level of Journalism 101, it is that basic.

True, if you disclose it the Securities and Exchange Commission won't get mad at you. As I pointed out in Wall Street Versus America, regulators view disclosure as a self-absolving confession. Disclosure=no fraud. However, the absence of fraud is no reason to chant hosannas. Freedom from conflict of interest is also a necesiity.

What makes that idea particularly bad is the lynch mob atmosphere surrounding short-selling, which has actually gotten worse since I described it in the book. I've written numerous blog items on the crazies of the naked short-selling conspiracy cult, many of whom have targeted Cuban -- whose blog is excellent, by the way -- as well as tough journalists like Herb Greenberg. But if Cuban trades in the stocks that are probed in his new venture, even if disclosed, it will simply reinforce the view that journalists and independent stock analysts are in bed with the shorts.

Take, for example,a hearing that will be held on June 20 by the Senate Judiciary Committee: "Examining Short Selling Activities of Hedge Funds and Independent Analysts."

I've said many times, such as in this Salon piece, that this campaign to shift blame from corporate incompetence and crookedness is gaining steam. The last thing we need is for the good guys to fuel the canard that investigative journalism is a profiteering tool for short-sellers.

© 2006 Gary Weiss

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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