Nov 1 1996

The Nasty Book

The New York Times Objects to a Whitewater Skeptic

Phil Gailey was shocked by the thesis of the book he had been assigned to review: “To charge that reporters have got just about everything wrong is astounding,” he wrote in the New York Times Book Review (8/4/96).

Gailey, a former New York Times reporter who now writes editorials for the St. Petersburg Times, was reviewing Fools for Scandal: How the Media Invented Whitewater, by Gene Lyons, a columnist for the Arkansas Democrat-Gazette: “Fools for Scandal asks readers to believe that some of the nation’s most respected news organizations . . . are out to smear, if not destroy, the Clinton presidency.”

What seemed to outrage Gailey the most was that Lyons singled out a news outlet that was not only respected-it was Gailey’s former employer, and the publisher of his book review. “Fools for Scandal vehemently attacks the professional integrity of the New York Times and the Times’ reporter, Jeff Gerth,” Gailey complained. “It accuses the Times and Mr. Gerth of lies, distortions and the suppression of exculpatory information, among other things.”

The odd thing is that Gailey never said whether any of these accusations are true or not. “Readers will have to weigh Mr. Lyons’ version of the truth and decide for themselves whether his charges have merit,” he wrote. One might have thought that the purpose of book reviews was to help readers make such decisions, so that they don’t have to read every book ever published.

Still, without citing a single error in the book—other than the mistake of not thinking highly of New York Times reporters—Gailey felt compelled to end his review with a bitter condemnation: “This is a nasty book, not because it challenges the reporting of the Whitewater story but because it assaults the integrity of the journalists who did the reporting. It is a smear job unworthy of any fair-minded critic of the press. Surely the newspapers got something right”

The Nasty Newspaper

Despite this warning, I took Gailey’s advice and read the book myself. My conclusion: If it’s nasty to assault people’s integrity without foundation, then the New York Times is a nasty newspaper.

Fools for Scandal is filled with examples of dreadful journalism from, yes, some of the nation’s most respect- ed news organizations.* But no example is more disturbing than Jeff Gerth’s attack on an Arkansas regulator in the very story that launched the Whitewater scandal, in the March 8, 1992 New York Times.

Most people still can’t tell you what “Whitewater” is about. (One of Lyons’ points is that the public doesn’t understand Whitewater because it’s a shaggy dog story—made needlessly complex to conceal the lack of a point.) But the central allegation was contained in that first story, which began with this lead: “Bill Clinton and his wife were business partners with the owner of a failing savings and loan association that was subject to state regulation early in his tenure as governor of Arkansas, records show.”

How newsworthy is it that Clinton had an investment in real estate–especially when, as Gerth acknowledges some 20 paragraphs later, the Clintons’ co-investor wasn’t involved with S&Ls until five years after the investment was made? For this to be big news—let alone a four-year scandal–there had to be an implication that something illegal or unethical was done–that Jim McDougal, the S&L owner, got special treatment from the state of Arkansas in return for giving Clinton a sweetheart deal.

To suggest that there was hanky-panky going on, Gerth focused on the state regulator in charge of S&Ls, Beverly Bassett Schaffer. “After federal regulators found that Mr. McDougal’s savings institution, Madison Guaranty, was insolvent, meaning it faced possible closure by the state, Mr. Clinton appointed a new state securities commissioner,” Gerth reported. “Under state law, the securities commissioner was supposed to close any insolvent institution.” The innuendo is that Clinton’s appointee ignored the law to help the crony of her boss.

Count the Mistakes

What’s wrong with this picture? First of all, the implication that Clinton appointed the commissioner, Bassett Schaffer, because of a federal threat to Madison is misleading. The report to which Gerth is referring was issued in January 1984; Clinton appointed Bassett Schaffer in January 1985–a full 12 months later—because the previous commissioner had resigned.

Secondly, that federal report did not find that Madison was insolvent. It found that Madison would be insolvent if certain accounting changes were made concerning real estate profits. In September 1984–four months before Bassett Schaffer’s appointment–the federal regulators told Madison that it did not have to make those accounting changes.

Thirdly, when Madison actually was found to be insolvent by an independent audit, in 1987, Bassett Schaffer wrote to federal regulators urging them to shut it down. (As a practical matter, state regulators could not close an S&L without federal cooperation.) More than a year later, the feds finally shuttered Madison.

Gerth went on to report that Bassett Schaffer “said she did not remember the federal examination of Madison but added that in her view, the findings were not ‘definitive proof of insolvency.’” In fact, Bassett Schaffer discussed the examination in one of two detailed memos she sent Gerth more than a week before his article ran–memos that explained most of the facts given above.

You can read both Gerth’s article and Bassett Schaffer’s memos in the appendix to Lyons’ book. After reading them together, it appears that Gerth ignored what Bassett Schaffer had told him because it would have caused much of his story to evaporate. Gerth never asked Bassett Schaffer whether her actions toward Madison had been influenced by Clinton’s Whitewater investment, even though that was the point of bringing her into the piece; if asked, she would have declared, as she did after reading Gerth’s article, that she had never even heard of Whitewater before.

Contacted by FAIR, Gerth said he had not read Lyons’ book. But he accused Lyons of sloppy reporting on the story, citing a May 29 column Lyons wrote in the Democrat-Gazette that the paper corrected the next day.

In challenging the plausibility of Lyons’ thesis, Gailey remarked, “Yes, journalists do make mistakes, but when they do, responsible news organizations correct them.” Far from correcting the assaults on Bassett Schaffer’s integrity–charges which eventually forced her to give up her law practice–the Times repeated the same errors in subsequent stories, and defends them to this day.

As Lyons notes in Fools or Scandal: “The New York Times apologizes to no one.” At least not to Arkansas lawyers like Bassett Schaffer.

* Actually, Lyons cites the work of several journalists who he thinks got the story right-most prominently, reporters for the Wall Street Journal’s news section (not the editorial page). But their work was mostly ignored, according to Lyons, mainly because they contradicted the New York Times.