Audit Notes: Tribune gets results, Buffett’s sweet deal, China

An investigation of the flame-retardant industry snares a doctor

The Chicago Tribune’s outstanding investigation into the flame-retardant industry (a probe featured in The Audit’s Best Business Writing 2013) is getting some results.

The Trib led off its series with a scorching piece exposing Seattle doctor David Heimbach as a shill and fabricator for the industry. Now the state of Washington is finally taking action:

Mager said the Tribune investigation sparked the commission’s actions, and the charges mirror the newspaper’s findings. The Tribune reported how Heimbach’s testimony was part of a campaign of deception by industry to promote the use of flame retardants, even though the chemicals do not provide meaningful protection from furniture fires.

The Tribune detailed how Heimbach told lawmakers gripping stories of babies suffering fatal burns while on cushioning without flame retardants. But the infants, as he described them, did not exist.

In an earlier interview with the newspaper, Heimbach said his testimony about babies dying in fires was not about different children but about the same infant.

This is great, but what took so long? The Tribune published its Heimbach exposé nearly two years ago.

— The Financial Times raises interesting questions about whether Graham Holdings (formerly the Washington Post Company) cut Warren Buffett a sweetheart deal on exiting its shares. The FT also looks at the lengths tax-hike-advocate Warren Buffett went to to avoid paying taxes on his $1.2 billion in Washington Post (now Graham Holdings) capital gains:

Mr Buffett, as chairman of Berkshire, has a duty to minimise a tax liability that would be around $400m in the event those capital gains were crystalised.

Note that Mr Buffett’s stake in Berkshire, worth $63bn, is about a fifth of the company’s $305bn market capitalisation. The value of that perfectly legal piece of tax avoidance to him personally is $80m.

Yet it has passed largely without comment that the very rich man who says he would like higher taxes on the rich has pulled off a deal designed entirely to avoid a large tax bill. America’s favourite billionaire indeed.

— Bloomberg is good at keeping a close eye on potential problems in the bubblicious Chinese financial system, and it reports today that one big developer has collapsed under the weight of more than half a billion dollars in debt. That comes a couple of weeks after a solar company became the first Chinese company to default on onshore corporate bonds, shaking markets:

The collapse of the company, based in the eastern town of Fenghua, adds to concern of strains in the nation’s real estate sector and comes less than two weeks after the first bond default by a Chinese company. Shanghai Chaori Solar Energy Science & Technology Co.’s inability to repay its debt may become China’s own “Bear Stearns moment,” prompting investors to reassess credit risks as they did after the U.S. securities firm was rescued in 2008, Bank of America Corp. said March 5.

“Chinese developers are extremely exposed to the easy credit that is used to finance purchases and investment,” said Patrick Chovanec, the New York-based chief strategist at Silvercrest Asset Management Group LLC, which oversees $14.1 billion in asset, by phone. “When credit is reined in even slightly, it undercuts demand. This is potentially an inflection point.”

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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. Tags: , , , ,