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“There’s nothing more important to us at Bloomberg than communicating openly and honestly about our company.” ~ Dan Doctoroff, President and CEO of Bloomberg LP, 13 May 2013.
Whether it started a month ago or whether it has “taken place in the newsroom for decades,” it is now a matter of public record. Not everyone now aware of the news is as glib about Bloomberg having allowed its reporters access to client information as is Matthew Winkler, Bloomberg’s Editor-in-Chief, who said on Sunday, “The recent complaints relate to practices that are almost as old as Bloomberg News. Some reporters have used the so-called terminal to obtain, as The Washington Post reported, ‘mundane’ facts such as logon information.” To be fair, Winkler also called reporters’ access to proprietary client data “inexcusable.” The Bank of England calls it “reprehensible.”
Some banks filed complaints about potential snooping as far back as 2011, but those complaints fell on deaf ears. The peel began coming off the banana in April when Goldman Sachs complained that Bloomberg reporters had somehow gained access to proprietary company data. Bloomberg has almost incomparable access to sensitive data from central banks and other major financial institutions all over the world.
The Securities and Exchange Commission (SEC) has outright accused Bloomberg of spying, and has called for an independent review of the alleged practices that are now known to have included public release on the internet of literally hundreds of thousands of private memos from clients using Bloomberg terminals. Until just a few days ago, the information was visible to anyone using Google search. At this point it is probably impossible to measure the extent of the scandal that this will become. As one unidentified Wall Street executive told the Guardian that, “There’s a lot of data being generated by a lot of important people here. Who knows really what was being looked at?” Aye, there’s the rub! The New York Times agreed, quoting former Bloomberg reporters as indicating that “the sheer amount of data available on the terminals created a dynamic . . . in which some reporters favored breaking news over strict subscriber confidentiality.” Wow. There’s a revelation. Which do you expect that reporters would favour? (Which is why I included “Stupid” in the headline.)
Unfortunately, it was more than unfettered access to newsworthy, but confidential information. Reporters also had access to operational data, being able to see who, at various clients, was actually logged on and what they were doing. Getting to this point is a natural consequence of internal pressures put on separately functioning components of a highly integrated organization. Having information already in hand that reporters could use, the logic is to make it accessible to them to allow them a competitive advantage. It also reflects the lack of an effective compliance officer – a thankless job within a company because he would not, if he were allowed to do his job, permit activities that pushed the boundaries of integrity, not to mention regulatory issues.
The manure may just now be hitting the ventilator, but the mess it is creating for Bloomberg is going to take a long time to clean up. In addition to investigations and a plethora of potential litigation, Bloomberg clients are expected to start negotiating for reparations than in and of themselves could cripple the company’s profitability.
On a final note, in a strange twist of fate, Bloomberg is reminding the press that its employees are bound by strict non-disclosure agreements and that all inquiries should be directed to senior management. Uh-huh. Sure.
