Madoff whistleblower Harry Markopolos created a stir in journalism circles last week when he testified that he approached one of The Wall Street Journal’s top investigative reporters, John Wilke, with the Madoff story in 2005 but nothing was done. While Markopolos speculated that Journal editors never “gave him approval,” some online commentary nonetheless faulted Wilke.
Jesse Eisinger, a onetime WSJ colleague of Wilke and now Wall Street editor for Conde Nast Portfolio takes exception to that view:
I’m pretty jaded, so typically when I see journalists eating their own, I barely pause from my daily routine. But I’ve been flabbergasted by comment about The Wall Street Journal’s John Wilke, our former colleague, regarding his role in the Bernard Madoff scandal. It’s way out of line and verges on the delusional.None of the bloggers and assorted critics seem to have researched what Wilke
was doing during the period he supposedly missed the Madoff story. Wilke is
one of the finest investigative journalists in the country and he continued
to prove it in the time he was in contact with Harry Markopolos, the Madoff
critic.Converting a speculative tip from someone like Markopolos is vastly harder
than it looks in retrospect. Markopolos was an outsider who figured out
something was wrong with Madoff — but wasn’t sure exactly what that was.
Nobody “tees up” stories about financial frauds as one of Wilke¹s
detractors wrote on Romenesko, misspelling both his and Markopolos¹s name.
Ever.
As all journalists, Wilke was likely conducting constant triage at the time, deluged by tips, story ideas, editor pressure and breaking news. Nevertheless, here¹s a partial list of what he wrote in that period:-On Dec. 27, 2005, Wilke broke that legendary mutual-fund trader Mario
Gabelli, then a bigger name on Wall Street than Madoff, had set up what
appeared to be sham minority and small-business firms to bid for discounted
FCC spectrum licenses. Six months after the story appeared, Gabelli settled
civil fraud claims with the government for $100 million.-On Feb. 10, 2006, Wilke did a page-one story about alleged price-fixing by
China’s vitamin makers.-On April 7, Wilke revealed a network of West Virginia non-profits set up by
former staffers and supporters of Rep. Alan Mollohan, funded by
congressional earmarks. (The New York Times followed the next day.)-On Oct. 11, the Journal reported that most of the earmarks won by Rep.
Charles Taylor, a North Carolina Republican, also benefited his family
banking and timber interests.-On Nov 1, Wilke exposed that a wealthy Nevada defense contractor had
funneled nearly $100,000 in campaign cash to Gov. Jim Gibbons through a
network of his companies, side-stepping state campaign-finance laws and
treating his patron to a lavish, undisclosed Caribbean cruise.I could go on about Wilke scoops. But the point is clear: For a year after
December 2005, Wilke bagged a series of journalistic trophies that would
make any self-respecting investigative reporter proud. Yes, with the benefit
of hindsight, it is easy to see that he should have demanded that his editor
give him the rest of the year to do Madoff, and nothing else. But let’s get
serious.-Jesse Eisinger
It wasn't a "speculative tip." The emails that he provided to Congress indicate that he gave Wilke a roadmap to the Madoff scandal. The SEC examiners who ignored Markopolos were also under the gun, and that has not prevented from them being flayed in the very newspaper that ignored Markopolos. What hypocrisy.
#1 Posted by Tad Berle, CJR on Fri 13 Feb 2009 at 04:19 PM
The difference, Tad, is that the SEC actually started several investigations of Madoff and failed to find the fraud. The SEC also has subpoena power, a powerful tool. There is no evidence I know of that the Journal started an investigation but botched it, as the SEC appears to have done.
#2 Posted by Mark Stein, CJR on Fri 13 Feb 2009 at 05:38 PM
That's right. What happened at the Journal was worse. It didn't even try. Wilke wanted to pursue the story but was not allowed by his editors to do so.
If that had happened at the SEC, the Journal would be all over the story.
#3 Posted by Tad Berle, CJR on Fri 13 Feb 2009 at 06:05 PM
I'm willing to accept all the above without hesitancy, but it doesn't excuse the Journal's failure to pursue Bernard Madoff when it could have made a difference.
Markopolos' testimony can be found at http://online.wsj.com/public/resources/documents/MarkopolosTestimony20090203.pdf and anyone and read through and draw their own conclusions. Markopolos's key statement can be found on page 16: "Unfortunately, as eager as Mr. Wilke was to investigate the Madoff story, it appeared that the Wall Street Journal's editors never gave their approval for him to start investigating."
Whether the blame belongs to the editors or Wilke is beside the point, and is of no interest outside the Journal.
#4 Posted by Michael Longbaugh, CJR on Sat 14 Feb 2009 at 06:16 PM
Self righteous certainty is a wonderful drink, particularly for those journalists possessed of not much self-awareness. The working journalist who can, after 5, 10, or 20 years in the business, insist that the big one never once slipped his hook probably never caught anything much worth talking about in the first place.
Every day we make decisions about stories to follow, and occasionally we guess wrong. You hope in the end that the stories you are pursuing are as good as those you are putting on the shelf. And--Huffpost bloggers to the contrary, no screw up is as simple as 'AHA, he said it was a ponzi scheme and they wouldn't follw up ... "
Nope. The distance from the cup to the lip is a long strange trip. There is lots and lots of reporting and sometimes you guess wrong. (And sources constantly speculate that only the nefarious motives of editors could account for why a reporter isn't moving on some story or another ... )
#5 Posted by Michael Powell, CJR on Sat 14 Feb 2009 at 07:29 PM
Then let's lay off the regulators, because the same can be said to excuse their failures too. Let's do that not just on Madoff, but every time they fail to listen to whistleblowers and properly constituted public complaints.
The same argument can be use to defend the SEC on Madoff and the Gary Aguirre revelations, and can be used to defend the FBI, FDA and other agencies that fail to heed public warnings.
But if we in the media are going to apply standards to public agencies, we need to apply the same to ourselves rather than circle the wagons and make weak excuses for our failures.
#6 Posted by Tim Havourd, CJR on Sun 15 Feb 2009 at 10:49 AM
Oy vey.
That's absurd and amounts to an excuse for not thinking. The SEC is tasked, legally, with policing Wall Street and the financial industry. They are armed, by federal statute, with police and subpoena powers. They can shut down businesses. They must, as a matter of law, follow up on reports of corruption, and they are given a very substantial budget and staff to tend to this task.
The same is true of the FBI, the FDA, DEA and virtually every other law enforcement agency.
There is an substantial and obvious to the point of smack yourself on the forehead distinction between a police agency and journalists.
On a practical level, there are but but so many injustices that any newspaper, and any group of its reporters, can chase after. (Another point: It is less defensible but no less anthropologically true that reporters often pay short shrift to tips passed along from colleagues--for reasons of ego, those tips tend to go to the back of the line)
As Jesse Eisinger lays out clearly, Wilke was pretty damn busy during this period exposing outrages. His track record puts most of us to shame.
In retrospect, should the Journal have chased this one? Sure. But there is an out of body quality to the self righteousness and caterwauling, as if the reporters playing the game of j'accuse never had to balance time and dealdines or choose between three, four, or five lines of promising inquiry.
#7 Posted by Michael Powell, CJR on Sun 15 Feb 2009 at 11:26 AM
Oy vey indeed. Your entire argument, and Eisinger's, is based on a falsehood and red herring, which is that Wilke was too busy chasing other crooks and that brainless critics don't realize what a busy man he was.
That's not true. He was willing to devote the time. He wanted to do it. He wasn't allowed. As was posted previously, Markopoloos testified Wilke was not allowed by his editors to pursue the article.
Eisinger has framed the issue incorrectly. He is personalizing the issue as one of "a poor reporter being criticized" when the issue is his employer. I have not seen a wave of villification of John Wilke. I have seen amazement at a newspaper not following up credible evidence of wrongdoing by a major money manager.
Eisinger says "Nobody 'tees up' stories about financial frauds" but that was what happened here, as can be seen from the emails and memoranda that Markopolos has made part of the public record.
#8 Posted by Tim Havourd, CJR on Sun 15 Feb 2009 at 01:14 PM
Brainless critics? Absolutely not. But I was responding to Tim's previous message, which suggested that the SEC's regulatory failures here are no different from those of the reporter and Wall Street Journal. And so I responded to that.
To whit: "The same argument can be use to defend the SEC on Madoff and the Gary Aguirre revelations, and can be used to defend the FBI, FDA and other agencies that fail to heed public warnings."
Tim and other critics suggest as well that the problem lies not with Wilke but with his editors. Perhaps. I don't work at the WSJ nor do I pretend to know their culture. But, logically, the WSJ produced some terrific investigative journalism during this period, and so the arguments that editors would simply turn their backs on this particular tip seems not credible.
More likely I'd guess that very good stories fall between the cracks. That's not good; I'm sure the editors are kicking themselves. But Eisinger is absolutely correct; until you dig into investigative material, you're never sure what's there. While there are some sweet tips, I can't remember ever having everything cued up. And sources often assume that "the editors"--that nameless, faceless amalgam--are somehow determined to prevent a particular story from surfacing, for various and imagined nefarious reasons.
There are plenty of examples of journalistic malpractice and newspapers and reporters who are reluctant to pursue certain stories--for the worst reasons. I've seen nothing that suggests this story falls into that category.
#9 Posted by Michael Powell, CJR on Sun 15 Feb 2009 at 04:01 PM
Whatever the culpability of the newspaper or lack thereof, the Journal handled this poorly. Yes, he may have been considered untested and dubious by the editors of the Journal. But after he was proven right, the Journal inexplicably chose to ignore its years of contacts with him.
Rather than produce an article by Wilke describing his intimate contacts with Markopolos, now a hero to the world, it kept silent and Markopolos himself did so. By remaining silent, the Journal gave the impression of being ashamed by its failure to act, as it well might have been. It is not too late for Wilke to write about his experiences, and it is a fair question to ask why he has not done so, even though now two months have passed since the revelations surfaced.
Paul Steiger did not help when he said t that he doubted that his paper was contacted at all by Markopolos. This impugned Markopolos' integrity and added to the impressio that the Journal was covering up for its failure to act.
#10 Posted by Dieter Wilhelm, CJR on Mon 16 Feb 2009 at 08:17 AM
If any of chest-thumping genius out there wants to prove they have what it takes to be an investigative journalist, give me a call. I am Patrick Burns, and I am the person who called John Wilke with the Madoff story, and I have plenty of other BIG cases out there for somone who actually works for a real newspaper and has the time and money to investigate. My bet is that you don't.
As for John Wilke, I will go to him again as he has proven his abilities time and time again. If you want to prove yours, and you actually work for a big-name newspaper (sorry, but I am not in the business of helping journalism students or newspaper reporters from Rabbit Patch, Kentucky), my email is PBurns@taf.org
Patrick Burns
Taxpayers Against Fraud
#11 Posted by PBurns, CJR on Tue 17 Feb 2009 at 10:10 AM