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.
1. Suppose a college applicant did this?
Here’s a story that seems so bizarre that it might be good material for a Tom Wolfe redo of The Bonfire of the Vanities rather than worth the time of a serious nonfiction reporter — except that it’s apparently true. According to this New York Times report last month, Egan-Jones, an “upstart credit ratings firm,” has been:
barred for 18 months from issuing certain government-recognized ratings after the firm made misstatements on an application with the government. The S.E.C. said the firm had exaggerated its record when it applied for a government designation in July 2008. The firm said then that it had performed 150 ratings of asset-backed securities and 50 ratings of governments, when it actually had performed none at that time, according to the agency…. Under the terms of the penalty, Egan-Jones is barred [for 18 months] from rating asset-backed and government securities issuers as a so-called nationally recognized statistical rating organization….For other categories of ratings, Egan-Jones will still have the government designation.
Huh? “Exaggerated” its record? A firm applying for the SEC seal of approval as a provider of honest securities ratings seems to have completely fabricated its resume, saying it had done 200 ratings when it had done zero. And the SEC puts them in the penalty box for just 18 months for some ratings and lets them keep right on providing other ratings?
There must be more to this story. Maybe the fabrications on the application were an accident, or the work of a prankster who snuck into the Egan-Jones offices and took over a keyboard. Or maybe the SEC announcement of the “settlement” was a prank. If not, can the SEC explain what an applicant would have to do to be barred permanently from winning a designation? And why did it take five years for the SEC to deal with this?
2. Is A-Rod’s contract as hollow as his bat?
The recent round of charges that faded Yankee star Alex Rodriguez may be implicated in another scandal involving performance enhancing drugs (PEDs) has generated press speculation that the Yankees will use the charges as a way of freeing them from A-Rod and the $114 million left to pay over the next five years on his contract. But according to this ESPN story, “Rodriguez might be in little danger of having his contract voided, even if the charges turn out to be true. There is no precedent to successfully void a contract in baseball over PEDs.”
I wish some enterprising reporter who gets hold of A-Rod’s contract (or at least gets someone reliable to reveal the specific language in it) that tells us if it contains anything about what happens if he gets caught having used PEDs. And my personal Pulitzer will go to the reporter who also finds out who took what positions in any negotiations between A-Rod and the Yankees about any proposed drug abuse clauses.
The ESPN report quotes some purported language in the contract related to drug use, requiring that the player’s suspension period for being caught using PEDs shall be the suspension period mandated by Major League Baseball’s drug prevention program. But that seems to be the boilerplate included in all contracts. The likely additions to that for a contract the size of A-Rod’s would come in clauses related generally to the player’s conduct and “morals,” or whether his drug abuse caused an injury or disability rendering him unable to play. Thus, ESPN quoted a “baseball official who handles contract negotiations” as speculating, “If there are specific clauses that went into steroids and performance-enhancing drugs, then I doubt he would walk away with his money.”