Audit Interview: Jonathan Weil

"You have to be willing to lose stories that depend on access."

If you’ve missed Bloomberg columnist Jonathan Weil’s work over the past year, you’ve missed a lot.

Early to sniff out AIG, Washington Mutual, and Wachovia, Weil was first to raise important questions about Lehman Brothers’ off-balance-sheet doings. And Weil ripped on Fannie Mae and Freddie Mac for months before they were nationalized.

Weil is at home around a balance sheet as we are smoking our Meerschaum pipes at the Columbia Club.

After years of covering the beat, Weil writes about accounting with an authority few in the field possess. As a writer, he is about as subtle as your average meat ax:

If MBIA Is AAA, Britney Is Snow White

At The Wall Street Journal, where he reported for several years, Weil was the first reporter to raise questions about Enron’s accounting.

He spoke to The Audit about covering the financial crisis:

The Audit: How do you get your column ideas?

Jonathan Weil: A lot of it’s reading 10-Ks and 10-Qs and proxy statements. A significant piece is getting tips. Most of it is seeing things that other people just aren’t seeing, and that’s because I’ve been doing this for about ten years and watching a lot of these companies I’ve been writing about the past year for just as long.

So it’s not so much that I suddenly discover that Fannie Mae or Freddie Mac’s financial statements are a crock. It’s that I’ve been watching these guys for five and six years and covered them way back when and there’s some institutional memory that builds up after awhile.

But if you know how to read financial statements it goes a long way to helping any reporter or anybody else not have to rely on official pronouncements from the people running these companies or the regulators who protect them.

TA: Do you think that’s a skill that’s in short supply in journalism?

JW: (It’s in short supply in) journalism broadly. I don’t think it’s in short supply at Bloomberg, and I’m not trying to be self-promotional when I say that. But at most news organizations, even at a lot of very prominent so-called business publications, understanding financial statements is considered a sub-specialty.

TA: That seems to be 101.

JW: Not only that, but I still feel like after all this time that my understanding is pretty basic. There was one bank I was looking through their 280 page 10-Q that they filed about a week ago or so, and when I read most of the things that are in there I think to myself either I don’t understand this because of me or I don’t understand this because of them.

TA: How do you see these things?

JW: Well, just as an extreme example, if a company is trading for less than its book value, one of first things I do is look at the balance sheet and I see if there’s any individual asset that supposedly is worth more than the company’s market value. You can get a lot of columns that way.

TA: Like the newspapers and goodwill (Weil wrote a terrific column on newspapers’ comically bloated balance sheets in July).

JW: Yes, exactly. Classic. Or if there’s a single asset there that’s approximating a company’s market value. When I wrote about Lee Enterprises, it wasn’t just goodwill, it was customer lists.

TA: (Laughter; The Audit enjoys a good accounting joke.)

JW: So … [the customer lists are] worth more than the whole company. It’s when you can get people to laugh that you realize that you’ve got one.

TA: Accounting is one of the least interesting subjects to many people, but you turn it into something interesting. How?

JW: I look for the reaction where the person reading it says “They want me to believe what?!”

Unless there’s something really revealing or instructive or just huge news, I’m not looking to write about a company that failed yesterday or last week. There’s enough to write about in the category of forward-looking, “look out” type of stories. I generally do not write autopsies; I look for biopsies.

TA: Whenever you have a panic there are going to be crimes. People trying to cover things up and save themselves, and this is the mother of all panics.

JW: Look back to Ken Lay—he got in the most trouble from a criminal liability standpoint because of the things he was saying on conference calls in October 2001.

TA: Is it your hunch that we’re going to see a wave of prosecutions?

JW: We have to see who gets appointed Attorney General, chairman or chairwoman of the SEC, and we have to see what type of people President-elect Obama puts in to run the country.

I think it’s shocking for instance that Lehman Brothers employees, the eve of bankruptcy, were running into the building at headquarters and walking out with just cartons and cartons of boxes of files, and they’re doing it on television. I first saw it in a picture on the New York Times Web site. It was reported completely neutrally with no question about: “Should this be going on?”

They had a conference call the week before where the market came up with the inescapable conclusion that their numbers could just not possibly be true.

TA: Outside of Bloomberg, who’s doing this kind of forward-looking stuff?

JW: At [The Wall Street Journal, people like Peter Eavis and David Reilly. At the Times, Gretchen Morgenson and Floyd Norris are still at it and will always be at it. Jesse Eisinger at Portfolio. People like Allan Sloan and Roddy Boyd at Fortune and James Bandler, too. There aren’t many.

TA: Why not? There would seem to be a huge market for this stuff. Is it the access problem: People with a beat having to juggle covering their beat with being hard on the company and doing investigative work?

JW: Everyone I just cited, they’re not wedded to a beat. But I still think that you can cover a beat well and not have to be political about it.

TA: Do you have any suggestions for beat reporters?

JW: Well, not just beat reporters, but their editors: You have to be willing to lose stories that depend on access and pleasing. I have experience with this. I covered the accounting profession and the Big Four firms at the Journal. I remember covering Arthur Andersen and they had this internal document that was their tick-tock of what happened with the whole shredding thing. They didn’t give it to me. They gave it to somebody else as punishment, and my editors, who were Leslie Scism, and Larry Ingrassia, and Mike Siconolfi, understood that. [Siconolfi and Scism remain Journal editors; Ingrassia is now the Times’s business editor.]

These are choices you have to make. If you’re covering a company as a beat, you have to call them like you see them, and the much better position is for them to be afraid not to give you stories than for them to be able to use leaks as leverage. The alternative is being meek and saying “Please, please, sir, can I have another leak?” Forget it. It’s access journalism and it’s always ugly to read.

It’s why it’s also so important to be sourced not just at the board level, let alone the PR level or CEO, CFO level, it’s important to be sourced at the mid-level. It’s more important to be sourced in the middle of an organization than it is to be sourced at the top.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.