Friday, July 25, 2008

ProPublica founders have got a problem

ProPublica, which was supposed to be an independent, nonprofit newsroom dedicated to investigative journalism in the public interest, has got a problem.

Its founders, a couple from the Bay Area, Herbert and Marion Sandler, appear to be part of the national mortgage mess -- and ProPublica isn't covering any of it.

That hasn't stopped the New York Sun, whose Adam Rowe writes:
    Here's a story you won't find on the Web site of ProPublica, the crusading new online news organization. Just before house prices began a nationwide decline in 2006, Herbert and Marion Sandler sold a mortgage lender, Golden West, to Wachovia for $25 billion. Since the acquisition, Wachovia's market capitalization has plummeted by more than $60 billion, and it said this week it was setting aside more than $5.5 billion in case of losses from Golden West's loan portfolio.

    While it appears Mr. and Mrs. Sandler couldn't have unloaded their company at a better time, Golden West's souring reputation may raise questions about the couple's most ambitious venture to date — the nonprofit, investigative news outlet ProPublica.

    The mission of ProPublica, where Mr. Sandler serves as chairman of the governing board, is to produce journalism that exposes "exploitation of the weak by the strong," according to the news organization's Web site. This is precisely the way some borrowers' advocates are characterizing the lending practices of Golden West, the company that spawned the fortune that made ProPublica possible.
Anna Werner of KPIX CBS5 also investigated pick-a-payment loans from Golden West's World Savings that were sold to elderly couples who couldn't afford them. (Click on image above.)

The Sun's story continues:
    ProPublica's editor-in-chief, Paul Steiger, former managing editor of the Wall Street Journal, denied that the Sandlers' interests would influence ProPublica's editorial content. "ProPublica, which is a news organization that doesn't publish editorials, doesn't have a 'position' on adjustable-rate mortgages," Mr. Steiger wrote in an e-mail. "We certainly wouldn't hesitate to cover the effect of ARMs, or Golden West, or Wachovia," he said. So far, however, ProPublica, which lists "subprime mortgages and ratings agencies" as the top item in the "scandal watch" on the front page of its Web site, has focused its attention on Countrywide Financial.

    "I think the problem is less in the journalism, in the work, than in the perception," the executive director of the Center for Investigative Journalism, Robert Rosenthal, said of ProPublica. The controversy over Golden West's role in the mortgage mess is "a problem, an issue, that you'd rather not have if you were Paul Steiger."

    The Sandlers have been the subject of adulatory profiles in the New York Times magazine and in the annual report of Human Rights Watch, to whom the Sandlers pledged $15 million, which the organization described at the time as the largest grant in its history.

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