The New Zealand Press Council has not upheld a complaint by Bryan Pippen of Auckland against The New Zealand Herald about the inadequacy of a news report about failures of business practice and apparent malfeasance at the giant American mortgage finance company, Fannie Mae.

On 25 May 2006 the Business Section of The New Zealand Herald carried a Reuters report that Fannie Mae would have to pay a fine of $US400 million following an enquiry into a “$US11 billion accounting scandal” at the company. (The name Fannie Mae is an acronym derived from Federal National Mortgage Agency.) The piece noted that the enquiry, by a Federal regulatory agency, had uncovered what was described as a “litany of accounting problems and failures” on the part of Fannie Mae executives along with misuse of political influence in Washington to interfere with federal examination of the company’s accounting problems. Employees were said to have massaged earnings in order to trigger bonuses for executives. The severely critical comment of the chairman of the Securities and Exchange Commission was noted.

The Complaint
Mr Pippen, a Chartered Accountant, wanted to know more. He wrote to the Editor on 26 May expressing concern that the report had not indicated whether an “independent auditor” had been involved in the enquiry. In the light of increased expectations about international accountability requirements arising from the Enron affair the article was unbalanced and a disservice to readers.

This letter, which does not seem to have been recognised as a complaint to the Editor, went unanswered. Mr Pippen accordingly complained to the Press Council on 15 June expressing his concern that although a very large sum of money seemed to have been involved the newspaper had not provided information about “the independent audit aspect of the case” or “explanatory comment” about the nature of the accounting problems uncovered by the enquiry. Although a regular reader of The New Zealand Herald and a Wellington newspaper, he had never heard of Fannie Mae.

The Newspaper’s Response
The Deputy Editor responded on 22 June. He said that the Press Council’s principles seemed not to have been infringed. Mr Pippen’s professional interest in the detail of the accountancy and audit issues involved in this matter was acknowledged…. “but, with respect, general readers would find this too much”. The piece had been clear about the reasons for imposing a fine. Far from having ignored Fannie Mae in previous reporting he found that the newspaper had in fact published 25 pieces referring to the company in the past five years.

Mr Pippen took up the matter again on 29 June to make the point that thousands of readers involved in the financial sector would be interested in knowing the detail. By failing to provide “explanatory comment in addition to the text provided by Reuters” the newspaper had inadequately served its readers. He claimed too that the headline to the 25 May report did not reflect the content of the article.

The Press Council has previously observed in relation to reports which had failed to satisfy readers with specialised interests or who came at issues from a particular viewpoint (see Annual Report 2004 – The Press Council and the ‘Big’ Stories) that the function of the press is to serve their constituencies in the broadest terms. In this case the Herald provided a story of interest in the financial community and elsewhere to the effect that yet another major corporate enterprise had been accused of failing to observe accepted standards. These days readers with particular expertise or points of view on a subject such as this can easily delve deeper. ( A quick Google search for ‘Fannie Mae’ turned up several recent and detailed reports on apparent accounting lapses at the agency.) A daily newspaper cannot, however, be expected to provide, up front, lengthy commentary on specialised issues in the detail that would satisfy the experts. Limitations on resources of staff and space alone would make that impossible; the wider consideration is the duty to the interests of the general reader.

The Press Council also finds that there was no conflict between the headlines over the Herald report and the substance of the article, as printed.

Mr Pippen’s complaint is not upheld.

Press Council members considering this complaint were Barry Paterson (Chairman), Aroha Beck, Ruth Buddicom, Penny Harding, Keith Lees, Clive Lind, Denis McLean, Alan Samson, Lynn Scott and Terry Snow.

John Gardner took no part in the consideration of this complaint.


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