Former Head of Pension Insurer Pleads the Fifth

Wow. The former head of the Pension Benefit Guaranty Corporation, Charles E.F. Millard, has pleaded the Fifth Amendment to a congressional panel inquiring into his alleged misdoings at the agency.

That, along with news that the fund’s deficit tripled in the last six months, is enough to get The Wall Street Journal to finally cover this big story. Better late than never, guys!

The Journal headlines the shortfall news rather than the scandal news, which I guess is understandable since it’s a $33 billion hole. It puts Millard pleading the Fifth in the second paragraph. The New York Times buries that big news in the sixth paragraph, which is better than the Washington Post, which stuffs it in the ninth. It should have been much higher.

I think The Boston Globe, whose Michael Kranish has been on this story more than anyone, gets it right. It leads with Millard taking the Fifth and puts the deficit news in the second paragraph. It’s close, but it seems to me that’s the way to handle it. Hard to write a double lede without implying that Millard’s shadiness somehow caused the $33 billion shortfall, which doesn’t seem to be the case.

And the Globe is the only paper to report this critical testimony:

The agency’s inspector general, Rebecca Anne Batts, testified at the hearing that Millard had engaged in “serious misconduct” by involving himself in the awarding of contracts to Wall Street firms that would implement the new strategy.

Millard, remember, is the guy who pushed through a shift in strategy at the PBGC—the main government insurer of pensions—to move money out of safe investments like Treasury bonds and into risky investments like stocks and real estate. This was intended to try to up the risk in the portfolio to give it a chance of closing its long-term deficit, which I’ve said was akin to gambling to make the rent. It’s unclear how much of the policy has been implemented so far, but it seems that not much of it has.

So the Globe needs to be more careful in how it phrases what Millard’s strategy was. This is something I’ve run into a couple of times myself. Here’s what the Globe says today:

Millard pushed through a strategy in February 2008 that shifted the $64 billion insurance fund from having 15 to 25 percent of its assets in stocks, to one that would put 55 percent into a riskier combination that included foreign stocks, private equity funds, and real estate. The remainder was to remain invested in bonds.

That’s leaning toward being wrong to say “that shifted.” It implies that the funds have already been invested in stocks and real estate when they haven’t necessarily been. The Times has a better way of handling that:

Last year, the agency’s board voted to allow it to shift its investment strategy to put more money into stocks, private equity and real estate, in an effort to reduce the deficit.

If that shift had taken place, the losses would most likely have been larger. But only a relatively small amount of the funds have already been shifted to stocks, so the losses on the investment portfolio were responsible for just $3 billion of the jump in the deficit in the last six months.

The Journal doesn’t have the space to cover that at all, though, since it gives the story just 405 words. It also gives short shrift to the allegations against Millard. This is all a Journal reader gets to know about them:

The PBGC’s inspector general last week issued a report saying that the former director had violated prohibitions on contacting bidders that were seeking investment contracts.

The former director, Charles Millard, has denied allegations that he had inappropriate contacts with several Wall Street firms that won contracts to advise the agency, and said his actions were approved by agency counsel. But his attorney, Stanley Brand, said in a statement that it was best if Mr. Millard didn’t testify at a Senate hearing Wednesday, in what he described as a “biased and hostile environment.”

Readers deserve more than he said/she said on this, especially when there’s clear documentary evidence of, at the very least, rule breaking by Millard, like repeated contacts with companies who had bid on PBGC contracts despite repeated warnings that that was illegal—and as the Times reported the other day:

Mr. Millard, in some e-mail messages sent during that period, makes clear that he knew the rules prevented him from discussing the contract.

Interesting, huh? Even more interesting is that Millard was seeking jobs from these people immediately after the contracts went out.

But Journal readers are left wondering why a former top government official pleaded the Fifth in a corruption case before Congress. That doesn’t cut it.

The paper needs to weigh in on this story in a much bigger way.

Has America ever needed a media watchdog more than now? Help us by joining CJR today.

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.