Reed Irvine - Editor
The tendency of power to corrupt applies to the media as well as to other institutions, as The Wall Street Journal revealed in a story published March 29. The Journal disclosed that one of its reporters, R. Foster Winaris, had been leaking information scheduled to appear in the paper's influential column, "Heard on the Street." Winans was one of two writers who wrote the column. The persons getting advance tips about stories that were to appear in the column were able to use the information to their personal advantage. They played the stock market, betting that the prices of particular stocks would rise or fall as a result of what was said about them in Winans' column.
The widely read column had power. A study has shown that of 184 stocks featured in the column in 1983, 75 rose an average of 6.5 percent on the day that they were discussed favorably in the column. In the five days prior to that, these same stocks had fallen by an average of 4.1 percent. In the following three months, those same stocks gained an average of 12.5 percent. On the other hand, 32 stocks that were discussed in the column in negative terms declined by an average of 5.5 percent the day the negative column appeared and fell by an average of 9.2 percent in the three months following publication.
Knowing that a stock would be panned or praised in the column could be helpful to a speculator, who could sell short, buy long, or purchase options to convert that information into profits. Winans was unmasked when an investigation revealed that stocks Winans panned in his column had frequently been sold short the day before the column appeared. A company whose stock dropped over 20 percent following a negative report in Winans' column was curious about the large volume of short sales immediately before the column's appearance on October 20. 1983. A few days later, a similar pattern was noticed with respect to another company's stock. The American Stock Exchange launched an investigation, and soon the Securities and Exchange Commission (SEC) was brought in.
There is no evidence that Winans himself was speculating on his own account. It is not even known whether he received any share of the profits reaped by those who speculated on the basis of the advance information he gave them. The SEC is very close- mouthed about all of its investigations, and most of what we know about the case has come from The Wall Street Journal itself. It did reveal that Winans had plugged a company whose stock was said to be held by his homosexual lover, David Carpenter. The Journal reported that Winans had pushed hard to get the stock of this company, American Surgery Centers of Scottsdale, Ariz., mentioned favorably in his column. He succeeded in getting it mentioned favorably on three separate occasions in 1983, and each time the stock rose in price. The stock was at $5 when Winans started to plug it. It rose to over $19, but on March 30 it closed at $3.75.
The SEC informed the Wall Street Journal on March 1 that it was probing the possibility that leaked information about stories that were to appear in "Heard on the Street" had been used by speculators. The SEC had singled out stories on six companies that Winans had written about. Winans had denied that he had leaked any information, and he denied knowing David W.C. Clark. a New York lawyer who was said to have made big profits by short-term trading in the stock of the six companies that had aroused the SEC's interest. Clark had denied talking with anyone at the Journal.
The Journal kept silent about this for nearly a month except for one sentence in a March 2 story about how media organizations guard against their employees using market-sensitive information obtained in their work for their personal gain. In retrospect, that 24- paragraph story carried on page 12 now looks like a vehicle designed to report the Journal's problem as inconspicuously as possible. The story was a side-bar to a lead article about the growing problem of insider information being used to make money in the market. After discussing how papers such as The New York Times, The Washington Post, The Philadelphia Inquirer, The Cleveland Plain Dealer and other publications try to insure that their employees don't engage in stock, market speculation on the basis of information obtained on the job, The Journal got around to its own policies in paragraphs 13-15. It said: "The Wall Street Journal has a 3 1/2-page conflict-of-interest policy that prohibits employees from trading stock in companies that are about to be or were just written about in the newspaper.
"'It is not enough to be incorruptible and act with honest motives,' the policy says. 'It is equally important to use good judgment and conduct one's outside activities so that no one--management, our editors, an SEC investigator with power of subpoena, or a political critic of the company--has any grounds for even raising the suspicion that an employee misused a position with the company.'
"It was learned yesterday, for example, that the SEC is informally investigating allegations that a stock trader had advance knowledge of certain articles that have appeared in the Wall Street Journal."
By mid-March enough suspicion had fallen on Winans that he sought legal counsel, and the Journal paid his legal expenses. However, nothing more was said about the on-going investigation until March 29, when the paper ran a prominent story on page 3 reporting that Winans had been fired. It also told of the dismay of the paper's officials, some information about the investigation by the SEC and the Journal's cooperation in the probe. This was followed by a much more detailed account that was carried as the lead story on page one of the Journal on April 2.
This article disclosed the link between Winans and David W.G. Clark, whose short selling of stocks mentioned adversely in Winans' column had triggered the investigation. Clark was a major client of Peter Brant, a young broker at Kidder, Peabody & Co. who was the source for at least two of the Winans' columns under investigation by the SEC. Winans had tried to persuade his editors to run an article touting Brant as a "super broker," partly on the ground that "he had made customers large sums of money through some innovative investment strategies." It appears that one of those "innovative strategies" may have been to plant stories in the Journal that would affect stock prices and tip off a client as to what was coming up. His salary and commissions were reported to be about $1 million a year.
According to the Journal, a number of trading rings may have had access to advance knowledge of what was to appear in Winans' columns and made large illicit profits as a result. It said that the SEC is looking into the question of whether Winans "may have knowingly prepared articles that were factually accurate but were published specifically to benefit sources he knew well." Winans was said to have denied doing this, but the Journal also reported that he had told friends that he was worried about criminal prosecution and that it was going to look like he had been "bought."
In addition to demonstrating the power that a single columnist can wield, this case has served to expose the vulnerability of the media to the misuse of that power. The Wall Street Journal had apparently made only a cursory check of Mr. Winans' qualifications before hiring him for this very key job. He had done some freelance writing for The New York Times, and The Times gave him a satisfactory reference. However, The Journal had been unaware of a charge by the city editor at The Trentontan that when Winans worked there he had taken unpublished material from the files of other reporters without their permission and sold it to other news organizations. The Journal has also admitted that it does not require its employees to submit financial disclosure statements. This makes it easy for reporters and editors to speculate in stocks about which they may have sensitive information without much fear of detection.
In its March 2 article about the practices followed by various publications, the Journal said that it found that it was rare for papers or magazines to require editorial employees to submit regularly forms listing their investments. It found that many media organizations have only informal policies or none at all to guard against employees' becoming involved in conflict-of- interest situations. It found that even written policies against journalists trading on the basis of information obtained on the job are the exception.
Jody Powell, White House press secretary in the Carter administration, has just published a book, The Other Side of the Story, in which he argues that journalists ought to be required to make financial disclosure statements similar to those filed by officials of the federal government. Powell said that an informal survey of the three television networks and The Wall Street Journal, The New York Times, The Washington Post and The Los Angeles Times revealed that none of them had any serious procedure for checking on the financial interests of their news personnel. He says: "The reporters could be on the payroll of an oil company, a labor union, the KGB and the Moral Majority for all they know."
Powell makes the valid point that journalists are often in a position to influence policy decisions. The Winans case shows that they are in a position to influence the stock market. Powell thinks public disclosure of their finances is therefore just as desirable as the disclosure for public officials. This suggestion came in for discussion on the CBS Morning News on April 6, when two prominent TV journalists were asked what they thought of Powell's suggestions.
Lesley Stahl, White House correspondent for CBS News and moderator of "Face the Nation," said that she would not like to see such a requirement for reporters, but she said that if it were required she would fully comply. Sam Donaldson, ABC's White House correspondent, didn't like the idea at all. He said that public officials, unlike journalists, hold positions of public trust. Powell, who was appearing on the program, observed that Mr. Donaldson and his colleagues wielded great power and sought public trust. Donaldson argued (a)that journalists don't have power and (b)that dentists, doctors, insurance agents and housewives also sought trust. He managed to change the subject before Powell could pin him down and extract a single logical reason why he and others in the journalistic fraternity should not be required to disclose their financial interests. None of those participating thought to bring up the Winans case.
In the March-B 1984 AIM Report, we reported that a CBS News series attacking the new artificial sweetener, NutraSweet, had inspired persons with advance knowledge of the series to bet that the series would depress the stock of the maker of NutraSweet, G.D. Searle & Co. Dr. Woodrow Monte, who had denounced NutraSweet on the CBS program, and his lawyer both admitted having bought "put" options on Searle stock, in effect betting that the stock would fall in price when the CBS series was aired. This had come to light before the Wall Street Journal scandal broke, and the Journal discussed it in its March 2 article on how media organizations handle these matters.
The Journal pointed out that the SEC was investigating to determine whether or not CBS employees had also bought options to sell Searle stock before the attack on NutraSweet was televised. CBS had announced that it expected the SEC to subpoena some of its employees in connection with this investigation. So far, no CBS employees have been subpoenaed, however.
AIM asked Gene Mater, senior vice president of CBS News, if CBS had made its own investigation and if it would make public its findings. Mr. Mater declined to say whether or not such an investigation had been made. He indicated that CBS News did not intend to follow the example of The Wall Street Journal and make public the findings of any investigation it might have made. Asked why, Mr. Mater said that the two cases were entirely different. He noted that many people at CBS News who had nothing to do with the NutraSweet series were aware that it was going to be aired. He asked if it would be wrong for them to speculate on the basis of that knowledge.
In its March 2 article, The Wall Street Journal had said, "No news executives were concerned about inside trading by non-editorial employees, although many people in a newsroom routinely know about all but the most sensitive investigative reports. Similarly, the media appear largely unconcerned about trading by subjects of interviews, such as in the Searle case, with some exceptions." Norman Pearlsline, managing editor of The Wall Street Journal, has issued a memo to his staff in which he said: "Even when it is obvious through the line of questioning where the story might be leading. we should never characterize the thrust of the piece to anyone."
This does not get at the problem of stories being planted or inspired by individuals who seek to use the media for their own gain. That appears to be what happened in the Winans case, and it is possible that it also happened in the case of the CBS series on NutraSweet. Dr. Monte had previously worked with CBS News personnel on at least one other story. Gene Mater would not or perhaps could not say whether or not Dr. Monte had interested CBS News in doing the NutraSweet story. That would seem to be an obvious subject for investigation.
Rather than insist, "We are clean. Trust us," CBS should make an investigation of the NutraSweet series and tell the public what it finds, as The Wall Street Journal has done. Beyond that, the powerful media organizations such as CBS and The Wall Street Journal should demonstrate that they have learned a lesson from the Winans and Searle cases and adopt Jody Powell's recommendation that they require key editorial personnel al least to file financial disclosure statements similar to those required of public officials--and make them public. We will be suggesting this at the annual meetings this year.
Write to Thomas H. Wyman, Chairman, CBS, Inc., 51 West 52nd Street, New York, N.Y. 10019, asking that CBS News folios, the good example set by The Wall Street Journal in telling the public the facts about the Winans scandal. Ask that CBS disclose the names and positions of any of its employees who engaged in market speculation on the basis of knowledge that CBS was to air a series on NutraSweet that had the potential of causing a drop in the price of the stock of G.D. Searle & Co. Suggest that financial disclosure forms be required of CBS News personnel.
GETTING AWAY WITH THREATENED MURDER
Louis Farrakhan is one of the Rev. Jesse Jackson's most ardent supporters. The head of the Nation of Islam, a Black Muslim group said to number between 5,000 and 10,000, Farrakhan furnished Jackson with bodyguards before he qualified for Secret Service protection. Farrakhan was a member of the party that accompanied Jackson on his trip to Damascus to obtain the release of Lt. Robert O. Goodman. Jr. He has frequently appeared on the same, platform as Jackson, and on ABC's "Nightline" on April 5, film footage was shown of Farrakhan and Jackson warmly embracing each other during one such appearance.
Louis Farrakhan was very angry about the disclosure in The Washington Post that in a conversation with a black Washington Post reporter, Milton Coleman, Jesse Jackson had referred to Jews as "Hymies" and to New York City as "Hymietown." Responding to the reaction to that remark, especially on the part of some Jews who attacked Jackson headquarters, Farrakhan warned the Jews, "If you harm this brother, it will be the last one you harm."
That upset many people, but the attention that it got in the media was a tenth of one percent of what it would have gotten had it been made by a close friend and leading supporter of any other major presidential candidate. There was no drumbeat in either the print or electronic media demanding that Jackson repudiate his friend Farrakhan or get out of the race for the Democrat nomination.
On April 2, The Chicago Tribune disclosed that Farrakhan had declared his intention to take revenge on Milton Coleman for having revealed Jesse Jackson's "Hymie" remarks. Farrakhan in a national radio address had said, "We're going to make an example of Milton Coleman." As to how this would be done, Farrakhan said, "At this point, no physical harm. We're going to keep on going until we make it so that he cannot enter in among black people... I'm going to try to get every church in Washington, D.C. to put him out... When- ever he hits the door, tell him he's not wanted."
Alerted to the story by The Chicago Tribune, the Washington post reported Farrakhan's threats to its readers on April 3, putting the story on page 6. It added a few choice items from Farrakhan's radio address, such as: "I don't want you religious sissies to come telling me about the forgiveness of Jesus Christ...he hates cowards and He hates turncoats and traitors." It also quoted this reaction from Jesse Jackson: "I discourage violence or intimidation or threats or the implication of them anywhere, anytime. That's my basic life style. I don't know enough about that. The point is that whatever was said wasn't an official position of my campaign. I do not see any obligation to be drawn into that conflict. Obviously, I'm concerned about it because I'm concerned about my unity and peace."
Benjamin C. Bradley, executive editor of The Post was uncharacteristically mild, saying: "I'm sure no political candidate condones this kind of specific threat of physical violence against a journalist whose professionalism is beyond question." he did not demand that Farrakhan apologize or that Jackson repudiate him.
The following day, The Post ran an editorial on what it called "The Farrakhan Affair." The editorial quoted more fully from the transcript of Farrakhan's address, revealing that The Chicago Tribune and The Post news stories had omitted the worst of what Farrakhan had said. After urging the churches to tell Coleman "he's not wanted," Farrakhan had gone on to say: "If he brings his wife with him tell his wife she can come in if she leaves him. But if she won't leave him, then you go to hell with your husband. If he is a traitor and you love to sleep in the bed with a traitor of your people then the same punishment that's due that no-good filthy traitor you'll get yourself as his wife. One day soon we will punish you with death."
The Post editorial found Jesse Jackson's reaction to this outrageous statement "tepid". It said his detachment and lack of interest in the moral question involved was "shocking." It said his reaction "is as outrageous as the Farrakhan assault on Milton Coleman-and much more baffling." But there was no demand that Jesse Jackson promptly repudiate Farrakhan or withdraw from the presidential race. The paper which had insisted that Earl Butz had to resign as Secretary of Agriculture for having told a racial joke and which had hounded James Watt from office for having used the word "cripple," could only bring itself to express bafflement at the failure of Jackson to repudiate Farrakhan.
The same day that editorial ran. The Post also published columns by two blacks, Carl Rowan and Ronald White. Neither demanded that Jackson repudiate Farrakhan. Rowan thought that Jackson would renounce and denounce "Farrakhan's demagoguery" because it hurts him and because he "does not need or want whatever votes Farrakhan can deliver so badly that he will stand silent in the face of a threat against a reporter who simply did what reporters do." White's column was a denunciation of the double standard that suggests that black reporters like Milton Coleman ought to protect black candidates against their own mistakes.
Jesse Jackson has gotten a lot of media attention since April 3. A little of it has been related to his failure to repudiate Louis Farrakhan, but what distinguishes this story from the treatment of James Watt last year has been the way in which the Farrakhan issue has been compartmentalized. For example, on April 4, the day after The Post had carried its first story about Farrakhan's threat against Coleman and after this had been reported by NBS on both the Today Show and on the Nightly News, a Post story about Jackson's campaign said that Jackson seemed to have put the trauma of his "Hymie" remarks behind him.
NBC returned to the Farrakhan story on the Today Show on April 4, and Jackson was asked about repudiating Farrakhan when he appeared on Meet the Press on April 8. He refused to do so, although he did call Farrakhan's remarks "a bit inciting and distasteful." The CBS Evening News on April 4, and ABC's Nightline performed a valuable service in exposing Farrakhan himself a public view on April 5. (He denied having threatened Coleman with death, saying that what he had in mind was punishing with death all traitors when the Nation of Islam took power.)
The New York Times distinguished itself by almost totally ignoring the story. On April 6, it ran a story on page 24 reporting that black journalists had criticized Farrakhan for threatening Coleman. That was it. There was no editorial comment, not even a column commenting on Jackson's failure to repudiate Farrakhan.
It was left largely to the editorial writers at The Washington Post to keep the heat on Jackson. On April 8, The Post ran a second editorial, observing that the double standard was alive and well. It said: "So some of the rules have been suspended for Mr. Jackson: those governing a candidate's relationship with demagogues and haters - with someone as violent as Louis Farrakhan." On April 10, The Post proved that point by carrying an upbeat story about Jackson's campaign in Philadelphia that didn't mention Farrakhan, while burying Vice President Bush's comments about the Farrakhan affair in seven paragraphs on page A17.
AIM REPORT is published twice monthly by Accuracy In Media, Inc., 1341 G Street, N.W., Washington, D.C. 20005, and is free to AIM members. Dues and contributions to AIM are tax deductible. The AIM Report is mailed 3rd class to those whose contribution is at least $15 a year and 1st class to those contributing $30 a year or more. Non-member subscriptions are $35 (1st class mail).
NOTES FROM THE EDITOR'S CUFF By Reed Irvine
IT ISN'T OFTEN THAT ONE OF THE PILLARS OF BIG MEDIA CRITICIZES DOUBLE STANDARDS applied by the media, but if you will read through the last paragraph in our second story in this issue, you will find a quote from an editorial in The Washington Post talking about the suspension of some of the journalistic rules in the coverage of Jesse Jackson. As we point out, that suspension of the usual rules was evident in The Washington Post's own coverage of Jackson. Jackson's "Hymie" and "Hymietown" remarks were not reported by Post reporter Milton Coleman when they were made on January 25. When they were finally reported, it was not under Coleman's own by-line. He had given the information to a colleague who included them in a story he was writing. They were not given prominence in that story, which ran on February 13. They were buried in the 37th paragraph. It wasn't until February 22 that The Post focused attention on them, running a news story and two columns about the remarks. That was nearly a month after Jackson had first made the remarks to Milton Coleman. Contrast that with the lightning speed with which The Post focused on James Watt's use of the word "cripple."
THE WASHINGTON POST EDITORIAL WAS NOT CRITICIZING THE DELAY WITH WHICH THE PAPER had brought Jackson's offensive remarks to the fore. It was criticizing the lack of concern over the threats made by Louis Farrakhan, Jackson's close friend, against Milton Coleman. There was a similar delay in bringing Farrakhan's remarks to public attention. Farrakhan's threats were broadcast in early March. According to CBS correspondent Bob Faw, a number of reporters knew what Farrakhan had said and failed to report it. Engaging in some rare media criticism on the CBS Evening News on April 4, Bob Faw said: "Had a threat like that been issued by a prominent Mondale or Hart supporter it undoubtedly would have been instant front-page news. But this time it was not. Newsweek, whose reporter learned of Farrakhan's comments almost three weeks ago didn't even publish the story until this week and did not include the death-threat language. Neither did The Chicago Tribune, the Los Angeles Times, or the reporter who first broke the story."
FAW QUOTED CHICAGO TRIBUNE REPORTER PHILLIP LENTZ AS SAYING THAT JACKSON MIGHT BE treated differently from other candidates "simply because there is a consensus that he can't be elected president, so they don't put him to the tougher standard they give to someone like Mondale or Hart." Try telling that to Earl Butz or James Watt, neither of whom was even running for president.
THE PERFORMANCE OF THE NEW YORK TIMES WAS ESPECIALLY BAD. THE CHICAGO TRIBUNE RAN the Farrakhan story the day before the Democratic primary in New York. The Washington Post ran its first story the day of the primary. The New York Times didn't get around to mentioning the story until three days after the primary, and then it ran it on page 24 under the headline: "Black Journalists Critical of Muslim." The story by Frank J. Prial did not quote Farrakhan's outrageous threats, saying only that he had implied "that black journalists who criticized black leaders were traitors to their race and dupes of nonblack news organizations." Not until the 11th paragraph of Prial's 20- paragraph story did the reader learn that Farrakhan "has been considered an important supporter of Mr. Jackson and has traveled with the candidate on the campaign."
THAT WAS THE ONLY ITEM WE COULD FIND IN THE NEW YORK TIMES ABOUT THIS AFFAIR UNTIL April 10, when The Times gave front-page play to remarks by Vice President George Bush in which he agreed with newspaper editorials censuring Farrakhan. He said that he found Jackson's behavior shocking (for not repudiating Farrakhan) and that he couldn't understand why the other two Democratic candidates, Mondale and Hart, had not spoken out. The Times said that both Mondale and Hart had criticized Farrakhan's threats against Coleman. It quoted Hart as saying that he would have repudiated Farrakhan's statement and dissociated himself from anyone threatening physical violence. In a side-bar on page B8, The Times reported on an April 8 speech by Farrakhan in Philadelphia warning the press against trying to destroy Jackson's candidacy. This gave them a vehicle for telling the readers for the first time what Farrakhan had said in March that had given rise to so much controversy. The conservative Washington Times also used the Bush remarks to catch up with the story, making Bush their lead story on April 10 and including in it a review of what Farrakhan had said. None of these papers reported that when Larry Speakes, the White House press spokesman, was asked about President Reagan's views on the Farrakhan affair, Speakes would not go beyond saying that the president did not disagree with Vice President Bush.
RAY BONNER, THE FORMER NEW YORK TIMES CORRESPONDENT IN EL SALVADOR WHO WAS ROTATED back to New York after coming under heavy criticism from AIM and the American embassy in San Salvador for his pro-guerrilla reporting, was a featured speaker at a left-wing gathering in Westport, Conn. on March 25. We prepared a leaflet with ten questions for Bonner about his reporting from El Salvador and the reasons he was recalled, and these were passed out to those attending by AIM supporters. Bonner declined to answer any of the questions, saying the answers would be found in his forthcoming book, Weakness and Deceit: U.S. Policy in El Salvador. The Bridgeport Telegram reported this, saying: "During the discussion period the Journalist declined to answer questions leveled at him by representatives from Accuracy in Media, a conservative group which, in this instance claims the press, and specifically Bonner, has gone out of its way to make the El Salvadoran government look bad."
THE TELEGRAM REPORTED THAT BONNER CRITICIZED U.S. BACKING THE SALVADORAN GOVERNMENT, "which he claimed would otherwise fall to guerrilla fighters." He said that the civil war goes on "because the right-wing military sector continues to send its death squads out." He said, "The debate should not be whether we can attain a military victory in El Salvador; the question should be why we are seeking it." The reporter, who is still employed by The Times, said he didn't agree with those who say we must support the present government to keep El Salvador from falling to the communists. He had reached that conclusion, he said, after living with a group of guerrillas for two weeks. He said they didn't know anything about communism; they were just fighting for an end to the death squads. Having made this profound discovery after spending two weeks with the guerrillas, Bonner criticized the effort to monitor the recent elections in El Salvador, saying that it takes months and years of study to understand the forces that participated in the elections. Bonner himself was assigned to cover El Salvador for only 10 months, and he was based in Mexico.
BONNER VIRTUALLY CONFIRMED TO THE LEFT-WING FAIRFIELD COUNTY ADVOCATE THAT HE HAD been pulled off the El Salvador beat because of this pro-guerrilla reporting. Asked about suspicions that this was the case, Bonner refused to comment "except to say that 'probably a lot of what you've heard is true.'"
WE HAVE RECEIVED NEARLY A THOUSAND ADVANCE ORDERS FOR MY FORTHCOMING BOOK, MEDIA Mischief and Misdeeds. We thought it would be off the press and in the mail to you by now, but the production process has been slower than promised. Please be patient. We are hoping to get the books in a few weeks. If you want to take advantage of the pre- publication price of $5, you can still do so.
WE NOW HAVE AVAILABLE OUR RESEARCH REPORT ON NBC'S "THE CHURCH OF THE RUSSIANS." It goes into more detail than did the AIM Report on this subject and will be a valuable reference. It runs 18 pp., single-spaced, and we are making it available, postpaid, for only $1.50 per copy.