Here is the news from Bloomberg: we made an inexcusable mistake
Bloomberg has had to grovel after the financial news agency let its reporters access clients' information. Gideon Spanier examines the repercussions
Tuesday 14 May 2013
Bloomberg and its notoriously demanding editor-in-chief, Matthew Winkler, are famed for their ultra-competitive approach to financial news. The media giant created by New York's Mayor, Michael Bloomberg, 32 years ago has become a major rival to the established heavyweights Thomson Reuters and Dow Jones, with an enviable reputation for story-getting combined with in-depth data. Big banks and other financial institutions pay $20,000 (£13,000) a year for each terminal, and Bloomberg operates about 310,000 terminals.
But it is fair to say that not everyone in the wider media world likes the company's superior attitude towards journalistic rivals. So there has been more than a hint of Schadenfreude among some in the media industry following the public relations disaster that has befallen Bloomberg in recent days.
The company has been forced to issue a series of apologies after it admitted last week that it let its journalists use internal customer information to inform their coverage when they worked on stories – a scandal that even Bloomberg itself has admitted is "inexcusable".
The most recent and grovelling mea culpa came from Mr Winkler in a personally bylined piece that appeared on the front page of Bloomberg's news service early yesterday morning, as traders returned to work after the weekend.
"Our reporters should not have access to any data considered proprietary. I am sorry that they did," wrote Mr Winkler in the 600-word column, entitled "Holding Ourselves Accountable". "The error is inexcusable."
His apology came as US and European regulators including the Federal Reserve, the European Central Bank and Germany's Bundesbank are considering whether to investigate Bloomberg's behaviour.
Banks including Goldman Sachs and JP Morgan raised concerns after it appeared that reporters had used internal Bloomberg customer information. In at least one case, a journalist was said to have contacted Goldman and suggested that a partner might have left because they hadn't logged into their Bloomberg machine recently.
This is not a scandal that is confined to Wall Street. The shockwaves have been felt in London as JP Morgan has raised questions about Bloomberg's coverage of the bank's huge losses incurred last year, involving a trader dubbed "the London Whale".
Mr Winkler insisted that his reporters had had only limited access to customer data, and claimed that this fact got "lost in much of this weekend's conversation" after the scandal broke. "At no time did reporters have access to trading, portfolio, blotter, monitor or other related systems. Nor did they have access to clients' messages to one another. They couldn't see the stories that clients were reading."
But he admitted that reporters could look at a users' login history and see "high-level types of user functions on an aggregated basis" – such as how many times a user had looked at certain functions on a Bloomberg terminal. "This is akin to being able to see how many times someone used Microsoft Word vs Excel," he said.
Reporters could also see information about helpdesk inquiries when a client contacts Bloomberg and asks for help on how to get a specific piece of information.
Such insight could still be potentially valuable for a journalist chasing a story – despite Mr Winkler's efforts to downplay the scale of the privacy breach. Bloomberg has now barred reporters from such access.
It is too early to say what impact the scandal might have on the reputation of a company which is thought to generate $7bn a year in sales and is highly profitable. Clients have come to depend on Bloomberg's financial data, and there is no sign yet of any customers cancelling accounts.
In the short term, this scandal is hugely embarrassing for Mr Winkler and, of course, for Mr Bloomberg, who owns 80 per cent of the company, even though he is hands-off at present because of his mayoral duties.
This is a company that likes to boast that it does not use anonymous sources and insists on quoting even company spokespeople by name in news articles. "We must be able to confirm it; we must not be speculative; we must not be questionable," Mr Winkler said in a rare 2011 interview. "The essence of Bloomberg is transparency."
The New York Post, owned by Rupert Murdoch's News Corporation, which is also the parent company of Dow Jones and The Wall Street Journal, broke the story last week, and has been crowing about the scandal. "Bloomberg reporters spying on financial clients!" tweeted Mr Murdoch yesterday.
Niri Shan, a reputation management specialist at the London firm of solicitors Taylor Wessing, said: "This disclosure is very damaging. It goes to the heart of the integrity of what they do. Having said that, to fess up in the way they have in a very fulsome way is the best way of dealing with things. Sometimes the way an issue is handled in the aftermath can exacerbate the damage done to reputation. I think they've done absolutely the right thing in the way they have handled it."
The big question is whether this scandal will end with the apology. Regulators, especially in the United States, expect high standards when it comes to financial reporting and disclosure, and are unlikely to take a positive view.
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