Rule 9. Shun Conflicts of Interest.

Conflicts of interest, such as personal, political, or financial relationships with subjects of news coverage, can cause legal trouble for citizen journalists. 

Legal risk aside, a real or apparent conflict of interest raises ethical concerns and can erode a journalist and news organization’s credibility.

Here are some examples of conflicts of interest for citizen journalists:

• Slamming a politician without disclosing one’s business partner is a candidate for her seat.
• Criticizing a planned waste management facility site without disclosing an investment stake in adjacent property.
• Praising a dentist without disclosing he’s a golfing buddy.
• Writing a glowing profile of a high school football coach when one’s son could receive the most valuable player award.

When it comes to journalistic values, these hypothetical examples all depict ethical breaches, raising doubts about fairness, independence, objectivity and accuracy. 

First Amendment principles bar government regulation of the press.  Journalists, unlike doctors, lawyers, and accountants, generally can’t be punished by courts or regulatory agencies for violating their field’s ethical standards.

But tweak the hypotheticals to combine a hidden agenda with defamatory statements and an undisclosed conflict of interest could contribute to losses in legal lawsuits.  For example, if the story on the politician contained damaging falsehoods (See Rule 1 on defamation.), the conflict of interest could help the politician’s lawyer win her case and boost any monetary award or settlement.

Legally speaking, some conflicts of interest are inherently risky.  Conflicts relating to securities trading or ownership can easily put journalists, bloggers, citizen media contributors, social network members and other Internet users on the wrong side of the law.  Conflicts involving competitors and business interests also can invite legal trouble.

Investing Concerns

Reporting and writing about public companies in which you invest or have some financial stake is problematic.  If you have a brokerage or online trading account, or work for a public company and have company stock or options, you should consider the risks of combining citizen journalism and investing. 

The risk extends to supervisors and news oganizations.  They can face steep penalities when someone manipulates or abuses early access to business news for financial gain. 

Because of the high level of risk, news organizations have developed guidelines around this subject.

The New York Times Ethical Journalism handbook devotes five of its 57 pages, including 19 paragraphs, to conflicts between journalism and investing. 

Gannett Company Inc.‘s Ethics Policy warns of the dangers of investing on the basis of information in advance of publication:

“The consequences of inside[r] trading violations can be staggering:

“For individuals who trade on inside information (or tip information to others):

“A civil penalty of up to three times the profit gained or loss avoided;
“A criminal fine (no matter how small the profit) of up to $1 million; and
“A jail term of up to ten years.

“For a company (as well as possibly any supervisory person) where appropriate steps to prevent illegal trading have not been taken:

“A civil penalty of the greater of $1 million or three times the profit gained or loss avoided as a result of the employee’s violation; and
A criminal penalty of up to $2.5 million.

“Moreover, if anyone violates the Company’s inside trading policy, Company-imposed sanctions, including dismissal, could result. Any of the above consequences, even an SEC investigation that does not result in prosecution, can tarnish a reputation and irreparably damage a career.”

It’s no wonder that news organizations have firm rules regarding conflicts of interest in business and investing. 

The newsroom policies typically bar journalists from trading or even owning the securities of companies and in industries they cover. They also prohibit disclosure of business news to anyone outside the newsroom in advance of publication.

So if business journalists have rules and training to help them avoid violating securities and investment-related laws, what about bloggers, citizen journalists, social network and chat room members, and others among the estimated 147 million American adult Internet users, millions of whom have online trading investment accounts?

Here are some of the questionable online investment-related activities on the radar screen of the United States Department of Justice:

 

 

• Getting paid to tout a publicly traded company to help drive up its stock price;
• Owning shares and pumping up the value of those shares with positive postings and then dumping or selling the shares before the market finds out the good news is false;
• Posting false negative news about a publicly traded company in order to drive down the value of its securities;
• While in possession of important, non-public information about a company that would provide some informational investing advantage, trading in that company’s securities or tipping off another.  The non-public information could be that you’re about to post a glowing review of the company’s new product or new management team and have decided to buy shares in advance of distributing that information so you can benefit from any upswing in stock price.

If you produce a Web site and solicit and edit stories relating to public companies, you’d be well-advised to consider adopting a policy prohibiting your staff and contributors from investing in the companies and industries they cover.  The policy should also ban sharing information about public companies in advance of publication. 

Covering Competitors and Business Interests

Covering competitors can heighten legal risk.  State and federal unfair competition and trademark laws can come into play to provide your competitor with claims against you should you publish false negative information.  Libel is also an increased risk when a person or business falsely attacked happens to be a competitor.  Review Rule 2 for details about the risk of trashing rivals.

Writing inaccurately positive stories also can be troublesome — especially when they concern promoting your own business interests.  There are laws against unfair competition and false advertising that can land you in court.

Bottom line: Conflicts of interest between news reporting and business and investing aren’t just unethical.  Such conflicts can spawn legal woes.

→ If you have a keen interest in Internet-related securities fraud, click here to read a federal prosecutor’s own detailed account of two investigations.

(c) Geanne Rosenberg

 

	Did you find this page useful? Yes No Tell us why or why not.