David Cay Johnston's Utterly Humiliating, Totally Incorrect Anti-Murdoch Adventure

I've been trying to resist taking satisfaction in David Cay Johnston's utter humiliation on his first assignment at Reuters. Y'know, there but for the grace of God, etc. I do wish him well, though I question whether the feeling is mutual. More important, I hope he recognizes the need to go into journalistic rehab. My guess is that he doesn't.

The former New York Times journalist/reporter (whatever, David) and yours truly had an extended online dustup four years ago when I demonstrated Johnston's in my view sloppy, foundation-limited, and biased reporting at the Old Gray Lady (graphic of first few paragraphs as originally presented; current link) in an item about what had happened to Americans' incomes between 2000 and 2005 (errors summarized here in "Top Six Errors Committed by David Cay Johnston and/or the New York Times in Their Income Growth Report"; I noted a seventh later).

Let's go through the development and destruction of Johnston's maiden effort at Reuters.

Johnston believed that he, unique among all human beings on earth, had found that Rupert Murdoch's News Corp., while earning billions, was not only not paying income taxes, but somehow "making money off the tax system." As excerpted from the TaxProf blog (Reuters has pulled Johnston's original story; the headline is apparently the one Reuters used), Johnston's anti-Murdoch, anti-Fox animus could not be more obvious:

It Pays to be Murdoch. Just Ask US Gov't

Rupert Murdoch may not garner as much attention for his financial savvy as he does for his journalistic escapades, which last week led to the shuttering of Britain's oldest tabloid. But that doesn't make his money management any less impressive.

Indeed, when it comes to taxes, instead of rendering unto Caesar, Murdoch has Caesar rendering unto him.

JohnstonReutersGraphNewscorp0711

Fox News, the editorial pages of his Wall Street Journal and other Murdoch outlets often rail against taxes. Their attacks on government benefits for the elderly, the sick, the jobless and children focus attention on the uses of tax dollars and away from his aggressive efforts to enjoy the benefits of civilization without paying for them.

Many other companies may follow similar practices but most of corporate America doesn't own one of the country's most powerful newspaper editorial pages.

How does Murdoch make money off the tax system? There are three basic elements, disclosure statements show.

One is the aggressive use of intra-company transactions that globally allocate costs to locations that impose taxes -- and profits to areas where profits can be earned tax-free.

... Buying companies with tax losses is a second way Murdoch can pocket, rather than pay, taxes.

Third, Murdoch's tax lawyers are expert at maximizing the benefits of deferrals. Incurring a tax today, but paying it by-and-by can be profitable.

Imagine how well Jesus might have done if he had put a corporate jet at Caesar's disposal. Or if he had a tabloid like the News of the World to put Caesar in fear of him.

Keep in mind that this is the same David Cay Johnston who, in 2007, in comments at BizzyBlog (here and here) and in e-mail exchanges, in essence insisted that he plays it straight and lets the data lead him to his conclusions.

This is the same David Cay Johnston who, after he took a buyout from the Times in 2008, continued to in essence  insist that he plays it straight and lets the data lead him to his conclusions even after he agreed in August of that year to appear with an "all star and diverse line up of progressives, labor, and working class speakers" at the "BuzzFlash Sep. 27 Philly Conference." Also addressing the group: Richard Trumka, then second in command at the AFL-CIO, now its head. In January of this year, as reported at the Blaze, Trumka asserted that, in the Blaze's words, his "main goal is using unions to fundamentally change American into his progressive vision -- not (to) negotiate member salaries."

Now, the same David Cay Johnston who likes to think he's an "investigative reporter" (or "investigative journalist"; whatever, David), when confronted with what he should have been seen as likely nonsensical information, has admitted that he didn't actually contact someone at News Corp. to make sure his revelations, unique among all human beings on earth, were correct (in his mea culpa, he writes that he tried but got no response) before releasing his report.

Finally, this is the same David Cay Johnston who has been forced to admit (and to his partial credit, has done so forthrightly) that he was completely and utterly wrong. News Corp. didn't "make money on taxes"; rather it paid in billions in U.S taxes from 2007-2010. First there was an Atlantic item by Adam Martin, followed by a lengthy apology and explanation by Johnston which appeared later at Reuters after the wire service's official withdrawal of the story:

(From The Atlantic's write-up)

... 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."

... "I probably read that disclosure and just didn’t realize what it was reporting," Johnston said. "This is very finely detailed stuff. I missed that they switched the number. It isn’t common practice, and I shouldn’t have missed it. At the end of the day, the fact is, I shouldn’t have missed it."

(from Johnston's retraction and apology column)

Rupert Murdoch's News Corp did not get a $4.8 billion tax refund for the past four years, as I reported. Instead, it paid that much in cash for corporate income taxes for the years 2007 through 2010 while earning pre-tax profits of $10.4 billion.

For the first time in my 45-year-old career I am writing a skinback. That is what journalists call a retraction of the premise of a piece, as in peeling back your skin and feeling the pain. I will do all I can to make sure everyone who has read or heard secondary reports based on my column also learns the facts and would appreciate the help of readers in that cause.

No excuses.

... The other facts I reported remain:

* Among the 100 largest companies in the United States, News Corp has the third largest number of subsidiaries in tax havens, a Government Accountability Office study found in 2009.

* On an accounting basis, which measures taxes incurred but often not actually paid for years, News Corp had a tax rate of under 20 percent, little more than half the 35 percent statutory rate, its disclosures show.

* Murdoch has bought companies with tax losses and fought to be able to use them, which reduces his company's costs.

* News Corp lawyers and accountants are experts at making use of tax deferrals, though the company's net tax assets have shrunken from $5.7 billion in 2007 to $3.3 billion last year as the benefits were either used or expired.

In other words, Johnston is admitting that News Corp's tax peeps are aggressively doing their jobs within the laws as they exist, from all appearances without violating them.

In other words, there was no story here -- only a "reporter" (or "journalist"; whatever, David) who thought he could make a big initial splash by piling on a company tainted by a hacking scandal at its (now former) News of the World publication. Face it, David: You wanted to believe, and let that desire get in the way of your supposed pursuit of the truth. I maintain that it's far from the first time you've let this happen -- just the most obvious.

The big story here, besides the obvious journalistic failure (my opinion, of course), is that David Cay Johnston can no longer pretend that he plays it straight and lets the data lead him to his conclusions. Those days are over, pal.

Oh, I almost forgot -- According to the Atlantic, part of Johnston's apology tour apparently includes an appearance on NPR and the issuance of a statement on The Ed Show. Really venturing into the lion's den, aren't you, David?

I seem to recall that a reporter named Terri Cullen wrote an item for Reuters in February 2010 about the impact of tax laws which the White House jawboned the wire service into retracting. A few days later, Cullen "resigned," which for those who don't know it is corporate-speak for "told to leave to avoid getting officially fired."

I'm not a big fan of people having to leave their jobs because of a mistake, but if Cullen "resigned," shouldn't David Cay Johnston? Just askin'.

Cross-posted at BizzyBlog.com.

Tom Blumer
Tom Blumer
Tom Blumer is a contributing editor for NewsBusters.