In his “Stories I’d like to see” column, journalist and entrepreneur Steven Brill spotlights topics that, in his opinion, have received insufficient media attention. This article was originally published on Reuters.com.
Paging Bloomberg’s Winkler and Pearlstine
This story that ran in Saturday’s New York Times is the best one yet on the abuse of Bloomberg’s customers’ private information by Bloomberg, the financial information powerhouse founded by New York City’s mayor. As first reported in the New York Post last month, reporters at the Bloomberg news service made a practice of checking the customer service files of bankers and others subscribing to Bloomberg’s ubiquitous and extremely expensive — about $20,000 a year each — financial data information services.
For example, they reportedly figured out that the “London Whale,” who was involved in losing billions for JPMorgan Chase, had been fired by seeing that he had not been logging on to his Bloomberg account. (Bloomberg is a competitor of Thomson Reuters, which owns Reuters — where this column appears.)
Saturday’s Times story fills in the narrative of how various Bloomberg customers, led by Goldman Sachs, pooled their suspicions (mostly arising from Bloomberg reporters unabashedly citing log-on information when asking the banks’ spokespeople questions, such as the one about the Whale). They then realized that this was a regular practice and complained to Bloomberg Chief Executive Officer Dan Doctoroff. (New York Mayor Michael Bloomberg officially left the company when he took public office and has not been running his business day-to-day while he serves at City Hall.)
Doctoroff has apologized, saying the practice was a mistake. Some of the company’s major customers, like Goldman and JP Morgan, have at least publicly said they accept the apology. But this should hardly be the end of the story.
First, for reporters to get that customer data was no casual exercise. It involved using different codes to access the company’s customer service database and then another set of keyboard maneuvers to home in on a particular user. So this was hardly an accident or the work of one rogue reporter.
Second, Bloomberg is known for its rigorous training of reporters and a top-down control regime run by long-time editor in chief Mathew Winkler. So, if I were reporting this story, I would ask how much Winkler knew about this and whether he oversaw the training of his reporters to do the complicated maneuvers involved in pulling it off. He has not provided anything close to a full explanation of what happened.
In fact, I can’t find one interview that Winkler has given since the scandal broke. He has only written an op-ed article that appeared in Bloomberg View, the site’s commentary section, saying, in part, “The error is inexcusable.” What does he think the “error” was? And who made it?
Third, those $20,000 a year terminals are the core of the Bloomberg business that has made its proprietor, the mayor, one of America’s richest men. Everything else — including the news service whose reporters were spying on those $20,000 a year customers — is meaningless by comparison. At least where the company’s bottom line is concerned.
So, ethical and legal issues aside, why were Winkler and his people allowed to endanger that core business with such a fundamental violation of trust? Bloomberg’s customers have long thought the $20,000 price was abusive enough, without knowing that they were paying $20,000 for the privilege of being monitored.
Why would any business risk killing its franchise this way?
Another question is why Winkler hasn’t been reprimanded, much less fired, or even publicly criticized by Doctoroff. Which to me raises the question of who really is running Bloomberg. If the mayor is still ultimately the person in charge, reporters could examine why he has allowed Winkler to survive a mess that has undermined one of media’s richest franchises?
Fourth, there are those ethical issues. They are particularly relevant because Bloomberg has now become much more of a big league journalism player. In my book, Bloomberg News deserved a Pulitzer for its reporting on the financial entanglements of the new Chinese premier, Xi Jinping, and his family. And Bloomberg Businessweek has become a truly great, groundbreaking magazine. Josh Tyrangiel’s remake of Bloomberg Businessweek in 2010 was overseen by Norman Pearlstine, the former executive editor of the Wall Street Journal and editor in chief of Time Inc., who was hired as Bloomberg LP’s chief content officer five years ago.
I assume that when Pearlstine (who is a good friend) was running the Wall Street Journal, he would likely not have allowed a reporter to tap into data on the Journal’s business side to get some financier’s address in the Hamptons so he could show up for an ambush interview.
So what does he think of this much more invasive breach of the wall that is supposed to separate the editorial and business sides of a professional journalism operation? Did he know about it? Does he think anyone ought to be disciplined for it? And what exactly is his role vis a vis Winkler, who seems to be the one who put the Bloomberg business in jeopardy.
Angelina Jolie makes a stock hot
In part, this is a story I loved seeing rather than one I’d love to see — because much of it is in this piece by David Sell of Philly.com.
“Movie star Angelina Jolie’s revelation Tuesday [May 14] of having had a double mastectomy to help avoid breast cancer had business and legal angles,” Sell begins.
The business angle, he explains, is that “Myriad Genetics, the Utah-based company at the center of a legal debate about the acceptability of gene patenting, has a monopoly on the testing Jolie had before opting for surgery. With the news of Jolie breaking in the morning, the company’s stock rose to a three-year high of $34.70 during trading on the NASDAQ market on Tuesday.”
In fact, even before Jolie’s announcement, the Salt Lake City-based gene testing company’s rise is a great story. According to its fiscal third quarter report issued in early May, Myriad’s revenues for the quarter were up 21 percent over the prior year and earnings per share were up 34 percent.
The legal angle is summarized by Sell this way in describing a pending Supreme Court case in which Myriad is the defendant: “The basic issue is whether Myriad — or any company or person — should be allowed to have a patent on a human gene. The court heard oral arguments April 15 and is likely to issue a decision before the end of the current term in June.”
The Myriad gene patent Supreme Court case, the company itself and Jolie’s announcement suggest three stories beyond what’s been reported so far.
First, because 74 percent of Myriad’s revenue comes from the kind of genetic testing Jolie used and because Myriad’s current patent gives it a monopoly on that testing that allows it to charge $3,000 for each test, this is a case that could make or break Myriad’s business model. So, how many hedge funds have hired legal experts to help them bet which way the court is going to go? We’ve been reading lately about Washington-based firms selling their intelligence-gathering skills when it comes to what the executive or judicial branches are planning. What about the judicial branch?
Second, Jolie’s announcement obviously boosted the Myriad stock, at least in the short term. So, a reporter who wants to offer a real-world lesson on the law of insider trading (complete with a photo that’s more attractive than the usual law professor head shot), ought to ask experts if Jolie or any of her friends or her doctors would have been guilty of insider trading had they bought the Myriad stock before her announcement. (My guess is that because insider trading prohibitions have to do with abusing information that one has a duty to keep secret, the doctor would be liable, because he has a fiduciary responsibility to keep Jolie’s medical information secret. But Jolie herself wouldn’t be liable, because she has no such obligation to keep her own information private.)
Third, it turns out that under Obamacare’s rules, the Myriad gene tests, at $3,000 each, must be covered 100 percent by insurance companies. How great is that if you’re a Myriad shareholder? There can be no co-pays or deductibles, because it is considered preventive care.
This means that if Myriad wins its Supreme Court case it not only has a protected monopoly on the test, but it can also charge whatever it wants without any patient caring. I’d love to see a reporter’s account of how Myriad lobbied that one — and what the party was like the night they won it.