Opinion

Stories I’d like to see

Lying to the SEC, A-Rod’s contract, and everybody gets hacked

Steven Brill
Feb 5, 2013 12:47 UTC

1.      Suppose a college applicant did this?

Here’s a story that seems so bizarre that it might be good material for a Tom Wolfe re-do of The Bonfire of the Vanities rather than worth the time of a serious non-fiction reporter – except that it’s apparently true. According to this New York Times report last month, Egan-Jones, an “upstart credit ratings firm,” has been:

barred for 18 months from issuing certain government-recognized ratings after the firm made misstatements on an application with the government. The S.E.C. said the firm had exaggerated its record when it applied for a government designation in July 2008. The firm said then that it had performed 150 ratings of asset-backed securities and 50 ratings of governments, when it actually had performed none at that time, according to the agency…. Under the terms of the penalty, Egan-Jones is barred [for 18 months] from rating asset-backed and government securities issuers as a so-called nationally recognized statistical rating organization….For other categories of ratings, Egan-Jones will still have the government designation.

Huh? “Exaggerated” its record? A firm applying for the SEC seal of approval as a provider of honest securities ratings seems to have completely fabricated its resume, saying it had done 200 ratings when it had done zero. And the SEC puts them in the penalty box for just 18 months for some ratings and lets them keep right on providing other ratings?

There must be more to this story. Maybe the fabrications on the application were an accident, or the work of a prankster who snuck into the Egan-Jones offices and took over a keyboard. Or maybe the SEC announcement of the “settlement” was a prank. If not, can the SEC explain what an applicant would have to do to be barred permanently from winning a designation? And why did it take five years for the SEC to deal with this?

2. Is A-Rod’s contract as hollow as his bat?

The recent round of charges that faded Yankee star Alex Rodriguez may be implicated in another scandal involving performance enhancing drugs (PEDs) has generated press speculation that the Yankees will use the charges as a way of freeing them from A-Rod and the $114 million left to pay over the next five years on his contract. But according to this ESPN story, “Rodriguez might be in little danger of having his contract voided, even if the charges turn out to be true. There is no precedent to successfully void a contract in baseball over PEDs.”

How far can the Chinese firewall stretch?

Steven Brill
Dec 31, 2012 18:11 UTC

1.    Media tug of war in China:

Last week, my daughter sent me this amazing Bloomberg.com story, accompanied by graphics and  clickable family trees, that unraveled how the “princeling” ancestors of China’s “Eight Immortals” – the generals and party leaders who built the communist superpower – now control the country’s leading industrial and financial conglomerates. The New York Times has also been on the case, detailing in articles like this one and this one how those controlling China’s national and regional governments have showered favors on their entrepreneurial relatives.

Then, last Friday the Times added a report describing heightened Internet blocking measures that Chinese authorities are taking to keep these kinds of stories about Chinese crony capitalism and other scandals from being seen online in China. The new efforts to firewall information that would embarrass the ruling class even include trying to block offending content from reaching the virtual private networks (VPNs) used by corporations to ensure the privacy and security of the information their employees transmit around the world.

It’s all fascinating, important stuff. But it’s only the opening rumble of what could be one of the major business and political stories of 2013. After all, this is the kind of information that threatens to overturn the implicit deal with the citizenry that the Communist Party rulers have depended on for the last two decades: let us rule and we won’t act like Communists when it comes to giving you economic opportunity.

Press-dinner proceeds, cat-and-mouse China reporting, testing the testers

Steven Brill
May 15, 2012 12:24 UTC

1. The White House Correspondents Dinner: How much for charity?

Two Sundays ago, Tom Brokaw used an appearance on Meet the Press to attack the increasingly over-the-top annual gathering of press, politicians and Hollywood stars and hangers-on known as the White House Correspondents’ Dinner. Brokaw called it “an event that separates the press from the people that they’re supposed to serve. It is time to re-think it.” Incoming correspondents’ association president Ed Henry of Fox News quickly tweeted back that the dinner, which featured among other celebs Kim Kardashian, “raises TON of $ for needy kids who might not get into journalism w/out help.”

Really? The association’s website lists just $78,000 for 15 scholarships in 2012, plus one scholarship whose amount is not listed. Assuming it’s about $6,000 (a bit above the average for the other 15 scholarships), that would be $84,000 in scholarships. Plus, there’s a $30,000 grant listed for a high school mentoring program. Yet this year’s dinner, according to an association board member, sold “nearly” 2,700 seats at $250 each to various media companies. That would raise over $650,000 for the dinner, compared with what, again, looks like $84,000 for scholarships and $30,000 for mentoring. That’s a total of $114,000.

Moreover, on the page where the website lists the scholarships, the correspondents’ association names 18 donors who are thanked for their “generosity.” The donors include Bloomberg, Time Inc and Thomson Reuters, and they seem to have given to the scholarship fund apart from buying dinner tables, or at least the website makes it appear that way. If so, wouldn’t these deep pockets have already come up with some or all of that $114,000 “TON of $” before the dinner was even held? That’s only a donation of about $6,000 each. Which would mean that the revenue from the dinner had little or nothing to do with the scholarships.

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