Over the weekend the Washington Post reported that we finally have a resolution to the closely watched debate over whether the Securities and Exchange Commission would take sides in a dispute over whether shareholders can sue bankers and other third parties for the fraud of their corporate clients and customers. The SEC is going to ask the government to support third-party liability. We’ll have more to say on the substantive questions later. But now we want to focus on something a bit less, well, important: the coverage of this story in the Wall Street Journal.
We’ve had good things to say about the reporting of Journal reporter Kara Scannell in the past. But take a look at her lede paragraph in this story: “The Securities and Exchange Commission is siding with investors in a widely watched case before the Supreme Court, a move that could ease concerns about a possible pro-business tilt at the agency.”
It would be hard to write a more misleading and, frankly, biased lede than that.
After the jump, we tear through the Journal’s article with hollow-tipped, Teflon-coated bullet points.
•Siding With Shareholders? Scanlan’s lede sentence assumes that a class of people who can be called “investors” were on one side of the case. You wouldn’t know it from her article that advocates of both sides of the question of third party liability claim that their position is pro-investor. Scanlan simply takes the side of plaintiff lawyers and calls them “investors.”
What’s worse, you might be fooled into thinking that some consensus on the question had been reached among investors themselves. Of course, no such consensus exists. The investing public is largely unaware of the case, and certainly does not have any kind of informed position about it.
•Ease concerns? When reporters assert the existence of subjective opinions without any attribution, it is usually a sign that they’re revealing their own opinions. Here Scanlan writes about “concerns about a possible pro-business tilt” at the SEC, without mentioning a word about who has that concern. The line about the SEC tilting toward business and away from investors—or the notion that this test was a test of that tilt—was heavily promoted lobbyists who wanted the SEC to back up the lawyers arguing for third-party liability. Scanlan once again converts a talking point of the plaintiff bar into a fact.
Contrast this with how the Washington Post treats the story:
Federal securities regulators will throw their weight behind investors in a big-money dispute that could resolve whether shareholders can sue bankers who enabled their corporate clients to engage in fraud, two people familiar with the decision said yesterday.
The Securities and Exchange Commission has asked the U.S. solicitor general to file court papers supporting investors in an upcoming Supreme Court case, an action that has not been made public. The agency's decision follows intense lobbying by industry groups, unions and plaintiff lawyers, including well-known California attorney William S. Lerach.
Although the Post's opening sentence refers to “investors” as well, the context makes clear that it is not investors in general but those party to the law suit before them. What’s even better, the headline makes it very clear who is doing what: “SEC to Side With Enron Plaintiffs.” The Journal’s headline says “SEC Backs Investors On 'Scheme Liability.'”
We appreciate Scanlan’s suspicion that the SEC might be too deferential to Wall Street or even broader business interests. But we don’t think the answer to this is uncritically accepting the position of plaintiff lawyers. Far better—and clearer for readers—to explain just who is on what side and what they want than to declare one side pro-investor.
SEC Backs Investors On 'Scheme Liability' [Wall Street Journal]
SEC to Side With Enron Plaintiffs [Washington Post]