Bloomberg News Scandal: What Went Wrong?

Bloomberg News Scandal: What Went Wrong?

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To some, the Bloomberg news and information company is something akin to the North Korea of journalism. The privately held business has its own laws and customs outside the mainstream of the journalism community. And the Bloomberg News employees’ slavish adherence to that unique corporate culture has paved the way for the scandal that is dogging parent Bloomberg L.P. right now.

The scandal centers around the ubiquitous Bloomberg financial terminals and the way Bloomberg’s journalists, working for a separate division of the company, used proprietary data to gain a news-gathering advantage. The journalists at Bloomberg News – which used to be called Bloomberg Business News when I worked there – had access to a function on the Bloomberg terminals that permitted the reporters and editors to look at customers’ contact data. The reporters were even trained to watch login activity to help them get information for their news stories. You can substitute “snoop” for “watch,” if you’d like, because the practice looks more than a little sleazy to the outside world.

After Goldman Sachs complained to the company, Bloomberg acknowledged, as The New York Times noted, that at least one reporter had gained access to information on the investment bank. The Federal Reserve and U.S. Treasury Department are reportedly also investigating whether their users were tracked.

Matthew Winkler, the editor in chief of Bloomberg News since its inception nearly a quarter-century ago, called the act “inexcusable” in a Bloomberg apology published late Sunday night. “The recent complaints relate to practices that are almost as old as Bloomberg News,” Winkler pointed out. “Some reporters have used the so-called terminal to obtain, as the Washington Post reported, ‘mundane’ facts such as login information.”

Maybe not so mundane, after all, though.

I spoke with a former Bloomberg reporter who told me how a reporter could use the terminal to gain an advantage. Say, for instance, Bloomberg had started investigating whether John Doe, a highly regarded trader at Goldman Sachs, had been fired. This would count as a nice scoop in the gossipy Wall Street world that Bloomberg serves.

Even if Goldman stonewalled Bloomberg, a reporter could check John Doe’s login to the Bloomberg terminal.  If the individual, who logged on at the same time every day, was suddenly not using the terminal, it might be a sign that the Goldman worker was no longer with the company. That’s one way Bloomberg reporters could use the terminal to gain edge over competitors from The New York Times, Thomson Reuters or The Wall Street Journal.

The Bloomberg terminal, for many, is critical. More than 315,000 Bloomberg customers around the world use the terminals to get instant information about stocks and financial markets. For Wall Street traders, it is essential to have an edge either in data or time over the competition. Many terminal customers believe that they simply can’t live without it, much like air and water.

Now the famous ingenuity of Bloomberg has a stigma attached to it, and the company’s reputation for an intense focus on customers has been undermined. Will Bloomberg be able to continue to have a hold over its clients? Probably. As one employee confidently told me over the weekend, “Making money is what drives Wall Street. And we help them do it better than any other news organization. They literally can’t do without us.”

If the snooping scandal comes as a surprise to people on Wall Street or in the media world, it shouldn’t. I worked as a reporter in Bloomberg’s home New York office from 1993 to 1999. I observed a company slowly but surely evolving into a force of its own. It was built on sheer toughness, doing whatever you had to do “get the story.” One reporter in the New York newsroom lingered in the office on a story even after his wife went into labor. (More rational colleagues shoved him out the door.)

The point is that Bloomberg’s 2,400 reporters worldwide will do practically anything to gain an edge over their counterparts. Long before Charlie Sheen popularized the word “winning,” Bloomberg used it as a mantra.

Think about it: One of the most remarkable stories in modern journalism annals is the growth and success of Bloomberg News as a worldwide force. Along with Gannett’s (NYSE: GCI) USA Today and News Corp.’s (NYSE: NWS) Fox News Channel, Bloomberg News is a testament to innovation, determination and perspiration.

Unfortunately, now the Bloomberg company is also known for something else: cheating to get ahead.

Full Disclosure: Jon Friedman was a reporter at Bloomberg News in New York from 1993 to 1999, before he resigned and began to work for another media company.