Top dog Matthew Winkler, editor in chief and co-founder of Bloomberg News, right, and Howard Buffett, president of the Howard G. Buffett Foundation and son of billionaire Warren Buffett, left, listen during a panel discussion on women in the media in 2011. (Andrew Harrer / Bloomberg via Getty Images)

For foreign correspondents in China, breaking stories that the censored Chinese press can’t touch has long been a core part of the mission.

In the recent past, this often happened via behind-the-scenes cooperation: Stymied Chinese investigative journalists discreetly shared details with foreign counterparts, reasoning that at least the news would be on the record somewhere, and with a bit of luck, word might eventually filter back into China.

I was the occasional beneficiary of this sort of thing during six years of reporting from China for The New York Times, from 2003 to 2008. When censorship made it impossible for local reporters to write about modern slave labor in the brick-making industry, for instance, local reporters passed along information to me and other foreign correspondents in the hopes that international coverage would blow the story open. And it did.

In 2012, though, this newsgathering model itself was blown away. Against the backdrop of a once-a-decade leadership transition in China, three big American news organization, one after the other, began breaking historic ground with original investigative work, ground on which no one in the Chinese media, however plucky, had ever dared to tread.

This new wave of extraordinary American reporting was far more than coincidence, but the result of fierce competition between news organizations over a critical story: political maneuvering and corruption at the highest levels of the Chinese political system—a subject that had traditionally been almost entirely hidden from the world.

The competition would yield unprecedented scrutiny for Chinese political and economic elites and a new cornucopia of information for readers. And it would tip one news organization into crisis from which it has not yet emerged.

Like a car wreck in slow motion, the Bloomberg team that produced the investigative work began falling apart.

Two of these organizations, The Wall Street Journal and The New York Times, were already long-established leaders of international reporting. Between them, they had racked up six Pulitzer Prizes for International Reporting from China alone. By comparison, the third player, Bloomberg News, a wing of financial-data giant Bloomberg LP, was an upstart. And yet it was Bloomberg, with its reporting on the immense, shadowy fortunes of close relatives of the incoming Chinese president, Xi Jinping, that many people who follow China closely believe broke the most ground and deserved the news industry’s greatest plaudits.

When it was instead the Times that won a Pulitzer from China—yet again—in 2013, Bloomberg reporters and editors described an immense letdown. But they were rallied by the company’s editor in chief, Matthew Winkler, who urged the China staff to keep its competitive fires stoked. According to one employee, he wrote to the team that produced the work on Xi, calling their reporting “fabulous stuff,” adding, “we’ll just keep going.”

Encouragement like this quickly led to another long-term reporting effort into the morass of political corruption at China’s highest levels. In a stroke, Bloomberg was becoming an important player in international news—and now, just as suddenly, it has tainted its corporate identity and journalism brand to a degree that could last for years. All because of its China coverage.

The crisis blew into public view last November when The New York Times, followed by the Financial Times and others, reported that a big, new enterprise project from Bloomberg, said to have documented an extensive web of corrupt ties between one of China’s wealthiest businessmen and elite politicians, had been spiked at an unusually late stage in the editing process. The reported spike came after an extensively footnoted version of the story had been fact-checked and pored over by company lawyers, and after members of the reporting team had been praised internally for yet more stellar work. The Times reported that Winkler, in a conference call with reporters, defended the decision not to publish the story by likening the situation to the need for self-censorship by foreign bureaus in Nazi Germany to preserve their ability to continue reporting there. That reasoning was controversial enough, but a Bloomberg executive would later let slip a motive that was even more problematic.

Like a car wreck in slow motion, the team that produced this work began falling apart. In November 2013, days after the first Times story, Bloomberg abruptly suspended Michael Forsythe, a lead writer on the China investigative work whom the company appeared to blame for leaking details about the killing of the latest project. Forsythe, who had faced death threats in China for his earlier work on Xi, has since left the company and joined The New York Times in Hong Kong. He declined to speak for this story, citing a non-disclosure agreement with Bloomberg.

The crackup continued over the next few months. Bloomberg’s Projects and Investigation team, which had done much of the groundbreaking China work, was thrown into chaos, worsened by the resignations of two senior editors deeply involved in the projects. One was Amanda Bennett, a top enterprise editor.*

The defining moment, however, the one that has dealt the deepest shock to Bloomberg and may affect it for years, was a widely reported speech by the company’s chairman, Peter T. Grauer, who in March said, in effect, that Bloomberg had gotten carried away with its investigative journalism in China to the detriment of its true vocation: selling computerized terminals that provide financial information.

“We have about 50 journalists in the market, primarily writing stories about the local business and economic environment,” Grauer said in answer to a questioner after a speech at the Asia Society in Hong Kong. “You’re all aware that every once in a while we wander a little bit away from that and write stories that we probably may have kind of rethought—should have rethought.”

During his Hong Kong visit, according to people present, Grauer had also told the bureau there that the company’s sales team had been forced to do a “heroic job” repairing the company’s relations with Chinese officials following the Xi Jinping story. He warned the Bloomberg staff that the company would “be straight back in the shit-box” in China if “we were to do anything like that again,” one source said.

Since the start of the crisis, Bloomberg had rejected the charge that it spiked its China team’s work, instead claiming vaguely that it was simply not ready for publication. Grauer’s comments, both public and to the newsroom, put a new cast on the matter and inspired new resignations, notably by Ben Richardson, a Hong Kong-based editor-at-large and the only Bloomberg journalist to publicly protest management’s handling of the story. “Clearly, there needs to be a robust debate about how the media engages with China,” Richardson wrote in an email to the journalism news website Romenesko. “That debate isn’t happening at Bloomberg.”

At a minimum, Grauer’s comments exposed a struggle over cultural identity and mission, one that threatens investigative journalism. In the meantime, Bloomberg faces a steep climb to earn back its credibility in China, never mind the kind of prestige that comes from competing for Pulitzers.

“I don’t feel proud of working for Bloomberg now,” said one reporter who had participated in the China efforts and has so far remained at the company. In December, the reporter removed from his table a letter of commendation he had received from Winkler and took it out of its frame. “I was ashamed of it.”

A step away from Bloomberg’s troubles, something far larger is at stake: the ongoing struggle between authoritarian China, an incipient superpower, and the international media over control of news in a country that is not only the world’s most populous but will soon be its largest economy. Lately, China has been rocked by yet another instance of high-level political intrigue, centering on the former head of internal security, Zhou Yongkang, until recently a member of the Politburo’s powerful Standing Committee and now under house arrest. The anticipated prosecution of Zhou will test China’s ability to control the narrative about official coruption in the country, particularly if the international media continues to take an investigative approach to coverage.

To be sure, Bloomberg has more to lose in China than other media companies. The market is crucial to Bloomberg’s core business of leasing $2,000-a-month data terminals to financial services firms, a more lucrative business than traditional media models of selling ads and subscriptions. What is more, at virtually the same time that crisis was erupting at Bloomberg, company executives were discussing the creation of a new, Chinese-language Bloomberg.com website, according to email correspondence shared with me by people privy to this effort. As Grauer said during his moment of public candor in Hong Kong: “We have to be there.”

But, all news organizations have a big financial stake in China.

What may be most critically at issue is the fate of any independent muckraking reporting from China, a recent innovation born of intense competition between rival American news organizations just two years ago.

To understand why this is so, one must first unravel the complicated story of how Bloomberg put its investigative effort in China together in the first place, and how it ultimately fell apart.

The narrative begins not with Bloomberg but rather with The Wall Street Journal’s coverage of a man named Bo Xilai, an ambitious former Politburo member and party leader whose removal from office in early 2012 and eventual imprisonment brought grave embarrassment to China. A charismatic, attention-loving figure in a country where most leaders cultivate bland public personas, Bo was brought down for a constellation of reasons. Notable was the fact that his wife was convicted of murdering a British business associate. But he also courted reprisal for challenging the Chinese status quo and for using his power to benefit his business interests and those of associates.

Week after week, as the Bo Xilai crisis unfolded, beginning in February 2012, the Journal seemed to produce the most original and revealing work on the subject, and the persistence of this trend seemed to drive the competition batty.

The Bo saga also represented a major watershed for the topic of high-level official corruption in China and seemed to open the door to more reporting. But there was an important caveat: Bo was on the outs with Chinese authorities. For the Chinese state, Bo was fair game.

While Bo may have seemed an isolated case for Chinese authorities, for the Chinese public, and for many foreign reporters covering the country, he became a symbol of a vastly larger problem that had gripped China as the country had grown increasingly wealthy and globalized: the rampant use of political power as a means of self-enrichment.

Beaten repeatedly on the Bo story, Bloomberg and the Times pushed hard on the theme of corruption, both choosing one top-level political figure a piece to illustrate the problem. A cornerstone of the argument that Bloomberg deserved the Pulitzer that the Times eventually won is the fact that the news agency chose the most ambitious target—the highest figure in the entire Chinese political system, Xi Jinping, the incoming president, about whom little of any particularly revealing nature was previously known.

“We were having our arse handed to us, and Mike said, well what we should do is follow the money,” said Ben Richardson, the British, Hong Kong-based former editor-at-large who quit the company in March. The Mike he referred to was Michael Forsythe, the lead writer for Bloomberg of what would become its Xi Jinping story, as well as the lead writer for the broader subsequent China corruption investigative story whose apparent cancellation would unleash Bloomberg’s folly a year later.

“I remember a conversation in a pub, three editors sitting there,” Richardson continued. “We came to the conclusion that we should stop trying to look where the Journal and the Times were looking, Xi is fair game . . . . That is why we started looking at Xi Jinping. [The decision] wasn’t top-down, it was organic. There was one point where we actually wondered whether they were going to let us run it. I wondered whether they knew what they were really doing, what the consequences were. There was a certain amount of bravado involved, though. It made the senior management feel good. I think they had no idea what they were getting into, though, and it wasn’t until they had been in the shit-box [i.e., subjected to Chinese reprisals] for several months that they figured it out.”

Another participant in the reporting said that while Hong Kong’s Ming Pao newspaper had done the first detailed reporting on high-level elite corruption involving Bo Xilai, Bloomberg was the first foreign news agency to touch the Xi Jinping family’s business interests and thus broke completely new ground. “We got exclusive stuff, and that really got people excited,” he added.

Indeed, the work was an international sensation, all the more so because Bloomberg had traditionally not been a player in the field of in-depth reporting on the subject.

“Bloomberg’s core competency was in sort of reading bond prospectuses, and they had never done anything like this before” in China, said Richard McGregor, a former Beijing bureau chief for the Financial Times and author of a book about Chinese politics, The Party. “I think that is the most amazing reporting on the Chinese leadership we have seen, maybe ever. Reporting on Chinese politics was, in my experience, a bit like ancient history. You get a little strand here, a little bit there, and maybe long after the fact you can begin to make something of it. This was totally different, and the beauty of it is that the Bloomberg model is like a cookie cutter that can be applied to any Chinese leader.”

Bowing down Animated characters in an online video cartoon mocking Bloomberg’s handling of the investigative reporting on Chinese Party officials. The video was produced by Next Media, a Hong Kong company critical of the Chinese Communist Party.

What McGregor called the cookie-cutter approach involved tracing the holdings of relatives of Chinese leaders back to Hong Kong, where their companies are frequently registered. It is a trick that begins with assembling a family tree and then converting the clan members’ names into Cantonese, the language of Hong Kong.

A Bloomberg reporter told me that staffers involved in the China investigative work had briefed reporters in the company’s other bureaus, especially in Russia, to help them apply the same methods.

The Times’ investigative work also involved sophisticated forensic accounting techniques and was extraordinary by any measure, but its target of choice was China’s outgoing prime minister, Wen Jiabao, a figure of far less power than an incoming president, whose family had been the subject of rumors of serious corruption for more than a decade. What is more, Bloomberg’s groundbreaking reporting on the Xi family came months before the Times would weigh in on the Wen clan.

Intimations of major repercussions for Bloomberg were not long in coming, and indeed began arriving on its doorstep even prior to publication. Once work on the Xi Jinping story was nearly complete, Bloomberg contacted the Chinese foreign ministry to seek its response to the article. Among other things, Chinese officials were told, Bloomberg reporting would state that Xi’s extended clan had accumulated business interests in minerals, real estate, and mobile-phone equipment, and included investments in companies with total assets of $376 million.

There are a variety of accounts of what ensued, but all of them agree that unknown to reporters at the time, high-level Bloomberg officials had meetings with the then-Chinese ambassador to Washington, Zhang Yesui, and later with another Chinese diplomat in New York.

Although there are minor differences in details given by three people who were close to the situation inside Bloomberg, the gist of these conversations was similar. According to one informant, Ambassador Zhang told Matthew Winkler, the news agency’s editor in chief, “If Bloomberg publishes this story, bad things will happen for Bloomberg in China. If Bloomberg does not publish the story, good things will happen for Bloomberg.” Winkler is said to have replied tersely, “I’m running the story.”

Shortly afterwards, Peter Grauer, Bloomberg’s chairman, and the company’s chief executive, Daniel L. Doctoroff, met with a Chinese official in New York, and a similar Chinese line, invoking carrots and sticks, was used. Two informants said that after hearing the implied threat, Doctoroff replied, “Mr. Ambassador, you don’t understand. If we don’t publish this story, it will be bad for our business.” According to yet another account, Doctoroff’s answer was even more decisive. He said, in effect, that Bloomberg would be out of business as a news provider if it suppressed its own reporting.

But people close to the Bloomberg reporting say that, for all the bravado expressed by Bloomberg officials, the Chinese warnings seemed to have a chilling effect.

Around that very time, participants in a lengthy conference call say that at least one senior company executive, Doctoroff, began speaking with reporters and editors about the Xi story, insisting on changes in wording that ultimately softened its impact. Most of these changes involved the way the story would characterize the Xi family assets. “Just before the story published,” one person said, “the wall between the news and the business side broke down,” adding that some on the reporting team were badly shaken by this.

Bloomberg officials, including Grauer, Doctoroff, and Winkler, were approached for an interview for this article and asked via email specifically about their encounter with Chinese diplomats and about whether business interests trumped journalism in the company’s decision-making.

Grauer did not reply. A spokesman for the company declined comment for Doctoroff. Winkler responded, meanwhile, “Thank you for your interest. I’ll come back to you on your question.” When a corporate spokesperson, Ty Trippet, followed up later by telephone, however, as he explained, “to talk about talking,” he said, “given we’re not really sure what you’re trying to say, I’m not sure how much help I can be of in providing people to speak with.” In the end, no one from Bloomberg responded to questions for this article.

Meanwhile, just prior to publication, Forsythe, the lead writer on the pending Xi article, who was then based in Beijing with his family, began receiving death threats. The first of these was indirectly conveyed via a China scholar at Columbia University who was passing along a conversation he had heard from a Chinese acquaintance, saying vaguely that Forsythe had better watch out. Later, Forsythe received a similar message relayed via a foreign press colleague in Beijing.

“What was extremely upsetting to me was that when we started getting death threats, Bloomberg told us that we were not allowed to speak about it,” said Leta Hong Fincher, a China scholar who is married to Forsythe. She contrasted the way that Bloomberg handled reported pressure from Chinese authorities with the response of The New York Times a few months later, after its prize-winning work from China was published. The Times had spoken forthrightly about the challenges of doing hard-hitting reporting in China, while Bloomberg sought to muffle discussion, she said.

Both companies have faced bans on their products in China since their groundbreaking investigative work.

For the Times, it has meant the blocking of a costly new Chinese language website, whose primary market is in China, and difficulties obtaining residency visas for its reporters, especially for new reporters rotating into the country as older hands leave.

The differing interests in the market seem to have dictated differing responses to official pressure. In particular, Fincher cited a December 2013 column by the public editor, Margaret Sullivan, which presented the Times’ attitude as stoicism in the face of difficulties like these and quoted the newspaper’s publisher, Arthur Sulzberger Jr., as saying that the Times “doesn’t flinch.”

Fincher said that Bloomberg has threatened legal action against her, but unlike her husband she is not bound by any confidentiality agreement. The Sullivan column appeared shortly after reports that Bloomberg had killed its big new investigative project.

In retrospect, people who worked on the new Bloomberg enterprise project say that the breakdown in the wall between news and business on the Xi Jinping story a year earlier looks very much like a dry run for the handling of their new work. Senior company officials again got involved with the story in its late stages of preparation, but this time to far more dramatic effect. According to a mid-October email exchange whose content was shared with me, this happened after an executive with a global investment bank with business in China remarked to a Bloomberg sales agent on the recent slowness of the company’s terminal data from China, mentioning that he had heard that Bloomberg was about to drop another investigative “bombshell” about the country. China’s censors often slow internet traffic when they are on guard for politically sensitive events. Other sources suggested that Bloomberg executives, and people in sales in particular, may have become concerned about the pending project even before this conversation.

A member of the Bloomberg team that was working on the pending story told me that a senior editor had told him he then received a call from sales “asking what was going on.” From there, things proceeded very quickly toward an effective cancellation of the story. Everyone interviewed for this article said that Bloomberg had been careful not to leave anyone’s fingerprints on that decision. One of them said, however, “you cannot overestimate the close ties between news executives and sales people at Bloomberg.”

The officials didn’t provide substantive explanations—beyond Winkler’s expressed fear of Bloomberg journalists being expelled—for why the story wasn’t being published, and in public even denied that it had been spiked at all. They insisted simply that it “wasn’t ready.”

“There hasn’t ever been any clear explanation of what went wrong,” said one reporter who spoke on condition of anonymity. Richardson, the ex-editor-at-large, said while some reporting remained—concerned Chinese parties had not yet been given a chance to respond, for instance—the excuse that the story “wasn’t ready” was a meaningless technicality, essentially a dodge.

Richardson said the disruption to the Projects and Investigations team, the downsizing or repurposing of another group that had done enterprise work, and the departure of Bennett didn’t bode well for future investigative work at Bloomberg.* “If you allow these sorts of things to happen, one thing is sure: You’re not going to have enough resources to do the kind of stories that we did in 2012,” he said.

Several days after our initial email exchange, Winkler, the editor in chief, wrote back to provide his sole quote for this account. “I’m proud of our reporting and our work speaks for itself,” it read.

Asked via email if that applied to the now apparently dead second investigative take on high-level corruption in China, Winkler replied, “The statement covers our work.”

*This story has been corrected to make it clear that Bloomberg’s Projects and Investigation team is still operational.

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Howard W. French is an associate professor at the Columbia University Graduate School of Journalism. From 2003 to 2008, he was Shanghai bureau chief of The New York Times. His latest book, China's Second Continent: How a Million Migrants Are Building a New Empire in Africa, will be released this May. He is currently writing a book about the geopolitics of East Asia.