In the aftermath of the Zachery Kouwe plagiarism fiasco, the last thing Andrew Ross Sorkin's Dealbook needs is another scandal. Yet this is precisely what may come out of a recent column by the TBTF author, in which ARS insinuated that Lehman whistleblower Matthew Lee came forth with incriminating Repo 105 evidence only after he was made aware he was about to be "downsized." The Columbia Journalism Review's Ryan Chittum debunks this story, after pointing out some potentially gross misrepresentations in the Sorkin column, which go to directly to motive and to the integrity behind Lee's actions. "The Times’s DealBook editor Andrew Ross Sorkin, who wrote the
column, quotes the sources saying the whistle blower 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." If indeed Sorkin misstated facts, a retraction is the only recourse as the potential for legal escalation on all sides of the story is huge. We are confident that while to Lehman managing directors $50 billion may have been a drop in the ocean, legal prosecution going after either ARS (or Lee) to reclaim it in part (or in whole) will surely make the Dealbook editor's head spin, even after accounting for Paulson and Geithner's 10,000 purchases of TBTF each (exaggeration ours... we hope).
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:
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
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.
Chittum then proceeds to note the abovementioned discussion with Lee's lawyer Shustak in which he makes it clear that Sorkin never spoke to his client.
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.
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.
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.”
It is a pity that the NYT, which recently let go hundreds of press room staffers, in the latest round of layoffs, has been resorting to such devices as attributing reality where there is none. In the old days, journalists would be forced to issue a retraction (or much worse) if indeed their reporting was not based on facts, as this particular piece so far appears to be. To be sure, this is not the first time the Columbia Journalism Review has discussed ARS - a week ago Dean Starkman wrote the most scathing review of Too Big To Fail we have yet read. Could this be just a case of some bad blood? Or, as Starkman insinuates, is this merely yet another case of Wall Street media capture? the truth will be made apparent over the next several months by the tone of Sorkin's pieces. Nonetheless, having already attempted to exonerate Fuld once, one wonders just where Sorkin's allegiance lies.
No Andrew, it doesn't. Yet we understand. After all, a sequel to TBTF has to be in the works at some point. And should Andrew lose his contacts, he may have to rely on his extensive understanding of finance to piece things together as an impartial outsider for once. Ironically, the Lehman examiner's report is precisely what Too Big To Fail should have been, had ARS actually dug in underneath the surface of all the primary material he had been presented with. We are surprised Doubleday or Penguin has not yet offered Valukas an advance for his next much more relevant Wall Street thriller.