Media Maneuvers: Work in progress

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Published January 12, 2007 at 4:30 PM

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Even in these times of blogging and vlogging exuberance, there are still some print journalists who manage to generate that ineffable excitement known as buzz. Malcolm Gladwell of "Blink" and "The Tipping Point" fame is clearly one of them. So when Gladwell chooses to take on a topic as charged as Enron Corp., one of the largest corporate frauds of all time, it's not just a story; it's an Event.

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Unless you've extended your holiday vacation through Muharram, you've probably heard by now that Gladwell offered a self-described "semi-defense" of Enron in the Jan. 8 issue of The New Yorker. In an extremely compacted nutshell, the piece argues that Enron was mostly a problem of information — too much information, that is. Enron, Gladwell explains, isn't a puzzle, or something that could be solved through a specific piece of missing or withheld information. Rather, he argues, it's a mystery, meaning the information was all right there in front of us, provided under accounting principles that were generally accepted at the time. We — meaning Wall Street, investors and most of the media — were just incapable of deciphering it. In fact, maybe it was indecipherable.

"In the case of puzzles, we put the offending target, the CEO, in jail for twenty-four years and assume that our work is done," Gladwell writes, referring to the sentence recently conferred on Jeffrey Skilling. "Mysteries require that we revisit our list of culprits and be willing to spread the blame a little more broadly. Because if you can't find the truth in a mystery — even a mystery shrouded in propaganda — it's not just the fault of the propagandist. It's your fault as well."

Gladwell being Gladwell, he takes us on a glib and breezy romp through Nazi propaganda, Watergate and prostate cancer to illuminate the puzzle vs. mystery dichotomy. His actual discussion of Enron, meanwhile, centers mostly around its use of special-purpose entities, which he calls "legally questionable" and "extraordinarily risky." Prosecutors, Gladwell says, argued that Skilling misled investors by not revealing how much of Enron's future depended on these shady SPEs. But, Gladwell maintains, Enron did, in fact, disclose details about them. The problem was that the SPEs were just too complicated for anybody to understand.

With a few exceptions, this view of Enron did not go over well with some folks who care about these things. One of its most visible naysayers was The New York Times business writer Joe Nocera, whose Jan. 6 column, "Tipping Over a Defense of Enron," nails Gladwell for conflating fraud with overvaluation and for glossing over Enron not having disclosed that some of its SPEs were illegally structured. Nocera also mentions that Gladwell further defended Skilling on his blog, quoting him: "Can anyone explain — in plain English — what it is that Jeff Skilling and Co. did wrong?" Gladwell asks. He continues: "The question is strictly a legal one: according to the way accounting rules were written at the time, what specific transgressions was Skilling guilty of that merited 24 years in prison?"

Nocera's story sent us straight to Gladwell.com, of course. And as the answers to the questions that Gladwell posed came pouring in, what developed is essentially the story after the story, or at least its abundant footnotes. (A similar phenomenon occurred after a controversial Gladwell piece on pensions appeared in August.) After one commenter to the site offered his take on Enron's crime, Gladwell responded by admitting that he "may be wrong" about what was and wasn't illegal about Enron partnerships. That's a pretty shocking admission for someone who just spilled a few thousands words in The New Yorker on the case.

Similarly, after Cal Berkeley economics professor (and blogger) Brad DeLong chides Gladwell for "discover[ing] that there are ways of doing accounts that mislead but that are not criminal accounting fraud," and "jump[ing] from that to the conclusion that it is unfair to send people to jail for doing things that are criminal accounting fraud," Gladwell responds: "I'm not saying that Skilling doesn't belong in jail. I have no idea, either way, which is why in my article I didn't address the legal particulars of the case against the companh's [sic] officers, and chose instead to focus on the disclosure paradigm."

True, Gladwell never explicitly said Skilling doesn't belong in jail. But the piece does leave the impression that Gladwell at least believes that Skilling shouldn't be locked up for 24 years. If Gladwell has "no idea" whether Skilling should be in prison or not, shouldn't he admit that in the original piece? Also, isn't it hard to offer a "semi-defense" of Enron without addressing the "legal particulars of the case"?

Perhaps we're being terribly old-school about this, stuck in a time when an article in a magazine, especially such a rigorously edited one as The New Yorker, was essentially an author's definitive word on a topic, with all the kinks in his argument hammered out or planed down, or at least anticipated or acknowledged. But maybe, thanks to the Internet, that's all changed, and we're moving to a place where the role of print is to simply provoke a conversation in the blogosphere, in which the author fully participates, annotating, amplifying, clarifying as the comments roll in. After all, what's more important, the article or the conversation, the provocative analysis or the prosaic facts? Maybe that's the mystery.

A few weeks ago in this space, we mused that the only thing missing from the ongoing war being waged on the opinion pages of The Wall Street Journal and The New York Times over the Securities and Exchange Commission and its Pequot Capital Management Inc. insider trading probe was a letter to Times executive editor Bill Keller from Journal managing editor Paul Steiger. But over the New Year's break, we were given something else — a letter to the Journal by the guy who started it all, former SEC attorney and current New York Times darling, Gary Aguirre. (Even careful readers could be forgiven if they missed the Jan. 4 missive. In the newly downsized Journal, letters can no longer be found on the opinion and editorial pages, but have been relegated to the back of the Marketplace section.)

In his letter, Aguirre takes issue with the Journal's portrayal of him, in a column and an editorial, "as a former SEC attorney who makes groundless charges against the Wall Street elite and SEC officials." Aguirre wants to make clear that he has made allegations only against the SEC for what he sees as the favorable treatment it afforded Morgan Stanley CEO John Mack in the Pequot matter; he has leveled no insider trading charges against Mack himself. It's a point also made by the Times in an October editorial, when it acknowledged that there "is hardly enough information available to jump to conclusions" about Mack, even after it ran a front-page story, fueled by Aguirre's allegations, implying that the SEC should investigate him for possible insider trading abuses. For both the Times and Aguirre, smearing Mack's name is apparently no big deal as long as it serves the larger end of nailing the SEC.

Aguirre also notes that he has offered "ample evidence" to support his claims against the SEC and takes the Journal to task for attacking "one of two Pulitzer-prize winning reporters who co-authored the first New York Times article about the SEC's investigation of Pequot," referring, of course, to Gretchen Morgenson. It's the third time in six weeks that Morgenson's defenders have used her Pulitzer to deflect critics. That's one potent prize.

Meanwhile, back on Christmas Eve, The San Diego Union-Tribune profiled Aguirre, playing off of the fact that he is the brother of San Diego city attorney Michael Aguirre. The piece was written by Bruce Bigelow, a member of the Union-Tribune team that won a Pulitzer Prize for national reporting last year.

The story notes that Aguirre's supervisors at the SEC testified before Congress that he treated colleagues who disagreed with his methods with "disrespect, bordering on contempt."

When the paper asked Aguirre to comment, the story said, he wrote a letter to the chief legal officer of The Copley Press, publisher of The San Diego Union-Tribune. "I suggest the U-T give careful thought before it launches an attack on my reputation by using the patently false testimony of senior SEC officials under investigation," the letter said.

Really, now. Is that any way to treat a winner of the Pulitzer Prize? —Yvette Kantrow