There are some real journalistic lapses in a New York Times column Tuesday that quoted anonymous sources about a Lehman Brothers whistleblower who tried to warn about the failing bank’s questionable accounting maneuvers, including one known as Repo 105.
The problematic passage is here (emphasis mine):
Lehman’s shell game didn’t come to light until June 2008, when a lower-level executive named Matthew Lee sent a letter to management raising a host of questions about the firm’s practices. (By the way, the S.E.C. and Fed were still working inside the building at this point.)
What the examiner didn’t report, however, was that Mr. Lee started raising questions about Repo 105 only when it became clear that he was being replaced in his role, according to people briefed on the matter. Indeed, Mr. Lee’s original letter to management did not mention the use of Repo 105.
The Times‘s DealBook editor Andrew Ross Sorkin, who wrote the column, quotes the sources saying the whistleblower came forward only after “it became clear” he was to be replaced in his job. We’ll get to that peculiar phrasing in a minute, but the main problem is the Times story gives no indication that Lee was called for comment.
In fact, he wasn’t called, according to Lee’s lawyer, Erwin Shustak, whom I talked to yesterday.
“I’ve never spoken to the man (Sorkin) in my life,” Shustak says. “Nobody’s spoken to Matthew.”
That doesn’t meet a basic fairness test. As it happens, Shustak tells us that Lee had no idea his job was in danger.
“That comment was made not based on any reality or fact that I’m aware of,” Shustak says. “He couldn’t possibly be accurate because I know that until Mr. Lee wrote these letters, he had not been notified that he was part of any layoffs.”
This is useful information that blunts, if not debunks, the anonymous sources’ innuendo that Lee was motivated to come forward because he was about to lose his job. Indeed, an on-the-record denial carries far more weight than an off-the-record or on-background attack, which this assertion clearly was. Sorkin declined to comment. (UPDATE:The Wall Street Journal later reported that Lee had been demoted by the time he wrote the letter. On the other hand, it also quotes Shustak saying Lee had been issuing oral warnings for months before that.)
The slip occurs near the bottom of a column on the failures of regulators to discover the Lehman scandal that was right in front of them, and is a jarring end to an otherwise fine piece.
Lee’s name first emerged last week in a lengthy passage in the blockbuster report on Lehman’s bankruptcy by examiner Anton Valukas, who describes Lee’s whistleblowing efforts in the spring and summer of 2008.
On Tuesday, the same day as the Sorkin column, The Wall Street Journal broke a story reporting that Lee had been fired. The story, by Michael Corkery (an ex-colleague of mine), quotes Shustak saying “it was easier to just shut him up and let him go.”
It also quotes the Lehman side, using anonymous sources:
Lehman said at the time it let go Mr. Lee, a senior vice president, as part of a broader downsizing at the firm, according to people familiar with the matter.
That is much fairer. At least both sides were given a hearing.
Also, as noted, the Times’s phrasing poses problems, reporting Lee blew the whistle only after “when it became clear” he was being replaced.
Clear to whom? If Lee didn’t know he was being replaced the fact that he was on his way out is irrelevant. The phrase itself is blurry. Why?
Lee’s lawyer, Shustak, says Lee never sought the limelight:
“Matthew is a very private person,” he says. “His life has been devastated when he was let go. He has not worked since then and is living off his 401k. He just doesn’t want to get into the middle of whatever lawsuits are going to be coming out of this whole report.”
Whether that portrayal ultimately proves the whole story is not the point. His side deserved a hearing.
And, finally, in assessing which side is more credible, it’s worth remembering that in Valukas’s report it was top Lehman brass who were found to have repeatedly made “materially misleading” statements about things far more important than this.
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 rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.