TheDeal.com executive editor Yvette Kantrow writes in her Media Maneuvers column that recent stories by the New York Times looking into allegations that Morgan Stanley CEO Stanley Mack was involved in insider trading with hedge funds and BusinessWeek looking into shenanigans by private equity firms both lack the facts that support their arguments.
Kantrow wrote, “But the fact that Aguirre’s evidence is so thin is problematic for the Times’ overheated coverage of this hedge fund ‘scandal.’ It’s hard to get worked up over an investigation that didn’t happen when the only proof of potential wrongdoing by the two main suspects is the fact that they are friends. (We bet they even play golf together. Quelle horreur!) But the Times is convinced that hedge funds are hotbeds of insider trading, that the SEC is looking the other way and that it’s going to end badly. Some of that may be true. Still, there has to be a better way of exposing those ills than throwing a bunch of half-baked accusations at the wall and hoping a few stick. If you want the glory of being first to call the fall of hedge funds, you’ve got to do the work.
“As the Times leads a jihad against the evil of hedge funds, BusinessWeek continues its crusade against rolling-in-the-dough private equity. Less than three months after bringing us the sensational headline ‘Buy It, Strip It, Then Flip It’ on its story about the initial public offering of Hertz Corp. by its buyout owners, BusinessWeek strikes again with the cover story ‘Gluttons at the Gate: How private equity is using slick new tricks to gorge on corporate assets.’ So, BusinessWeek, tell us how you really feel.
“Inside is the usual smorgasbord of complaints about how buyout shops do business, from how much debt they lay on their companies to the ‘dubious’ fees they charge to the record dividends they ‘extract.’ ‘Some private equity firm executives are being investigated for outright fraud,’ the magazine adds. Whom is it referring to? John A. Orecchio of AA Capital Partners Inc., a Chicago firm with $194 million under management. Not exactly Henry Kravis and his ilk.
“Still, an indictment is an indictment. The problem is, BusinessWeek, like the Times in the Mack case, can blow lots of charges into the air, but it can’t begin to close the case. Yes, multiples are rising. True, buyout deals have gotten bigger. But even BusinessWeek feels compelled to qualify nearly every sensational charge. The story leaves the impression that BusinessWeek, like the Times, just wants to position itself for when, inevitably, something bad does happen.”
Read more here.