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Sitting on the news

Kai Ryssdal May 8, 2007

KAI RYSSDAL: Dow Jones stock is still somehow holding above $55 a share, despite no indication the family that controls the Wall Street Journal’s going to bite at Rupert Murdoch’s $60 a share offer. Most of the us found out about Murdoch’s $5 billion bid for Dow Jones last Tuesday. May the 1st.

Andrew Ross Sorkin reported in the New York Times this morning that the managing editor of the Journal, Paul Steiger, found out a bit sooner.

ANDREW ROSS SORKIN: Well, he learned about it a good deal earlier than that. The board of Dow Jones learned it earlier than that. And Richard Zannino

, who is the chairman of Dow Jones, learned it earlier than that. The interesting issue, however, is when Paul Steiger — and not just him, but several of his editors — learned of the bid and their decision to effectively sit on that news.

RYSSDAL: All right, well let’s play with that for a little while. What we have here is the managing editor of arguably the world’s leading financial newspaper sitting on huge market-moving news.

SORKIN: Exactly. And I think the other facet of this is not only is it market-moving news, but it was moving the market even before the announcement was made. And there was options trading and stock trading prior to the May 1 announcement. So there’s now an insider trading investigation going on. Inquiries at Dow Jones, inquiries at News Corp by the SEC, and in fact just this afternoon, we learned that a couple in Hong Kong has been arrested and charged with insider trading related to this. So there was material, non-public information that was moving the market that the Journal was aware of that they did not publish.

RYSSDAL: Here’s the interesting thing about that, to my mind anyway — and I’m sure it occurred to you as well. If you spend enough time in newsrooms, you know that journalists like to gossip. They like to spread the news around.

SORKIN: Absolutely. And so I guess at some level it’s surprising that it didn’t. I think there’s two issues here, though, that are very important. One is that Paul Steiger and the other editors at the Wall Street Journal we do not believe learned of the information from corporate. In fact, Paul Steiger learned of the information directly from Rupert Murdoch — in an e-mail that was an attempt, in effect, to ingratiate himself and his bid with Mr. Steiger. Now the e-mail message was marked “personal and confidential,” and perhaps that is what weighed on Mr. Steiger in terms of not publishing, trying to feel . . . or feeling bound by some kind of confidential-source relationship.

RYSSDAL: What if some enterprising reporter who really wanted to make his name at the Journal had gotten this and had fought it up the chain of command? Then, Steiger’s in a very different situation.

SORKIN: And I do not think, at least through the reporting that we’ve done so far, that a story, if you will, was killed. Or that a reporter had found this out. But let’s also be clear that it was not just a single person in Mr. Steiger . . . or the management that knew about this, but there were several other editors. And let’s also remember it’s not clear that all those other editors learned of it from Mr. Steiger. They may have actually learned of it from other places, which may have allowed them free reign to publish.

RYSSDAL: Mmmm. And as long as we’re doing the caveats, there’s no indication that anybody did anything wrong. I mean, the SEC and the New York Attorney General are looking into this, but there’s no intonation — at least, so far as I know — that these guys actually traded on that information.

SORKIN: Let’s state that up front, and let’s stipulate that there is no allegation that these folks are responsible. Though I think the one thing that makes this somewhat interesting is that it adds a new constituency to the inquiry. Typically — and these inquiries, by the way, have become routine ahead of these major mergers where there’s been unusual trading — but typically, the constituencies that they’re looking at are managements, the bankers, the lawyers, the consultants that are around this. This adds another element to the picture and the puzzle.

RYSSDAL: All right. Andrew Ross Sorkin at the New York Times. He covers mergers and acquisitions there, and this one — Dow Jones and the News Corporation — would be a big one. Mr. Sorkin, thanks a lot for your time.

SORKIN: Thank you.

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