Thursday, July 30, 2009

Sobering Tidings From BusinessWeek


Meet your new publisher

The good news is that Jon Fine is doing a smashing job covering the pending sale of BusinessWeek, unlike a lot of news organizations that are reluctant to cover themselves. The bad news is that his latest news, out this afternoon, is pretty discouraging.

The good news is that two new would-be buyers looked over BW's books. The bad news is that they are both private equity firms, Platinum Equity and Warburg Pincus. The other two that seem interested are Bruce Wasserstein and OpenGate Capital, also a private equity firm.

The last thing BW needs to be taken over by one of those slash-and-burn types, who would be almost entirely focused on the bottom line and would be likely to make BW even more unrecognizable than it is today, if they don't simply strip it like a 1997 Saturn and sell it for spare parts.

If you want to find out what private equity firms can do to a company, you can read about it in...... BusinessWeek (right). There's also a book out soon called The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis by Josh Kosman, which I've read in galleys and is terrific.

The even badder news is that BW's books apparently read like they were written by Dickens. Read it and cringe:

The financial data provided to potential buyers or partners are not for the faint of heart. While certain performance metrics detailed in the initial information provided by the company offer some positive signs—the average revenue figure BusinessWeek netted per print-ad page increased slightly from 2006 thru 2007 and 2008, and is forecast to grow again in 2009—the ad revenue decline is severe. Print-ad revenue exceeded $109 million in 2006 but is projected to fall to $59.7 million in 2009, which represents a decline of more than 45% for BusinessWeek's largest revenue stream. Total revenues, including those from BusinessWeek's Web site and offshoot products such as its six-times-a-year magazine SmallBiz, will decline from $181.5 million in 2006 to a projected $135.6 million in 2009, according to the data.
Aw, man. That, if you'll pardon the expression, really blows. I wonder if maybe McGraw-Hill somehow accidentally switched its financials with those of the most recent repository for my scribblings, Portfolio. May it rest in peace.

I don't know what I would do if I were Terry McGraw. Guess I'd hold my nose and sell BW to a private equity house, 80 year history be damned. I wouldn't be able to sleep at night, but at least I could hum something like "protecting shareholder value" as I wept bitter tears and, maybe, deep down, expressed regret that I hadn't hired different people to run the magazine during the last four years. Might not have worked, but I guess we'll never know.

UPDATE: Jon Fine comments.

© 2009 Gary Weiss. All rights reserved.

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Why BusinessWeek Matters

Former Denver bureau chief Mark Ivey has a great blog post on the subject. Find it here. The comments are interesting.

© 2009 Gary Weiss. All rights reserved.

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Could Carmela Soprano Have Been Sued Like Ruth Madoff?


Carmela's lifestyle was financed by Tony

The $45 million lawsuit against Ruth Madoff yesterday by Irving Picard leads me to wonder: what kind of precedent might this set?

Certainly Ruth is not the first wife to have benefited from the thievery of her husband. Down through history, from Mrs. Jesse James to Mrs. Lansky to Mrs. Gotti and, of course, our beloved if fictional Carmela Soprano, wives have enjoyed lavish lifestyles because of their husbands' criminality, and I imagine they could have been sued by the feds by the same logic that Picard is using. I guess there might have to be a bankruptcy involved, but maybe not. Prosecutors can be creative, after all.

Picard says Ruth lived a "life of splendor" on proceeds from the Shtunk's fraud, and you can't really argue with him. I wonder if he might be trying to play a bit to the crowds here, as Picard has been a subject of a great deal of unjustified criticism by victims, as Joe Nocera pointed out in a column a few weeks ago. This lawsuit may, or may not, get some of the critics off his back.

While I'd love to see Ruth reduced to the penury of her victims, I have doubts that Picard is going to have much luck collecting and whether the attendant legal fees will exceed any possible recovered sums.

But it's an interesting precedent. Might even serve as a deterrent. Only question is whether future bankruptcy trustees will have the moxie to engage in a similar spouse-suing strategy.

© 2009 Gary Weiss. All rights reserved.

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Wednesday, July 29, 2009

Close BusinessWeek?

Marketwatch suggested yesterday that profit-hungry McGraw-Hill, which just announced atrocious second quarter earnings, might actually close BW if a buyer can't be found:

McGraw-Hill has several options, none of which will bring smiles to the faces of worried BusinessWeek staffers. Indeed, it can try hard to find a buyer and unload its magazine foundation. Or McGraw-Hill can be adventurous (this is not a company well known for being daring) and make BusinessWeek an wholly online product. Worst of all, McGraw-Hill can ultimately do what Condé Nast did with Portfolio: kill it.
Closing is not out of the question, if for no other reason than because Condé Nast did indeed just kill Portfolio.

Over the years, McGraw-Hill has unsentimentally shuttered operations that haven't met expectations, ranging from BW's ill-fated financial supplement Assets to something called Value Added News. The latter was a financial wire service, and it was shut down before the 1990s explosion in financial news. Talk about terrific timing. (Don't bother googling either
Assets or VAN; neither are there.)

But I can't see management just pulling the plug on BW. It would amount to taking millions of dollars invested in the magazine over eighty years and flushing it down the toilet.

That's right. This is BW's eightieth anniversary. It was founded by the current CEO's grandfather, so there is sentiment factor that can't be discounted altogether.

My betting is on BW being sold, and not for a dollar, though I shudder to think who might buy it (Sam Zell? The Saudis?). But if a buyer can't be found, I'd not be surprised if it becomes an online-only venture, just like Portfolio.

© 2009 Gary Weiss. All rights reserved.

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Yet Another Road Map for Regulators


Will the SEC revoke Byrne's "Get Out of Jail Free" card?

I've used the expression "road map for regulators" at least twice in describing how white collar crime-fighter Sam Antar has exposed the phony accounting used by the corporate crime petri dish Overstock.com. Sam's latest post this morning describes the latest sleight of hand CEO Patrick Byrne has used to juggle the numbers.

Sam lays out in detail how Byrne was only able to report a "profit" in the most recent quarter, which sent share prices climbing, by violating Generally Accepted Accounting Principles and other smoke and mirrors.

As William Wolfrum points out, Byrne has had a busy week, trolling Internet message boards and unleashing his attack dog Judd Bagley on critics. As usual. But "the real story is in the financial reports," as Wolfrum points out. The rest is just icing on the cake.

As usual, the question is whether the SEC will take action, or continue to give Byrne a "get out of jail free" card that he uses every fiscal quarter.

There. Two metaphors for the price of one.

© 2009 Gary Weiss. All rights reserved.

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Tuesday, July 28, 2009

High Frequency Trading: Specialists on Steroids

A Bloomberg article today on high-frequency trading begins as follows:
Frank Troise, the head of electronic equity trading products at Barclays Plc, says using computers to execute orders in milliseconds is no different than brokers jockeying for position years ago on the floor of the New York Stock Exchange.

“This has been going on for quite awhile, and it’s now at a fever pitch,” says Troise, 43, who is based in New York. “There’s always been an advantage to executing with speed.”
Bloomberg was raked over the coals for this in The Audit for "stating the obvious," but I don't think that my friends there understand the irony of what Troise is saying.

It's certainly true that it's been going on for a while, and that there has been an advantage to executing with speed. Why? Because of the part of the equation that Bloomberg left out, which was covered by the New York Times the other day:

While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee.

In other words, the high-speed traders are able to engage in the sophisticated semi- (and sometimes outright) frontrunning that stock exchange specialists have been doing since the gaslight era. used to do until last year (see comment section).

As with the (former practice of) the specialists, it's all perfectly legal, very much money being made the Wall Street Way.

© 2009 Gary Weiss. All rights reserved.

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Michael Lewis on Goldman Sachs

Today at Bloomberg, Michael Lewis has an interesting column on the constant Goldman Sachs bashing that we've seen in the media, and makes an off-hand reference to the controversial Rolling Stone article by Matt Taibbi.

Lewis goes point by point to rebuff the attacks on Goldman, concluding with this:

Rumor No. 5: Goldman Sachs is “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

Those words are of course taken from a recent issue of Rolling Stone magazine and they are transparently false.

For starters, the vampire squid doesn’t feed on human flesh. Ergo, no vampire squid would ever wrap itself around the face of humanity, except by accident. And nothing that happens at Goldman Sachs -- nothing that Goldman Sachs thinks, nothing that Goldman Sachs feels, nothing that Goldman Sachs does --ever happens by accident.

This is a gutsy stance, but I think he misses the point.

Matt Egan recently had a piece at the Fox Business News website on the Goldman-bashing phenomenon, quoting me as calling Goldman the "King Rat of Wall Street." He didn't capitalize the expression but he should have. I was referring to the James Clavell novel and 1960s movie about a prisoner of a Japanese prison camp who somehow manages to accumulate wealth while all around are suffering.

It's only natural to feel envy but with Goldman it's more than just that. The public and media have a genuine reason to wonder why Goldman emerged unscathed from the financial crisis, to question the extent to which the bailout benefited Goldman, and to question its many decades of intimate ties to the government.

It's a mistake to dismiss the genuine questions that have been raised about Goldman as mere envy. Lewis seems oblivious to the genuine and well-warranted anger that people feel, and that's a mistake.

But he's right about one thing: Goldman needs to cease its longtime policy of keeping hautily keeping the media at arm's length--assuming that's what he means by "we who are inside Goldman Sachs must open a dialogue with you who are not. Not for our benefit, but for yours."

He's got that partly right. Goldman needs to open itself up for the sake of its own reputation and continued ability to generate obscene profits.

© 2009 Gary Weiss. All rights reserved.

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Monday, July 27, 2009

The Public Relations Genius of Patrick Byrne


Judd Bagley runs Byrne's self-degradation campaign

You might think that planting spyware in emails and Yahoo posts is "so 2007," but don't bet on it. Overstock.com's wack-a-doo CEO Patrick Byrne is "back in the game," as that obnoxious dieting commercial says.

A blogger at the Daily Kos, who had been needling Byrne in previous posts, reports tonight that he was sent a spyware-infected email that obviously came from Byrne's henchman, the ever-nauseating Judd Bagley. Bagley also sent links to crude tracking spyware planted in Yahoo message boards.

The typically nauseating details are here.

The comments are interesting, but I think this one is the best, and at this writing had been recommended by three dozen Kos readers:

My wife ain't gonna be happy...she's bought a few things from them.

No more. It might not mean much, but I'd pay double for something instead of putting another penny into that piece of shit's pocket.

Hey, you can't buy publicity like that.

UPDATE: Bagley and Byrne proudly admit their latest cyberstalking venture, and point to the latest missive on Deep Capture in which Bagley lies about everything, including my gig at Portfolio. (See update to Kos post, at the bottom. Evidently Byrne started counting my Portfolio articles and stopped at "one").

Excellent follow-up in RedState.com, entitled "Patrick Byrne, Will You Please Go Away Now!"

Here's a follow-up post describing Byrne's motives: he is, as usual, cooking the books at Overstock.

© 2009 Gary Weiss. All rights reserved.

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Thursday, July 23, 2009

Suitors (Gulp) Emerge for BusinessWeek

Kudos to Jon Fine, BusinessWeek's media columnist, for producing the first genuine news to emerge since word that BW was being put on the block. That's the good news. The bad news is that they are a forbidding, and tiny, bunch.

In a column online here, Fine identifies two potential bidders:

One company participating in that process is OpenGate Capital, the Los Angeles private equity firm that in October 2008 purchased TV Guide magazine (without its Web operations) for $1 plus the assumption of substantial liabilities. Another interested party, though it is not yet fully certain he will place a bid, is the veteran financier Bruce Wasserstein. Wasserstein is the chairman and CEO of Lazard Frères and also chairman of investment firm Wasserstein & Co., which holds a substantial stake in business publisher Penton Media and owns The Deal magazine. In 2003, Wasserstein bought New York magazine.
So we have the company that bought TV Guide for a buck, and a Wall Street guy that you really don't want to have owning a biz magazine if you can avoid it. Which maybe you can't in this instance.

Time Inc. has passed on BW, as has Thomson Reuters, Bloomberg, and the private equity firm that owns the American Banker.

So goes another day in a business that truly sucks.

© 2009 Gary Weiss. All rights reserved.

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Overstock.com Finds a New Way to Waste Money

Earlier today, I ran an item describing Overstock.com CEO Patrick Byrne's latest issuer retaliation gambit. Well folks, I just got an email from a p.r. person for Overstock. That was quick.

Threatening? Angry? Slimy? Not at all. Why, they were so darn nice that I have an awfully good idea that they didn't read my latest item and, in all likelihood, haven't a clue about the slimeballs that have hired them.

The email (a mass spam, of course) came from a p.r. firm called "Advocacy Ink." The subject header says: "INTERVIEW: Overstock.com praises Senators for demanding SEC action on naked shorts, calls SEC 'the Barney Fife' of regulators." The purpose is to see how many journos are as dumb as they are, and who may want to chat it up with Overstock's president Jonathan Johnson.

Why not the famously nutty CEO Patrick Byrne? Duhh.... you figure it out.

It reads in relevant part:
Dear producers and reporters:
Sens. Ted Kaufman (D-DE), Johnny Isakson (R-GA), Carl Levin (D-MI), Jon Tester (D-MT), Sherrod Brown (D-OH), Orrin Hatch (R-UT), and Robert Menendez (D-NJ) yesterday sent a letter to SEC Chairman Mary Shapiro. These senators are urging the SEC to stop abusive naked short selling.

...This is big news in the fight to stop naked short selling, which Overstock.com welcomes. Jonathan Johnson, President of Overstock.com commented that, “Overstock has been working to get the SEC...
Yadda yadda. He then uses the "Barney Fife" hyperbole, an outright metaphor-steal from Wall Street Versus America (page 13), but I forgive him because of its entertainment value. The SEC, of course, has given Overstock a free pass while it cooks the books and retaliates against critics, as I pointed out in my item earlier today.

The email ends, "Please let me know if I can schedule an interview for you with Mr. Johnson," and is signed by an Audrey Mullen. A month or so ago, Byrne had hired someone from Levine Communications in Los Angeles to send out emails to reporters comparing him to Wyatt Earp. I guess that metaphor didn't work out, so Byrne is trying a new one.

What gets me is what a terrific way this is to add to the shareholder deficit. Just hire somebody to send out a spam to everybody they've got on a media list. Reporters love spam emails, particularly on behalf of lowlifes.

I wonder what other media pals of this corporate crime petri dish also got an email from these geniuses. I also wonder if Advocacy Ink's other clients are getting such first class service.

Sourcewatch describes Advocacy Ink as "pro-corporate, anti-regulation, Republican, conservative, somewhat libertarian." Looking at the client list of authors, I see that the firm represents an anti-environmentalist book and several extolling the joys of conservatism. Judging from their superb work for Overstock so far, I'd say that environmentalists and liberals have nothing to worry about.

© 2009 Gary Weiss. All rights reserved.

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Patrick Byrne Teaches a Lesson in Issuer Retaliation

I missed the Overstock.com conference call yesterday (I was washing my hair or feeding pigeons or sumthin'.) Well, what a major shame. The conference call transcript, published on Seeking Alpha today, shows that Overstock.com's forever shameless CEO Patrick Byrne taught a graduate-level seminar in issuer retaliation.

He personally attacked the only person coming to the conference call with any probing questions--white collar crime fighter Sam Antar--thereby intimidating the brokerage analysts into a kind of gasping, quavering series of obsequious questions.

That's a shame, because Overstock's second quarter numbers were even sham-ier than usual. The company reported "earnings" of 2 cents a share based entirely on accounting card tricks and smoke and mirrors--as evidenced by the fact that the company is continuing to burn through cash at an alarming rate and has a $4 million shareholder deficit.

Sam had submitted his questions in advance, and posted them here.

Byrne's sneering non-answers to Antar's questions begin on page four of the transcript. This exchange stands out from the ususal evasions:

[Sam] asked how the recognition of legal fees related to that litigation affected comparable quarters last year. Those litigation expenses were included in our G&A for Q1 and Q2, and we've never disclosed detail amounts of legal expenses in any of our litigation matters.

Patrick Byrne

And is Sam afraid his checks may stop clearing?

Jonathan Johnson

That could be.

Patrick Byrne

I'm going to get whacked for that one later. So, that was Sam. Anything else we want to say about Sam Antar?

Steve Chesnut

No.

Patrick Byrne

But if Sam's worrying that we've shut down the litigation against his friends, he shouldn't worry. It's still going on, right?

Jonathan Johnson

That continues and we're pleased with how it continues. They're going well.

Patrick Byrne

So maybe you should go to pay in advance, Sam. Okay, question from Steve Rubis of Stifel Nicolaus.

In other words, Sam Antar is not to be believed, because he is being paid to pursue Overstock.com.

He isn't, but when has the truth ever stood in the way of Patrick Byrne? Byrne has long contended that he is a victim of a conspiracy of people who don't actually find him wretched, but must be persuaded by cash to ask difficult questions of this fine man.

It's sick. But it works. To no great surprise after that exhibition of bullying, Mr. Rubis of Stifel Nicolaus was suitably stifled, slobbering over himself with a softball question. Nat Schindler of Banc of America could be heard cringing over the line as he applied tongue to the boots with "Thanks for taking my question and it seems like a very strong quarter this quarter."

You bet it was strong. It was so strong that revenues declined. That trifling detail--and Byrne's refusal to elaborate on insurance reimbursement of litigation expenses--went unpursued, in a conference call that had the tenor of a government press conference in Iran.

The Securities and Exchange Commission has the tools, in Sarbanes-Oxley, to do something about this kind of behavior. Perhaps even the will. The SEC's "wish list" of 42 suggested changes to the securities laws even has a "Deep Capture clause" that would amend Sarbanes-Oxley "to make clear that subsidiaries and affiliates of issuers may not retaliate against whistleblowers."

But the SEC doesn't have to expand the rules to curb this kind of behavior. This isn't Byrne hiring yet another Judd Bagley to intimidate critics. It is him, acting as CEO, doing it openly on a conference call, for the express and undisguised purpose of boosting the price of his stock by curbing serious analysis and questioning.

And boost it did. Share prices jumped 12% yesterday, climbing from 12.27 to 13.78, based on Byrne's uncontradicted hype and intimidation of a critic.

He accomplished that by giving a graduate level course in issuer retaliation. The only question is, will the SEC learn anything from it, and act?

© 2009 Gary Weiss. All rights reserved.

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Wednesday, July 22, 2009

How McKinsey Saved BusinessWeek

There's been some ink recently on how Condé Nast has hired McKinsey & Co. to "rethink" how it does business. What none of the comenters apparently realize is that McKinsey has plenty of experience evaluating magazine companies. The soon-to-be-sold BusinessWeek, for example.

Back in the 1990s, a crackerjack team from McKinsey came to BW's offices and conducted an evaluation of the magazine's editorial operations. I don't believe it received any publicity at the time, that being the pre-blog era and BW not having the kind of gossipy staff as Condé Nast.

It was a mystery at the time, and still is, why McGraw-Hill brought in McKinsey. The magazine was far from the the wreck that it is today, with solid advertising sales and a respected editorial product. There were no evident defects with the magazine's editorial operations. It was a bit weird.

So the consultants came. I can't really say much about them because they never talked to me. In fact, what was a bit strange was how few people they talked to. Seems they only chatted with a select number of editors. (Maybe that's what consultants do; I don't really know.) I also did not see their report.

Scuttlebutt said that the report recommended that department editors--line editors expert in their subject matter--no longer edit stories, and that editing be centralized at the copy desk, consisting largely of part-time personnel. If that's what the report actually said, it would have been completely daft.

All I do know for sure is that the report was placed on a shelf and quickly forgotten.

UPDATE: And just to correct the record (too late, I'll admit) I'm told by an ex-BW editor that it was Booz-Allen, not McKinsey.

© 2009 Gary Weiss. All rights reserved.

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Tuesday, July 21, 2009

When Being Right Means Nothing

Somebody just emailed to bring an interesting essay to my attention. The title "SLAP A LIMIT ON LEVERAGE--NOW."

Note this:
It's easy to lash out at [1998 hedge fund disaster Long Term Capital Management] and at hedge funds in general. And yes, new regulation is necessary--but not aimed randomly at the funds. Instead, regulators should focus on the high-octane "fuel" that powered LTCM directly into a brick wall. What is really to blame here is the excessive use of leverage, especially when investing in derivatives and currency. Whether such leverage be employed by a hedge fund or trading desks at a bank or securities firm, it is currently almost entirely unregulated.

and

True, limiting leverage may make some high-tech investment strategies difficult or impossible. It might also cut into the derivatives business of banks and Wall Street firms. If that's the case--well, so be it.
Not bad, huh? This appeared in Business Week, and the publication date is Oct, 12, 1998, ten years before the financial crisis.

I'm ashamed to say I wrote it, ashamed in the sense that I totally forgot about it, as did everyone else on the planet, until someone sent me a link today.

This commentary appeared in the largest business magazine, circulation 1 million. Nobody noticed at the time, or since. Even I forgot about it, and I wrote the dang thing.

This relates back to some points that have been made recently, such as by Dean Starkman at Columbia Journalism Review in his excellent article last May. Sure the media didn't do a particularly good job of writing about the conditions that led to the financial crisis, such as out-of-control leverage. But even if we did, nobody paid attention or cared.

Hey, that's the way it is, as Uncle Walter would have said. Journalism is not as powerful as some poeple think. Even if this had been a cover story, even if it had been a page one story in the Wall Street Journal or New York Times, even if everyone had gotten on the leverage bandwagon, in all likelihood the outcome would have been..... nothing.

Why? Because leverage was a potential problem at the time. It was a danger, and so it was until the bubble burst. And history proves, time and again, that our government does a crappy job of heading off looming threats, whether it be leverage or Al Qaeda.

It is the responsibility of government to adequately regulate the markets. Sure, we in the media can point the way, but, as Chris Byron once said, we're just "seeing eye dogs" for the blind regulators. If they choose to fall off a cliff, because that is what Wall Street wants and they are too captured to do anything about it, there is nothing the media can do to stop it.

The media have been hostile to one of my pet causes: mandatory arbitration of brokerage disputes. I've railed against it for years, and the big media have regularly described how arbitration stinks.

Do you think that has moved regulators by as much as one inch? Don't bet on it.

© 2009 Gary Weiss. All rights reserved.

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Wednesday, July 15, 2009

How Not to Revive BusinessWeek

Alan M. Webber, co-founder of Fast Company, has some ideas in Huffington Post on how to revive BusinessWeek. I'm glad that someone of his caliber is thinking about that--heaven knows, BW needs new ideas--but the ones he has presented indicate, to be quite blunt about it, that he hasn't followed the magazine too carefully in recent years.

Webber says as follows:

. . . a rejuvenated BW could be the American answer to The Economist. It wouldn't report the news--instead, it would interpret it, coverage off the news rather than on it. BW could bring fresh energy, opinion, and perspective to all of the change in business that is so hard to make sense of. It could use interpretive graphics and recruit opinionated columnists--with renewed opportunity for bloggers who can compete for space on the web site. A renewed BW could cherry pick the best old school business journalists (who are all dying for a new venue) and add in the new generation of academics and trendspotters who are producing hit books blending sociology with new management practices. BW could feature conversations from around the world that migrate back and forth from the web. In other words, get out of the news business and go on offense! Stop playing defense--attack, attack, always attack!
The fact is that BW moved away from regurgitating the news, and moved in the very direction that Webber suggests, quite some time ago under the former editor Steve Shepard, and has done so to an even larger extent under his successor Steve Adler.

Adler tossed out the "top of the news" section (one of his few initiatives that I agreed with). He introduced columns by Jack Welch, Maria Bartiromo and some wine expert whose name escapes me. He built up the website, recently redesigning it quite handsomely, and assigned a top gun to the job, his exec editor John Byrne. He and Byrne enormously expanded the number of staff-written blogs on the website. He initiated a "reader-written" issue last year. Reader input was constantly sought and reader participation played up to a ridiculous extent.

Webber says "Most of all, BW needs to create a franchise." Excuse me? BW had a franchise before Adler came on board, and that franchise has since evaporated. I have nothing against the guy personally (I've never met him, and I left BW before he came on board), but that's a fact.

BW's franchise, which it built up in the 1980s and 1990s, was an emphasis on interpretive reporting and scoops. Sure, good stories appeared and BW continued to break news in recent years, but it didn't seem to do very much good. The damage was done. True, Adler didn't have the ad pages and money that Shepard had in the 1990s. But my feeling is that his 2007 redesign went in the wrong direction, that he made a mistake by building up a bureaucracy of middle-management while staff was being chopped, that the new columns were a waste, and that he generally did not make optimal use of the magazine's resources and brainpower.

It's a shame, and hopefully the new owner, if there is one, will recognize what went wrong and act accordingly. Personally I'd like to see something of the old BusinessWeek spirit revived, which is why the idea of BW coming under Joe Mansueto, publisher of Fast Company, appeals to me.

© 2009 Gary Weiss. All rights reserved.

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Tuesday, July 14, 2009

'Strategic Options' Explored for BusinessWeek Means. . .

Since all the world now knows that McGraw-Hill is shopping BusinessWeek, I'm perplexed by the corporate-speak of an email delivered to the staff yesterday, after the news broke on Bloomberg, by BW publisher Keith Fox. '

It said as follows:

We all know that the media industry is facing unprecedented challenges. The growth of digital innovation has created new entrants, new challenges and entirely new business models for media companies. The move of readers and advertisers online, coupled with the impact of the recession on print advertising, has created additional urgency on the need for change. Given the current market environment, the Corporation has decided to explore strategic options for BusinessWeek.
Up until the last sentence, that statement could have been made about any magazine in the U.S. Since there was no obligation to issue a statement at all, I don't understand why such opaque, ice-cold language was used, particularly in a note to a terrified staff.

It appears that M-H is likely to get little or nothing for the magazine, because of the mounting losses. So essentially it will get bubkis in return for giving away its flagship publication to a new owner who will do what M-H should have done years ago, which was to sweep out the top editors.

Personally I'd like to see BW go to Joe Mansueto, who worked wonders with Fast Company is one of the rare journalism moguls who cares about magazines.

© 2009 Gary Weiss. All rights reserved.

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Monday, July 13, 2009

Bernie Madoff Gets a Wet Kiss From the Feds

Here's the latest Bernard Madoff outrage: instead of getting the hard time that he deserves, he will be confined to the "crown jewel" of the prison system, Butner Federal Correctional Complex in balmy North Carolina.

The "crown jewel" description comes from the press coverage Butner received in 2006, when Enron's Jeff Skilling wanted to be confined there. (He actually made out reasonably well, and is currently confined in FCI Englewood, a low-security institution near the pretty little town of Littleton, Colorado.)

Sure, no prison in the system is a "country club," but the idea of Madoff getting a comparatively cushy prison assignment is galling. What has this man done in return for such beneficence?

Business Insideer reports that "Butner is also known for having excellent medical facilities, especially its cancer-treament programs. There have been rumors that Madoff has been diagnosed with cancer." In other words, Madoff gets top quality health insurance at government expense, which is more than his elderly and impoverished victims are going to get.

Hey, I'm not saying he should be thrown in a dungeon and fed bread and water, but this is a bit too much.

© 2009 Gary Weiss. All rights reserved.

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Phantom Shares Plague Overstock.com

In the past I've scoffed at notions that Overstock.com, a third-rate Internet retailer that bellyaches about "naked short selling," has been beset by sale of "phantom shares." Well, my bad. Appears that the reports are true, and I certainly hope that regulators investigate and take necessary enforcement action.

White collar crime-fighter Sam Antar reports that such shares indeed have been issued--by Overstock itself. The company disclosed "that it improperly issued an extra 201,421 unregistered shares of common stock in connection with the company’s 401-K Plan."

That's a lot of unregistered shares for a company with a razor-thin float like Overstock. The company said that it “may be subject to civil and other penalties by regulatory authorities as a result of the failure to register these transactions.”

Sure hope so. And while regulators are on the subject, why not take action against Overstock for using accounting gimmickry to bolster its share price? It's all laid out in black and white in Sam's blog.

© 2009 Gary Weiss. All rights reserved.

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BusinessWeek on the Block

Recent rumors that BusinessWeek is for sale appear to be true. Bloomberg is reporting that McGraw-Hill has hired Roger Altman's Evercore Partners to shop the magazine.

Great timing, you have to admit. Ever hear of a more terrific climate for magazines? I can't. I'm sure McGraw Hill will fetch a high price for its flagship property, particularly given its recent 34% decline in ad pages. It's also one heck of a way for BW to celebrate its 80th birthday.

I heard in early 2008 that staffers were told the magazine would be shopped in four years if losses hadn't stopped by then. Maybe the demise of Condé Nast Portfolio gave M-H execs inspiration to pull the plug a bit early.

BW lately has been getting more than its share of awards, but the magazine is a shadow of its 1990s self (full disclosure: I worked there at the time), and not just because of repeated layoffs under the new editor in chief Steve Adler. "Celebrity" columns, inconceivable in the past, have led to embarrassments like this one, while failing to produce any benefits visible to an outsider and teeing off the staff.

Beefing up the magazine's management ranks, at the same time that it was firing reporters by the droves, seemed particularly ill-conceived, as was last year's "reader-written" edition. And then there was a 2007 redesign, about which the less said, the better.

It always surprised me that Portfolio (full disclosure: I wrote for that magazine until its demise) was constantly under attack in media blogs for far less serious boners, while BW management received little attention for one gaffe after another that eroded its decades-old franchise.

I'm also at a loss to understand why McGraw Hill didn't try a change in management before taking such a radical step. Instead it went ahead and hired Evercore, and inevitably word of that leaked out. That'll do the magazine a whole lot of good, in terms of both ad sales and staff morale, if a buyer doesn't materialize. Nice going!

UPDATE: The Wall Street Journal has "people" confirming the report. BusinessWeek won't comment and McGraw-Hill "couldn't be immediately reached for comment." Huh? Not returning phone calls?

© 2009 Gary Weiss. All rights reserved.

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Tuesday, July 07, 2009

Welcome to Ruth Madoff Rehabilitation Week


Bernie and Ruth taking a break between ripping off people/not know hubby was ripping off people

ABC News is reporting that the feds have given back Ruth Madoff's passport. This means, and it is a close question, that either the government is being more incompetent than usual or that Ruth Madoff is not going to be charged criminally for being the rather obvious accomplice to her hubby Bernie.

So this seems to be Ruth Madoff Rehabilitation Week. In its latest issue, New York magazine falls just a few inches short of taking her side, in an article with a title that asks the clueless question, "Why does Bernie's better half inspire such vitriol?" Because she's probably guilty, that's why.

The article goes on to quote Gloria Steinem unconvincingly trotting out the gender card:
Ruth’s problem seems to be a particularly female one. “It’s the gender politics of the culture,” says Gloria Steinem. “It’s easier to blame the person with less power.” And, she adds, why aren’t people blaming her sons? “They would be much more likely to be in cahoots, because they were in the same professional field. And the answer is, they’re men, that’s why.”
Why aren't people blaming her sons? Hello? In its current issue, Vanity Fair has an article by David Margolick describing just how much people are blaming her sons. I wouldn't have minded the Steinem quote so much if it weren't preceded by the ridiculous, approving topic sentence that Ruth's problem is a "particularly female one."

Not to worry. Looks like Ruth will be walking off with her $2.5 million, unprosecuted. One can only hope that the lawsuits snatch away from her that outrageous bonanza, and quickly. Then we can get another naively sympathetic article about "poor Ruth."

© 2009 Gary Weiss. All rights reserved.

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