In this five-part series, we’ll look at some of the challenges that young business journalists face in today’s media landscape. A common theme running through all five installments is the recognition that avoiding errors is a journalist’s first responsibility. News moves faster, farther and wider than ever before, and given the ever-increasing volatility of markets, the effect of incorrect news reporting can have shattering consequences: not just on the share price or business prospects of the company being written about, but on the media organization that faces legal liability and the exorbitant cost of legal defense.
The first installment is “Know Your Stuff,” where we’ll look at the need for business journalists to examine the nuts-and-bolts of the specific industry or subject they are writing about.
There is an old truism in journalism that any good business reporter could cover a house fire, but not all general assignment reporters can cover a tax investigation or a Food and Drug Administration recall.
Why is that? The simplest answer is that a shooting, a house fire, or a bus crash are events of easily understood cause and effect, and the impact of that kind of reporting is universal. By contrast, the events that transpire in the business world are not often understood by reporters and if mistaken, may create legal liability.
Defamatory meaning vs. bad news
Libel cases arise when a person makes a statement that (generally defined) impugns the reputation of the person or company written about, accuses them of wrongdoing, shameful or unethical conduct, or in some cases professional incompetence.
Although that sounds wide-ranging, this should not dissuade reporters from chasing such stories, but it does place the responsibility on them and their editors to recognize when they are indeed making such an accusation and once recognized, be able to prove the truth of the statement through facts disclosed in the story itself.
Similarly, the law recognizes that reporters and editors need the flexibility to determine what is simply run-of-the-mill “bad news” for the company and acknowledges the press’ need for freedom to meet a deadline. See, Curtis Publishing Co. v. Butts, 388 U.S. 130 (1967) (Supreme Court discussing the necessity for rapid dissemination in weighing whether editors departed from applicable standard of culpability).
As usual, the extremes are easy to define. While an allegation that a company is under investigation for tax fraud is surely capable of defamatory meaning, a statement that a company lost 3 percent of its market cap is simply reporting the usual ups and downs of business. In the former example, one is worthy of scorn or opprobrium; in the latter, this is just what businesses go through every day.
The tricky part, of course, is being able to navigate through that great middle of the bell curve. For example, a reporter learns that a pharmaceutical company’s product is being recalled. That sounds bad and will surely have an effect on the share price. But is it defamatory? That depends on the context of the statement. Could it be reasonable to understand that saying that XYZ medication may not be safe and effective accuses the company of selling a bogus or even dangerous product? Absent more facts and reporting, many courts would not dismiss a libel case and would allow that question to be put before a jury.
Therein lies the challenge: serving the public interest of providing important (and possibly time-sensitive) news while still meeting the applicable legal requirements should the story be either incorrect, or carry an incorrect implication. That challenge is meet by developing the skill sets of specialized reporting.
Precision makes the difference
The skill that thoughtful reporters and careful editors employ in these situations is precision and a full understanding of the process and industry being reported upon. In this example, a reporter would be best advised to dig into what the recall really means. Here the law reminds us that what we leave out of an otherwise accurate story can create a defamatory implication.
In Tomblin v. WCHS-TV, unpublished, 4th Cir. 2001, available here, a television station accurately reported that a state agency was investigating allegations of sexual molestation at a local day care center. Unfortunately, the report failed to mention that the investigation was actually about what one child had done to another: nowhere was the day care center or its employees accused of molestation.
The plaintiff argued that this missing fact changed the meaning of the story, or in the alternative, carried a defamatory implication. The Court of Appeals agreed, saying that “a reasonable viewer could believe, falsely, that an adult at the daycare sexually abused a child, and thus the daycare center’s libel claim could proceed.” Id. The takeaway? What you leave out of a story can change its entire meaning, intentional or otherwise.
Let’s revisit the hypothetical about the drug recall. Like tax reporting, complex finance, accounting and aviation, the pharma beat is built on specialized knowledge and regulations. Reg Gale, deputy managing editor for U.S. health and science for Bloomberg News, is responsible for covering the pharmaceutical industry.
Gale often reminds reporters that words like “recall” have different meanings to industry specialists (and investors) than they might to ordinary readers. Ordinary readers would perceive a “recall” as a statement that the drug in question is dangerous, or may have caused dangerous side effects or harm, Gale says. In fact, “recalls are a regulatory process often loaded with language that is negotiated by the manufacturer and the FDA, and a ‘recall’ may be far less serious than one might think.”
For example, Gale explains, recalls can mean that the manufacturer has simply stopped making new shipments, has agreed to send warning advisories to physicians, or has restricted the recall to specific lot numbers or dates of origin. That’s a considerable difference than being “pulled off the shelves,” Gale says. Recalls do not necessarily mean that a product has been withdrawn from the market, and if misreported, the damage to a firm’s reputation (and sales) could bring serious legal liability.
According to Gale, in his experience less than 5 percent of recalls are unilaterally imposed by the FDA, and most recalls should – after fact-checking — be described as voluntary, or at the least, done in conjunction with the company and the FDA.
“It’s critical that reporters understand the technical language that the industry uses. The biggest mistake young reporters make is assuming they understand that language,” Gale says. “If you are not sure what something means, ask someone who does know.”
Don’t forget fundamentals
To be sure, while business reporters need to develop specialized knowledge to cover their beat well, Paul E. Steiger, former Wall Street Journal managing editor and current executive chairman of ProPublica, stresses the need for fundamental reporting skills. Newsrooms under Steiger’s leadership have garnered 18 Pulitzer Prizes, including two awarded to ProPublica in 2010 and 2011. “Data and documents are terrific, but they do not stand alone,” Steiger says. “Reporters need to get out there and talk to people about what those numbers mean. We should have reverence for outside voices explaining the facts that reporters gather.”
Emphasizing the use of good-old-fashioned reporting, Steiger tells an instructive story about what old-timers call “shoe leather” reporting. A tragic hotel fire had cost the lives of a publicly-traded company’s top leadership, and Steiger tells of assigning a reporter to find out what the future looked like for the company. When he saw the reporter siting at his desk, Steiger asked what he was doing. “Waiting for the flak to call me back,” replied the reporter. “Waiting for the flak to call you back?” Steiger recalls responding. “How do you know the flak wasn’t killed too? Get out there and start talking to people!”
The importance of making every effort to contact people – especially those accused of wrongdoing – “is absolutely crucial” as a fundamental skill, Steiger says, adding that there is no excuse to not make every practical effort to allow the story subject an opportunity to explain the facts and figures upon which a reporter is basing a story.
In my 12 years at Bloomberg, I helped developed the best practice of reporters building a paper trail of efforts to contact a story subject. In one instance, our reporter had gotten proof that a particular fund was being investigated for illegal insider trading. She had left messages for the fund’s manager, and got no response for two days. She finally called me, worried that she’d lose her exclusive and asked if we could publish.
Because the news in this case lacked immediacy, I suggested she write the fund manager a fax generally saying: “Dear Sir: I have been trying to contact you for three days about a possible SEC investigation of your firm, specifically the allegations [that such-and-such.] Your secretary has confirmed that you got these messages. We really want to provide you with the opportunity to tell us that we are wrong or in the alternative, that there is some explanation, but we cannot hold the story forever. If I don’t hear from you by tomorrow, we will not have the chance to include your side of the story.”
The letter went out, the deadline passed, and we published an accurate story. Nonetheless, a year later the fund sued for libel anyway. Although the plaintiff tried his best to meet his burden of showing that the story was inaccurate, I pointed out this letter to the judge and watched her become redder and redder in the face as she read it. She turned to the plaintiff’s table waving the letter at them and angrily said “Why are you wasting this court’s time?” She dismissed the case from the bench.
Lesson learned? Making every effort to contact those people you write about is not only a fundamental element of journalistic fairness but can also protect you from claims that you rushed a story to print and were unfair or irresponsible in pursuit of a story.
Developing expertise on your beat
The most dangerous thing a reporter can do is assume that he or she possesses specialized knowledge covering a complicated industry or company structure, and failing to get a reality check on his or her understanding of that structure. A few years back, Bloomberg BusinessWeek published a fascinating story about Market America, a merchandising company the writer described as “a multi-level marketing company that exploits the get-rich-quick dreams of every red-blooded American” and had promised huge profits for participants.
Replete with great color, the story showed the top man’s 350,000-square-foot mansion, the 150-foot yacht, the celebrity fetes and all the other trappings of wild success. The story also included accurate quotes from some people who felt that the company did not live up to their promises. In fairness, the reporter also went back to the company with the would-be millionaires’ complaints, and included the company’s view that those people had not applied enough effort to succeed.
The writer also called the company structure “dizzyingly complex” noting bewilderment the way “money flows in so many directions.” That’s where the reporter got off track: In the initial version, he had used the short-cut phrase “pyramid scheme” to describe the way that the company and its distributors were paid. In fact, according to the Federal Trade Commission, “pyramid schemes” are illegal, and generate revenue for participants solely through the recruitment of other salespeople.
He failed to run his understanding of the payment structure past the company (or a forensic accountant), and as pointed out by angry PR executives (and their lawyers waiting in the wings) Market America specifically disallows distributors to sign up “pyramids” of other distributors. The reporter never came right out and asked company executives if it was a “pyramid scheme” and if not, why not. Though no lawsuit was filed, the assumption that the reporter made – that he truly understood the business model — resulted in a correction that took some of the shine off an otherwise great story.
Like Steiger, Gale also emphasizes “shoe leather” reporting skills as fundamental. He encourages reporters to attend industry-sponsored events where products or strategies are discussed and trying to attend presentations where the industry being covered is speaking to potential customers. On becoming an expert on your beat, Gale says “you can’t do it just from your desk.”
Gale also encourages reporters to read their competition faithfully, and look for the same expert names that keep appearing. The odds are that the more technical the beat is, the smaller the universe of experts. In addition, he suggests, become familiar with the technical literature of the beat, and mine those studies and reports for people who appear to really know what they are talking about.
Checklist for developing expertise
• Don’t assume that you understand a term of art or regulatory phrase. Ask someone who knows.
• Always make best efforts to present the story subject with your understanding of the structure or allegation of wrongdoing. At worst, you’ll get a “no comment” or denial, but you may just end up learning that you don’t fully understand the subject.
• You can’t own your beat from behind a desk or on email. Get out there.
• Read the industry literature, newsletters and trade journals. They not only provide a gold mine of resources for expert voices, but also leads on stories you might be able to bring to a wider audience.
Charles J. Glasser Jr. spent the last 12 years as global media counsel to Bloomberg News, responsible for litigation, ethical newsroom issues and pre-publication review, and was responsible for handling the work of more than 2,100 journalists on a 24-hour basis. Prior to joining Bloomberg, he represented a wide variety of news organizations including The New York Post, Readers’ Digest and NBC News. Prior to becoming an attorney, he was a journalist for 16 years. He is currently a consultant on media law and corporate communications issues, and can be reached at charlesglasseresq@gmail.com
