When is Good Publicity Not So Great?

The answer is: when you're investigated by the SEC, and you lie in the Washington Post.

Yesterday, Overstock.com's wack-a-doo CEO Patrick Byrne was the subject of a puff piece by the AP. White collar crime-fighter Sam Antar tells me that he was talking to the writer of the article for literally weeks--and yet the AP reporter, Paul Foy, omitted crucial facts, and allowed Byrne to tell a breathtaking lie.

The problematic passage is as follows:

Byrne, who owns nearly 30 percent of the company's shares, says Overstock's accounting errors were generally conservative. The latest involved 0.1 percent of revenue and gave the company no advantage, he said.

Foy left out entirely that correcting the "accounting errors" had turned a much-ballyhooed fourth quarter 2008 profit into a loss. It's right there in 10-K, in black and white.

That is not a small thing. When the phony fourth-quarter profits were announced in January 2009, it pushed up Overstock shares by 21%. The news agency to which I just linked, Reuters, has never revisited the subject.

Nor did the article report that Overstock had bitterly fought the restatements, firing one of its previous accounting firms, Grant Thornton, or that it is under a continuing SEC investigation. For a piece that took weeks to prepare, such omissions are inexcusable.

Foy also irresponsibly quotes Byrne as comparing whistleblower Sam Antar to Bernie Madoff, when it was Sam who had blown the whistle on Overstock's accounting gimmickry.

The problem, for Overstock at least, is that this lamentable journalism, containing a blatant lie by Overstock's CEO, was published today, lies intact, omissions glaring, in the Washington Post. Pickup of the AP story by the local Utah media can be ignored, but not splashed in the SEC's hometown daily.

The SEC may well be destined to give Overstock the Allied Capital Treatment, but the Post article doesn't help, unless the SEC officials involved are too busy writing their resumes to care.

This AP story, meanwhile, raises a journalistic issue that I thought had been settled a long time ago: when a CEO lies, and when the reporter knows it's a lie, is the reporter obligated to point that out?

The answer, which I think is pretty obvious, is "of course." Otherwise the media becomes embroiled in what is, in effect, a pump-and-dump scheme. Reuters can't be held responsible for its January 2009 article reporting the phony Overstock financials, but the same can't be said for the AP.

The other question that it raises, which I've broached before: To what extent are puff pieces like the AP's motivated by a desire to avoid Byrne's well-known penchant for attacking the press?

Barry Ritholtz calls the AP story some of the worst business reporting he's ever seen. It's hard to argue with that.

© 2010 Gary Weiss. All rights reserved.

Goodbye, "Howard" McGraw

BusinessWeek salutes "Howard" McGraw

Above is a story that has been on the BusinessWeek.com website for the past three days: an AP obituary of former McGraw-Hill CEO Harold McGraw that gets his name wrong in the headline.

BW was not alone. Apparently nobody at the AP or its member papers (such as this one) noticed that his name is "Harold" not "Howard." Otherwise I assume there would have been a correction and all these mistakes would have been fixed.

Strange isn't it? You'd expect that if the error was going to be corrected anywhere, it would be at BW.

I guess there's a bit of symbolic significance in this boner going uncorrected. Over the past few years, BW has become unrecognizable since the days when McGraw ran the magazine's former parent in the seventies and early eighties. One observer recently contended that BW had morphed over the past few years into the "Reader's Digest of American finance."

McGraw was an old-school CEO who rejected a bid from American Express, handsome as it was, on the grounds that Amex would not have been a proper steward of the company or the magazine.

The New York Times reported in its obituary that McGraw said Amex “lacks the integrity, morality and sensitivity” to merge with McGraw-Hill.

Wow. Can you imagine anyone rejecting a bid for a media company today on the grounds that an acquirer lacked "integrity, morality and sensitivity"? I wonder sometimes if those words have been cut out of the dictionary.

On the contrary, the current CEO Terry McGraw, his son, was only too happy to toss BW under the bus when it ceased being profitable. He put it up for sale and would have sold it to a venture capital outfit if the price had been right.

I happen to think that Terry's a good guy, but I doubt very much that he would have rejected a buyer for BW because it lacked "integrity, morality and sensitivity." Hell, it looks like he wouldn't have rejected a buyer even if it failed to come up with much in the way of bucks. Bloomberg paid chump change for BW.

So of course nobody noticed Harold McGraw's name was misspelled. It's also not really surprising that rather than pointing out how the company and BW were saved by this forgotten old man, BW runs an AP obit that underplays the Amex battle and doesn't even get his name right.

That figures. The correct spelling of his name wasn't the only thing that has been forgotten.

© 2010 Gary Weiss. All rights reserved.

The AP's Misguided "5 words for $12.50" Policy

I'm as sympathetic as most people, maybe more so than most, with the AP's striving to prevent piracy of its stories on the Internet. I even said so in a comment on CJR Online's Audit blog a few days ago.

But a loyal reader brings to my attention that I was being just a bit too sympathetic. This blog post from some weeks ago, which I hadn't seen, indicates that the AP is, to say the least, overreaching in its effort to prevent people from quoting its articles, and extracting payment from those that do.

The New York Times had reported in June about the AP's effort to stop unauthorized piracy of its articles. That led to a furor and the Audit reported that the AP is simply trying to prevent systematic ripoff of their articles.

But look what you see on the bottom of articles on the AP's website. I picked one at random. Note the link at the bottom "Click here for copyright permissions."

Click there and then click "post" and then "post excerpt."

According to the form that pops up, if I wanted to post five to 25 words for a nonprofit or educational blog, I pay $7.50. If it's a "for profit" blog--which I guess includes bloggers like myself who get reap the beneficence of Ad Brite and so forth for lunch money---the cost is $12.50.

Seriously. Here's the pay chart:



Yeah, I know the AP says it won't sue small-time bloggers and such. Then what's this all about?

Like I said, I'm sympathetic to the AP. One of my first jobs was with a little wire service that went bust (two that went bust if you count one that I left before it went bust). I know what a horrid business it is. But this is overreaching, pure and simple, and simply atrocious p.r.

© 2009 Gary Weiss. All rights reserved.