Power to Truth: Exposing Corporate Wrongdoing in a Shifting Media Landscape

What happens to the pursuit of truth when investigative journalists face a media world dominated by corporate influence?

In a recent episode of the “Power to Truth” series, Anat Admati, Professor of Economics and Finance at Stanford University Graduate School of Business, and highly acclaimed journalist and author Louise Story examined the obstacles in reporting on corporate scandals and wrongdoing.

Story recounted her journey at The New York Times, where she started on the advertising and marketing beat before transitioning to cover Wall Street after the 2008 financial crisis. She highlighted how her MBA from Yale had equipped her with the knowledge to ask hard questions and investigate deeply, even without established sources in the financial world.

“I did know financial concepts from business school, so having that education enabled me to jump in, ask questions, and not be hoodwinked,” she said. “I ended up emerging as one of the more hard-hitting reporters because I didn't have any social ties or previous ties to sources. I didn't get my knowledge from them.”

“I asked tough questions and managed to uncover a lot of things that were really important information about what had gone wrong.”

Admati emphasized the value of a business education for journalists, as it enables them to navigate complex subjects and avoid becoming mere "mouthpieces" for their sources. Story shared how her MBA classes, particularly in forensic accounting, had taught her to identify fraud by understanding incentive structures and strategic thinking rather than just looking for familiar patterns. This approach helped her uncover financial fraud and navigate the ever-changing tactics used in such schemes.

Story elaborated on her investigation into securities lending, a practice where banks hold investments for pension funds and loan out shares of stock to hedge funds, often for short selling. She and her colleague, Gretchen Morgenson, explored how the financial system was skewed in favor of big banks over ordinary people.

“Why was it that many people on Wall Street still got huge bonuses before and after the financial crisis, whereas ordinary people through their homes and investments really lost out?”

Story spoke about her investigation into JPMorgan’s securities lending practices. Her work uncovered significant losses in the New Orleans retirement pension fund due to these risky loans.

“You might remember the ending to the story. The person from the pension fund said in the end, essentially the leaders at JP Morgan were going to do whatever it took to make money for their shareholders.”

Admati expressed her concern that banks continually prioritize shareholders' profits, often at the customers’ expense. She then asked Story about her investigations into kleptocracy where corruption exists at the highest levels of government.

Story said that after the 2008 financial crisis, she investigated various financial scandals, including a significant case involving Goldman Sachs and Abacus, a subprime mortgage product, that led to a major settlement. Her focus later shifted to uncovering where corrupt, stolen money from around the world was being hidden.

“At first, I thought I'd be doing a piece about the Virgin Islands or an offshore place. But I started calling around to investigators and asset forfeiture lawyers to ask, where does the money go and how do you follow this money trail? And they said, you're in New York, right?  Just look at your window. It's right there, it's holding up your whole real estate market.”

Story began looking into the Time Warner Center in Manhattan, revealing that several dozen of the 200 condo owners had been accused of serious crimes globally, with money often laundered through offshore entities and invested in U.S. real estate. Among the findings was a major scandal involving billions of dollars stolen from the people of Malaysia.

Admati noted that both the U.S. and the UK are major destinations for such illicit money, which contributes to rising real estate prices in cities like London, often referred to as ‘Londongrad’.

Story added that art markets, through institutions like Christie's and Sotheby's, have also been used for money laundering due to less stringent regulations compared to banks. Her investigation highlighted how it was easier to launder money through real estate and art than through banks, which had more requirements to verify customers' identities.

Since the publication of her 2015 investigation, there have been some reforms, including new Treasury rules around real estate transactions. However, the problem of stolen money and corruption still exists today.

“There are more hurdles and certainly, there's more awareness now. We did this project before the Panama Papers and all of those projects on secrecy and shell companies. So I think it inspired many other outlets to write on this topic.”

Admati discussed the challenges surrounding corporate transparency in the U.S., mentioning the Corporate Transparency Act and expressing skepticism about its impact on identifying beneficial owners. She pointed out that, while it's difficult to engage in everyday activities without being tracked, it is surprisingly easy to buy property or form a shell corporation anonymously. She cited a sting operation by Global Witness, led by Patrick Alley, which revealed how top U.S. law firms were willing to help clients secretly move money into the country.

Story noted that this represents a significant shift in U.S. practices over the past 30 years. Historically, under a Jeffersonian ideal, land ownership was public, and people knew who owned property, which made it easier to address any disputes.

However, today, it is often difficult to determine who owns a property due to the rise of anonymous corporate ownership. She highlighted that transactions involving real estate held by LLCs were rare before the 1990s but have since skyrocketed. While not everyone using an LLC is doing something illegal, she emphasized that the widespread use of anonymous entities creates an environment conducive to fraud, allowing bad actors to blend in and appear legitimate.

Admati asked Story about her experiences with whistleblowers in investigative journalism.

“In every investigation that I've done, I've always had inside sources,” she explained. “You cannot uncover the real details and prove them to a level where you can publish them without some people inside talking to you. And it's always very sensitive because people who have talked to me for these investigations are putting their jobs at risk and potentially opening themselves up to legal action with their companies.”

Story went on to say that many whistleblowers are motivated by a desire to expose wrongdoing within their organizations, often after trying unsuccessfully to raise concerns internally. She emphasized the importance of maintaining confidentiality and being careful about how whistleblowers are described in stories to protect their identities.

Admati asked if whistleblowers often attempt to change things from within before turning to journalists.

Louise confirmed that some do, but she said, “Many of the people who have been the best sources of information have not raised concerns inside, and they did not seek me out. But when I approached them and they thought about it, they realized it was a problem, and they wanted to be part of bringing it into the light.”

Story noted that she prefers it when she finds sources herself, as she can be more confident that they are not driven by an ulterior agenda.

“Sometimes, people in a system don't always reflect on the ethics of what they're doing and if everyone around them is doing it, they're just participating. So, I've actually found when I've interviewed people, sometimes the questions I've asked have caused them to start reflecting and thinking differently.”

Story also discussed her experiences investigating corruption in various countries, including Malaysia, Mexico, and Russia. Investigating public officials, particularly in certain countries, requires careful consideration of safety, as sources could face serious risks, such as arrest. She recounted her investigation in Malaysia in 2014, where she had to disguise herself to protect her sources. She described how a photo of her meeting with a source was quickly circulated by government security, making it necessary for her to take additional precautions to avoid drawing attention to those she interviewed.

“I realized the burden was on me not to stand out when I was meeting with people.”

Admati asked Story about her time at the Wall Street Journal, which followed her tenure at the New York Times and involved a role that bridged journalism, technology, and business strategy. Story explained that, while at the New York Times, she had helped develop a digital transformation blueprint that stabilized the company's financial footing. This work led to her recruitment by the Wall Street Journal to assist with its digital transformation.

At the Wall Street Journal, she held a unique position that combined coverage strategy with overseeing product and technology development.

“We actually did some early AI deployment at the Wall Street Journal, and I was able to bring together both the engineering teams and the news teams to try some things out. It's given me a good perspective on AI and the news. I now advise media companies, so I often will help them think about their AI plans.”

Admati asked what an AI plan might look like for a news organization operating in a highly competitive industry. Story responded by explaining that media companies currently face critical choices about whether to partner with companies like OpenAI to provide content for AI training or to develop their own AI technologies.

She cited a recent example where the Wall Street Journal struck a deal to allow OpenAI access to its content in exchange for short-term financial gains.

“What I advise news companies to do is -- you don't have to do a deal with Open AI, but if you say no, we're not doing that and we're not going to be involved in the training, don’t say we’re doing nothing on AI. Because that's just not going to work. It's running through the whole economy.”

She noted that while the New York Times has chosen not to partner with OpenAI, it is heavily investing in its own AI technology, hiring specialists, and developing in-house AI products. She warned that news companies that neither partner with AI firms nor build their own AI capabilities risk falling behind in the digital landscape and limiting their future product offerings.

Story's experiences remind us that uncovering the truth often requires persistence, creativity, and a willingness to ask tough questions. As technology reshapes the flow of information, the role of truth-seekers has never been more crucial and more demanding.