Paul L. Caron
Dean



Wednesday, July 13, 2011

The Atlantic: David Cay Johnston's No Good, Very Bad Day

Following up on yesterday's post, Johnston: Rupert Murdoch Feasts at U.S. Tax Trough:  The Atlantic, Reuters Columnist David Cay Johnston's No Good, Very Bad Day:

David Cay Johnston is having a rough day at work. The veteran business reporter (he covered tax policy for The New York Times, winning a Pulitzer for documenting corporate tax loopholes in 2008, until he took a buy-out in 2008) filed his very first column as a Reuters columnist today about Rupert Murdoch's News Corp. making money on income taxes. It turned out to be incorrect. Not just an embarrassing typo or a little bit off, but totally, absolutely wrong. A full correction is coming soon, and it will detail how, exactly, Johnston misread a News Corp. financial statement but for now there's this posting on Reuters' Mediafile blog: "Please be advised that the David Cay Johnston column published on Tuesday stating that Rupert Murdoch’s U.S.-based News Corp made money on income taxes is wrong and has been withdrawn." Which to any journalist reads as one big ouch.

A new column will go over the details of Johnston's error, but the brief version is this: Because of a change News Corp. made in its annual reports during the seven-year period Johnston reported on, his calculations on Rupert Murdoch's tax bills showed a negative number where there should have been a positive one. "This is particularly painful," Johnston told The Atlantic Wire via telephone. "I have been at this for 45 years, I have never, until now, had to do anything like this. I am assiduous about correcting the record."

UpdateDavid Cay Johnston Apologizes

https://taxprof.typepad.com/taxprof_blog/2011/07/david-cay-johnston.html

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Comments

"I am assiduous about correcting the record."

That he is. Johnston is a stand-up guy who never ducks the blame if his numbers turn out to be wrong. It's an admirable trait that few pundits share.

Posted by: AMTbuff | Jul 13, 2011 2:11:20 PM

Unfortunately, his numbers are often wrong. "Never had to do anything like this" is a matter of degree.

Posted by: Scipio | Jul 13, 2011 2:37:44 PM

David Cay Johnston is a fantastic financial reporter. Everyone makes mistakes - and he fully took responsibility for his. I look forward to reading his articles in the future.

Posted by: AM | Jul 13, 2011 3:52:07 PM

Very reliable guy who, unlike many other "pundits" does admit his errors. We are all human.

Posted by: George W | Jul 13, 2011 3:56:31 PM

Haha. Jpe deserves a Pulitzer. I don't buy this apology either. He knew there was potentially an issue when jpe first said something. But what did Johnston do? Say of course I'm right, you are just reading it wrong as is typical of the pompous man he is. Then he waited another 24 hours for the story to spread across the web to retract it.

And his excuse that NewsCorp switched isn't consistent with his response to jpe. He is lying by coming up with what appears to be a reasonable excuse to cover himself. Think about it. If he was unaware of NewsCorp switching, the 4.8 billion figure would be lower because he would have been subtracting it. I doubt he even opened the 2007 file as the 2098 file contains the previous year. He just didn't understand how a cash flow statement works.

When his "story" comes out explaining how he screwed up, think about whether or not it is consistent with his mistake and his initial response to jpe and others.

Johnston should be fired. Reuters should be ashamed to have hired this guy in the first place. His columns sound like a rambling old man who wants to say everything that's on his mind in a single column. A guy who invokes Jesus into many of his columns about tax policy should not be taken seriously.

Posted by: tax geek | Jul 13, 2011 4:03:32 PM

On the June 22nd article about David Cay Johnston starting for Reuters, a commenter wrote: "Thomson-Reuters just lost credibility." Oh, wait! I'm that commenter. Well, actually, that wasn't very hard to predict.

Okay, no more gloating. I hope that DCJ learned a lesson and starts writing articles that present accurate conclusions based upon relevant and accurate data.

Jpe, who pointed out the fatal flaws in Johnston's analyses, provides regular enlightening responses to posts at this site. Johnston should hire him as a proof-editor. I'll serve as a critic for free.

Posted by: Woody | Jul 13, 2011 6:04:35 PM

Thanks, tax geek. I'm a little irked that Johnston credited my argument - verbatim - to an accounting prof, but whatever. (I don't doubt the prof told him the same thing, because the prof and I were looking at the exact same financials, but he'd have saved some time by just reading my response) At least it was corrected, even if this will undoubtedly become urban legend from here to eternity.

It's also a little irritating that he blames the SEC for his inability to read financial statements, but whatever.

Posted by: jpe | Jul 13, 2011 6:35:36 PM

Johnson is a lefty and known for distorting the facts.

Posted by: Michael Kennedy | Jul 13, 2011 6:56:36 PM

http://nymag.com/news/intelligencer/16875/

NYMag: The only person you really single out in the intro is business reporter David Cay Johnston, who started a campaign against you for being on a corporate board.

Dan Okrent, former Public Editor of the NYTimes: Yeah, he was very single-out-able. I didn’t mention this in the book, but when I had my troubles with Johnston, one of the senior editors said to me, “There are three things you must understand about Johnston: He’s a Pulitzer Prize winner, he’s a unique talent, and he’s an asshole.” I’m convinced that at least two of those are correct.

Posted by: Walter Sobchak | Jul 13, 2011 7:56:56 PM

Like most NYT writers he's good at fiction.

Posted by: PTL | Jul 13, 2011 8:34:26 PM

COLUMN-How I misread News Corp's taxes: David Cay Johnston -- "No excuses. But I will explain how I made such a bonehead error." [Followed by all sorts of blathering and excuses.]

That is one of the worst "apologies" that I've ever read. What a bunch of lame excuses, uh, I mean explanations. Johnston can't be gracious in his error, and uses the "apology" to bash Murdoch even further. And, you have to love his subject of "Complex Statements," which means that plus and minus signs confuse him. Johnston rambles on and on and on. Not only was he wrong, he can't even write well.

Finally, what is it with the slathering compliments from commenters about how Johnston is the greatest thing since sliced bread? Did he solicit comments from friends? I wanted to throw up at this contrived damage control.

Posted by: Woody | Jul 13, 2011 10:23:59 PM

Sounds like yet another case where a liberal "journalist" so badly wants a story to be true he can't be bothered to accurately verify it... even to himself.

Posted by: Williaminsd | Jul 14, 2011 12:14:18 AM

Another reason that Johnston should be fired is that a negative tax number is rare especially four years in a row. And that should warrant further investigation as to why the company has a supposed negative cash flow tax and a positive accrual tax elsewhere in their statement. Running with that number quickly before finding out why is akin to doing your own taxes, finding a weird final number, but then just going with it)

But Johnston had a story to tell. He wasn't about to get to the bottom of it (if for example there was a reasonable explanation for it such as overpayment in a previous year).

Posted by: tax geek | Jul 14, 2011 6:55:10 AM

Glad he admitted the error, but it is pretty bad it happened in the first place. If you are going to put out a story that a gigantic corporation cheated on their taxes, it seems like you would be extra careful with your facts. Amd did he ask newscorp about it before hand. I'm sure if he had, and described the coming story, newscorp would have hooked him up with one of their tax accountants to explain the truth.
The really amusing part for me is that collossal journalistic errors like these seem to constantly happen in stories attacking conservatives. These journalists never seem to get things wrong in a way that makes liberals look bad, it is always in ways that make conservatives look bad. If the errors were evenly distributed between pro conservative and pro liberal, then accident and chance could explain things. With all the errors skewed one way, it looke like reckless disregard for the truth.

Posted by: richard40 | Jul 14, 2011 8:13:49 AM

Johnston should get the "Dan Rather Fake But Accurate Award of Journalism."

Posted by: Woody | Jul 14, 2011 8:37:07 AM

Business reporter??? Pulitizer Prize winner??? Surely you jest. Any beginning accountant can eye-ball the financial statements. If your after tax income is LESS than the before tax income, YOU must have paid some tax. The two choices here are 1) incompetent or 2) liar with an agenda. I do NOT accept your apology, Mr. Johnston.

Posted by: Spook | Jul 14, 2011 9:12:54 AM

A big mistake, no doubt. I hope people keep in mind that ANY mistake will be used to take him down in no uncertain terms. This is what makes the blunder so astonishing. You have to be sort of super-human to be that critical in your orientation (i.e. to not just re-publish corporate narratives of what the numbers mean and to scrutinize all numbers and give your own interpretation and to give a second thought to poor people) without making an error in your career. He's sort of like the Chomsky of tax law. Unfortunately, he's apparently not a infallible information-assimilating genius. We should give him a break and support his continued work.

Posted by: PCTax | Jul 14, 2011 3:49:59 PM

PCTax: The guy is a blowhard who never does serious analysis of an issue. Yes, I've read his book, and I read his crap on Tax.com.

David Cay Johnston is a sensationalist. Speaking of Murdoch, Johnston would be well-suited to be a tabloid writer. That's what his columns are. Sensationalist writing on an issue in which the public knows little about but is prone to believe certain things written by a man whose understanding of tax policy is actually quite limited.

There are liberals who do serious work on tax policy issues affecting the poor. That work is done by Urban Institute and CBPP for example.

Posted by: AZ | Jul 14, 2011 5:54:06 PM

Mr. Johnston never met a tax he didn't like.

When your mindset is that the "rich" don't pay enough taxes, you make glaring mistakes like he just made.

Posted by: Elmer Stoup | Jul 15, 2011 9:14:57 AM

Geez, give the guy a break.

He made a mistake, got caught up in the frenzy around Murdoch and fell into one of the real problems of the blogosphere - pressing the send button without review by anyone else.

But let's not ignore the fact that corporations make use of offshore tax free zones and the acquisition of NOL's as part of generating "tax efficiency." Just the other day Oracle's Safra Catz pleaded for a tax holiday for a trillion dollars of US corporate profits sitting offshore.

And even Warren Buffett thinks wealthy Americans don't pay enough taxes. It's interesting to note that when the US top marginal tax rate (on largely unproductive coupon clipping rentiers) was closer to 90% productivity was much higher than it is now.

Posted by: Steve Diamond | Jul 16, 2011 6:52:13 AM