Feb 10, 2010

Profiting from the take down

Bill Lobdell, former religion writer for the Los Angeles Times, and Barry Minkow, former con man, have a novel idea for an online investigative operation - invest in companies, look for fraud, and then short sell the stock of the ones that are found to be corrupt.

Newspapers strictly forbid reporters from profiting off the subjects they cover, much less giving reporters a profit motive to take a company down. Lobdell and Minkow believe the answer to this ethical barrier is more disclosure. To prove the point, the website includes gems like this:
Minkow was his (sic) released from prison in 1995, and has made restitution to all his victims (and he's making payments on his one outstanding debt). Now, in addition to his work at the institute, Minkow serves as the senior pastor of Community Bible Church in San Diego.
The idea of transparency as an enabler of unethical behavior is troubling. Telling someone you're going to punch them in the eye doesn't give you the right to punch them. But is the ibzireporting.com unethical on its face?

It is if it wishes to judge itself according to the standards and ethics of traditional journalism, practiced by newspapers and other major media. Then again, there's a lot of perfectly legitimate behavior out there that traditional journalist's wouldn't be allowed to pursue.

So maybe the best way to approach this is to say that, however Lobdell and Minkow describe their venture, they're not doing journalism - neither are private investigators nor insurance claims adjusters, although all of them might uncover wrongdoing in the course of their business. What Lobdell and Minkow are doing is running a short-selling enterprise that might provide journalists with important tips, but is primarily designed to provide interested investors with a way to make money. Because the company will need to turn a profit, which means finding a reason to short sell a stock, readers will have a reason to be suspect of stories until verified by other sources. But if they want to say they're journalists first and foremost, they'll need to rely on more than simple disclosure to win the argument.

Read James Rainey's profile of the righteous-investor/reporter model in today's Times.

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