Reading the
fine print: A review of ‘24 Days’
A
review by Nathan Fishbach
Feb.
11, 2004
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Nathan
Fishbach
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By
this time, even those with a slight interest in business are aware
of Enron’s collapse and Arthur Andersen’s subsequent
fall. Perhaps the shock of their demise was exacerbated by the
sudden and rapid nature of the descent. Without a doubt, these
scandals are a seminal event marking a change in the way that
the public views the business sector — having an impact similar
to that which Watergate had upon the political world three decades
ago.
As
the Enron litigation winds through the legal system, it is interesting
to recount the company’s unraveling through the eyes of journalists
who covered the story — and who played significant roles
in discovering important evidence. In “24 Days,” Wall
Street Journal reporters Rebecca Smith and John R. Emshwiller
focus upon the period between October 16 and November 8, 2001,
a time when Enron lost $19 billion dollars in market value, leading
to its bankruptcy later that year. It has been said that journalism
is “history on the run,” and “24 Days” is
a fast-paced journal (almost a diary) of how these reporters sprinted
through their coverage of the Enron debacle.
To
a large degree, Enron provides the backdrop for the book’s
illuminating description of how financial reporters cover the
big story. Noting that newspapers are not “so all-powerful”
that they “make things happen” on their own, the reporters
state that a newspaper’s role is to support “agents
of change” (i.e., news sources) who provide valuable information
to reporters. Significantly, the WSJ’s coverage of
Enron did not start with a banner headline and a major expose.
Instead, the coverage was a slow accumulation of evidence provided
by different sources over a period of weeks. Although the facts
and circumstances surrounding the Enron inquiry consisted of a
dizzying maze of financial transactions, the reporters developed
their stories using the police reporter’s ancient technique
of establishing relationships with informants who were “in
possession of better information than any outsider, including
a reporter, could acquire.”
Significant
tips for the early WSJ’s articles were derived from
studying the fine print in public documents. For example, at the
start of the WSJ’s coverage, Emshwiller learned that
a senior Enron officer operated secret partnerships that “appeared
to be doing vast amounts of business with Enron.” Emshwiller
obtained this data by retrieving, from the Internet, a quarterly
Enron filing with the SEC consisting of “thirty-seven single
spaced pages of numbers and legalese.” Not having the “time
or inclination” to read the document, Emshwiller “fell
back on some of the shortcuts he’d been taught as a young
Journal reporter” and focused upon the “related party
transactions” section. As he learned of the partnerships
from an allusion in this section, Emshwiller “felt a kick
of adrenaline. He’d never seen a disclosure like this before.”
Although Emshwiller could not determine the nature of the deals
since they were “cloaked … in a bewildering string of
words,” he knew that “hundreds of millions of dollars”
were involved.
Each
WSJ article provided foundation for the next. When there
was insufficient corroboration for a full-blown story, the reporters
“packag[ed] the information as a ‘Heard on the Street’”
column. This caused sources to step forward with new data. Smith
writes that she “often put small slivers of information in
stories, like messages in bottles, then tossed them into a receding
tide and was amazed at what came back.” Frequently, readers
forwarded tips on where to obtain other evidence or provided “internal
documents,” which Smith describes as “the most beautiful
phrase in a reporter’s lexicon.”
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24
Days
By Rebecca Smith and John R. Emshwiller
Published by HarperCollins Publishers, Inc.
416 pages
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Throughout
their coverage, the authors faced competition from their WSJ
colleagues as well as from other news outlets (particularly the
24-hour news channels). The very nature of the WSJ heightened
this rivalry. Because of the WSJ’s limited news space,
a story’s “placement was critically important because
it also determined length.” If a reporter “didn’t
have a good slot” for a story (such as on the first page),
it “wouldn’t get much space. That meant you couldn’t
tell much of a story.”
Accordingly,
the reporters framed their stories to maximize their impact. Since
the WSJ is only published on weekdays, the reporters, at
the end of the week, were “driven by the eternal Thursday
afternoon angst” that “there wouldn’t be another
chance to get a story in the paper until Monday.” Over weekends,
WSJ reporters and editors sometimes “nervously wait”
to see if a “major competitor would beat” them “to
a story on Saturday or Sunday.”
The
reporters constantly analyzed whether they had sufficient corroboration
to justify a story — knowing that if they did not run with
it, they might be scooped.
Emshwiller
recounts that when he learned of document shredding at Enron,
his editors were concerned that the evidence was not sufficiently
“solid” for an article. As Emshwiller was waiting to
meet with confidential sources who could possibly provide further
verification, a colleague called and advised that ABC was running
an interview with a former Enron employee who had observed shredding.
The exasperated Emshwiller writes that “[w]hile he’d
been plugging away trying to get some people to talk anonymously
and just minutes away from a preliminary, off-the-record meeting
with two potentially good sources, ABC News finds a person willing
to waltz onto national television and tell their tale.”
Because
of the WSJ’s impact within the financial community,
the reporters took special precautions in conducting their inquiries.
The reporters were careful to ensure that the very fact that they
were pursuing a lead did not become “the story.” They
knew that “often in the past, a company’s stock had
reacted when word started spreading around Wall Street” that
an article “was in the works.” Consequently, the reporters
were circumspect when contacting potential sources. Interestingly,
as a result of the potential effect that the “Heard on the
Street” column has on stock prices, the column’s editing
is, as a rule, specially handled so that few individuals come
into contact with it before publication.
Besides
describing the journalistic techniques used to uncover a financial
scandal, the book provides lessons in crisis management for corporate
officials — i.e., how not to do it. For example, as the events
started, the reporters constantly called Enron’s information
officer, who had credibility and was generally accessible. He
was of great assistance in interpreting many of the complex documents
prepared by the company, particularly those presented during the
quarterly earning conference calls with analysts and reporters.
However, the official had less value after it was clear that the
executive suite was not keeping him in the loop on the unfolding
events.
“24
Days” offers insights that are of interest to — and
serve — even the casual observer of the business world. As
the book closes, the reporters discuss Enron’s lessons. They
note that some are quite obvious, such as “[b]eware of things
— or companies — you don’t understand.” Moreover,
“[d]on’t cut corners or rely on financial gimmicks.”
And, of course, always study the fine print.
