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Enron Defense Rests ... On The Press?

Amid a slew of coverage of the trial of former Enron executives Kenneth Lay and Jeff Skilling, there was an interesting tidbit within The New York Times' article about the trial's opening day that may end up being of particular interest to media watchers:
Mr. Ramsey [Lay's lead counsel] blamed articles in The Wall Street Journal about off-the-books partnerships controlled by Mr. Fastow, as well as short-sellers who Mr. Ramsey said were sources for the stories, for starting a panic on Oct. 22, 2001, that led to a sharp drop in Enron's stock price.

Mr. Ramsey said that Rebecca Smith, a reporter for The Journal, had hurt Enron by failing to listen to a conference call on Oct. 16, 2001, where Mr. Lay revealed a $1.2 billion equity reduction. The paper reported two days later that Enron had failed to disclose the reduction in its earnings press release. Paul Steiger, The Journal's managing editor, said the paper was ''proud'' of the work Ms. Smith and others at the paper did in ''uncovering questionable accounting at Enron.''

The Wall Street Journal's (subscription required) coverage yesterday included a short article on the dealing exclusively with Ramsey's criticism of the Journal's coverage:
While the government alleges Enron's downfall was linked to misdeeds by its executives, Mr. Lay's attorney, Michael Ramsey, argued that Enron was a successful company caught in a market "panic" -- sparked by Journal articles that focused on Enron's dealings with outside partnerships run by its chief financial officer at the time, Andrew Fastow.

Mr. Ramsey was particularly critical of Journal reporter Rebecca Smith's coverage of a conference call Enron held when it announced its third-quarter 2001 earnings. Ms. Smith is on the government's witness list. On the call, Mr. Lay mentioned a $1.2 billion reduction in shareholder equity; Mr. Ramsey said Ms. Smith missed the statement that day but did a damaging article a day later. On the day of the call, Mr. Ramsey said, the paper "was either lazy, ignorant, inattentive or not doing" its job.

Smith and Journal reporter John Emshwiller – who is covering the trial -- wrote a 2003 book about their coverage of the Enron scandal, "24 Days: How Two Wall Street Journal Reporters Uncovered the Lies that Destroyed Faith in Corporate America." So far, there hasn't been too much coverage of this element of the trial, but the Journal article states that Smith is "on the government's witness list." Whether Ramsey's argument holds water and the issue itself becomes one of interest remains to be seen as the trial progresses. But it might raise some interesting questions about how business journalists approach stories. Do they have to consider what effect their reporting will have on the market? Are there times when stories have to be delayed or scrapped because of those potential effects? How on guard do journalists have to be against sources who could be trying to influence the market through the media?