A Wall Street Journal reporter and bureau chief has been accused of being unethical and inaccurate in a column about the investing website SharesPost.
SharesPost is a company that bills itself as an “online marketplace for private investments.” According to Cnet, SharesPost allows people to buy stock in private companies from “people who own pre-public shares.” SharesPost also features “analysts’ research on the companies in its market to help buyers and sellers agree on a value for shares being transacted.”
Business Insider questioned Dennis Berman‘s journalism ethics in reporting his column, because as Berman admits in his column, he used his dead grandmother’s information to enter SharesPost’s website. Business Insider also reprinted an e-mail sent from SharesPost’s CEO David Weir to SharesPost members about the Berman’s column, posted on Business Insider’s website here.
Berman is the Wall Street Journal’s Money & Investing deputy bureau chief and manages “a team of bloggers.”
As Berman wrote in his column, “Relying on erroneous information that I, as a test, submitted under her name, SharesPost let Grandma into its realm.” He later commented: “To SharesPost’s credit, it suspended Grandma’s access after it realized I was the one calling and asking questions under someone else’s name. Clearly, I was not a 107-year-old woman seeking an angle on Facebook.”
Journalism ethics codes, like the Society of Professional Journalists’, recommend journalists only resort to undercover reporting “when traditional open methods will not yield information vital to the public.”
While Berman did let his readers know that he posed as his dead grandmother, Business Insider wondered why Berman used his grandmother’s information to get an inside look at SharesPost system. Business Insider explained that it recently submitted legitimate information to SharesPost to learn more about the system, and it was able to learn what it needed without having to lie.
“So, from our viewpoint, signing up for SharesPost and poking around in preparation for an interview is ethical, as long as we don’t submit fake information or misrepresent our reasons for signing up. Berman, meanwhile, appears to have crossed the ethics line by submitted, as Weir describes it, ‘fraudulent’ information.”
iMediaEthics aasked SharesPost what advantages Berman would gain by entering in another person’s information as opposed to using his own, real information to test SharesPost’s system. SharesPost CEO David Weir responded via e-mail to explain SharesPost participation levels. According to Weir, “there are two levels of participation on the SharesPost online marketplace for private investments – members and accredited investors.”
You can register on the site for free and get “full access to new and archived private company research to help bring transparency and openness to the market for private company shares.” But, you can’t be listed as “accredited” on SharesPost if you don’t “meet certain income requirements per the SEC” and complete a SharesPost-reviewed “form and questionnaire.” Weir added that all SharesPost transactions are “vetted by a licensed broker” before going through the system.
But, Berman isn’t just being criticized for misrepresenting himself. He also reportedly made several errors in his reporting.
Weir called Berman’s story about SharesPost inaccurate and incomplete. According to Weir, the article “badly misrepresented our company’s policies and procedures and was based on questionable journalistic ethics.”
Columbia Journalism Review also commented on Berman’s story and methods of reporting in a post on its Audit blog that called it unethical. CJR also claimed that Berman’s story featured “lots of errors” such as the following:
- Berman’s headline: Berman’s grandmother never invested in Facebook, despite the headline describing her as a “fledgling Facebook investor.”
- Berman wrote that his grandmother “was ‘cleared’ to buy Facebook shares” and labeled “an accredited investor;” however, SharesPost suspended her account and Berman noted that users certify themselves. SharesPost’s CEO Weir added that the suspension was “after six hours.”
- Berman wrote that the SEC is looking into possible insider trading “in these secondary markets” like SharesPost. But the SEC reportedly hasn’t mentioned insider trading in any related investigation.
CJR posted an e-mail from Berman to Stoll in which Berman stated that his “approach and objectives were discussed in detail with the companies prior to publication. As you can see, the story also praises SharesPost for cutting off my access.”
He said that the Wall Street Journal is “in the business of truth-telling, not deception,” and that his work “helped shed light on an important topic…that ultimately serves the public good.”
But, CJR countered Berman’s e-mailed statement, asking
“If the WSJ is ‘in the business of truth-telling, not deception,’ why did Berman lie and deceive?”
“Is what Berman did unethical? Yes—if you’re going to lie in the service of reporting a story, you need to be able to get information that way which you couldn’t get through normal reporting channels,” according to CJR. “The ends don’t remotely justify the means here.”
CJR also criticized Berman because he’s not “some kind of overenthusiastic kid reporter who stepped a bit too far” but has an editorial position of authority at the Journal.
“What he does is a clear signal to everybody who works for him about what is and isn’t acceptable in WSJ reporting. Unless, of course, he makes it clear that he has lower standards for his own work than he does for the work which he edits.”
Ira Stoll blogged on Future of Capitalism commenting that “Berman relies on euphemisms — submitting ‘erroneous information’ and ‘fibs’ — but what he really did was he lied.”
We e-mailed Dennis Berman asking why he used his grandmother’s information and not his own, if he had commented to any of the criticism, if he intended to run any corrections given the claims of his errors by CJR, Business Insider and SharesPost, and if he was given approval for his methods of posing as his grandmother.
Ashley Huston, a spokesperson for the Wall Street Journal, responded on Berman’s behalf:
“The Journal gave both companies full opportunity to comment on Mr. Berman’s findings before publication. We stand by his reporting approach and the accuracy of the story.”
We also asked SharesPost for comment about the story and if the company has had any contact with the Journal since the story’s publication.
CEO David Weir answered our questions, according to Allison VanNest, one of SharesPost’s press contacts. Weir wrote that the company hasn’t “spoken with Mr. Berman since the story’s publication” but did send a statement to the Journal post-publication about the article. The newspaper printed “an edited version.”
The full statement from Weir follows:
Dennis Berman’s column about SharesPost (April 12, 2011) badly misrepresented our company and was based on questionable journalistic ethics.
His story was based on results he derived by submitting false information as part of our Accredited Investor vetting process. He defends his actions by saying he is in “the business of truth telling.” Unfortunately, though, his article omits large portions of the truth.
The fact is that Mr. Berman’s “test” confirmed that our qualification system works. Our broker and electronic systems detected his fraud and barred him from our platform within six hours of submitting his fraudulent information and long before he would have been able to execute trades. Somehow that fact was treated as a mere footnote to the story, leaving readers largely misinformed and our company unfairly maligned.
Other facts about our compliance system that were left out of the story:
- Mr. Berman failed to mention that his fraud only enabled him to view information on our site. Had he attempted to transact, he would have been required to undergo a second level of compliance review and direct dialogue with one of SharesPost’s FINRA registered broker;
- Had he actually entered into agreements with a seller, those agreements would have required him to make multiple contractual representations to the seller, the company and SharesPost that he had provided accurate information and was in fact an Accredited Investor
- Had he actually entered into a contract to purchase shares, the transaction would have been processed by U.S. Bank, a third party escrow agent, which first verifies buyers’ and sellers’ identities by collecting all the documents required under the Patriot Act and Anti-Money Laundering regulations.
For the sake of some glib one-liners and a pre-determined “gotcha” story that he was hellbent to write, Mr. Berman lied about who he was and ignored and embellished the facts to suit his story line. We think the Wall Street Journal can and should do better.