In an effort to boost U.S. exports, the Washington, D.C.-based Export-Import Bank lends about $12 billion a year to foreign firms seeking to buy American products. The problem, Harris and Smith discovered, was that the bank did little due diligence. Hundreds of millions of dollars in loans were going to nonexistent companies in Mexico—thus the Texas angle—to pay for nonexistent American goods. Much of the money was pocketed by phony “exporters” who fabricated borrowers and suppliers through false applications and fake invoices. When the loans defaulted, the taxpayers picked up the tab—an estimated $243 million between 2003 and 2007 alone.
The bank refused to speak to Harris, but after an eight-month delay, loan documents acquired under the Freedom of Information Act finally arrived. Though sparse, they told a story. Shortly after they got the records, Harris and Smith jumped in a car and made a 1,500-mile road trip in four days, visiting dozens of Mexican “importers” and American “suppliers” embroiled in a swindle that stretched from coast to coast and across the Mexican border. They found that some addresses didn’t exist. They found firms that didn’t make the kind of goods specified on the invoices and companies that had no idea their good names had been stolen. As a result, a San Antonio man was sent to federal prison and one from El Paso was charged in March. Others are still being investigated, and the Export-Import Bank appointed the first inspector general in its history.
“Documents are the key,” says Harris. As he speaks, he sits at a conference table picking through a tote bag crammed with papers, receipts, bills, direct-mail ads, and other items—all related to an investigation of firms that take money from banks to maintain abandoned and foreclosed homes, but then fail to pay the mom-and-pop contractors who mow the lawns and do the maintenance.
Harris, Shipp, and Smith all carry miniature Kodak video cameras—hardly larger than an iPhone—that can shoot video when a photographer isn’t available or discretion is required. And all three are eager to help other reporters in the newsroom with investigations and stories wherever they can. “I’m so old I know who to call for something,” says Harris, with a smile. Having developed an expertise on aircraft, Harris is the newsroom’s go-to source on that subject, as well as financial issues. He and Shipp also often swap scripts with other reporters for critiques.
On the wall of his small glass-walled office, Smith has a large and well-worn dry-erase board covered with long lists of stories that Harris and Shipp are working on or might be—if they pan out. Not all do, even after months of effort, and that is one of the things that makes investigative work costly.
Legal work is another expense. Although the WFAA unit has been fortunate to date, the potential for lawsuits in investigative reporting is as real as the necessity of engaging lawyers to vet sensitive reports, at upwards of $500 per hour—a cost that dampens the investigative appetite of some news directors. The cost of research and the probability of a suit can be factors in the choice of stories, too.
In the aftermath of an investigation of a grade-changing scandal involving basketball players at a local high school, the family of one named student did sue, but the case was eventually dismissed. Called “A Passing Offense,” that series involved a primarily African-American school, South Oak Cliff High School, which took great pride in its winning basketball team. It took more than a year to nail down the facts and convince the teachers—all of them African-American—to go on camera. They described how the head coach and principal had ordered athletes’ failing grades changed to passing to make them eligible to play. As a result of the reports and the ensuing school-district examination, the team was stripped of two state championships, though the coach remains.
“Our station took a lot of heat on that story,” says Smith, recalling angry letters and charges of “yellow journalism” and implied racism. But, he said, the issue was the integrity of the grading system in the school district. The station management never flinched.