Canadian Pravda: How the Chronicle Herald fails its readers. A case study

Updated, November 7. See below.

What’s the role of free press in society? It’s not a theoretical question: Halifax is the birthplace of press freedom in this country, and we pay homage to Joseph Howe for calling out corruption when he saw it. Meanwhile, reporters and editors elsewhere are being murdered for a job reporters in Canada take for granted.

Today, journalists in Halifax don’t face being thrown in jail for libel. Death squads aren’t going to hunt us down. Our families don’t face violent retribution for our work. The biggest threats we face are some awkward interactions on the cocktail weenie circuit and not being on the short list for jobs at Communications Nova Scotia. All that’s required for journalists in Halifax to properly do their job is to be independent and curious, to question everything and, when necessary, to reject the party line.

Unfortunately, even that is beyond the abilities of the Chronicle Herald business section, which has played the role of a Canadian Pravda, unquestioningly repeating official propaganda, kowtowing to the powers that be, and airbrushing inconvenient truths out of the official record.

A case study: Unique Solutions

Last week, I published an article about Unique Solutions, a Dartmouth firm that the province’s economic development agency, Nova Scotia Business, Inc., has a $5.6 million equity stake in. In the article, I show that that investment has mostly evaporated. Taxpayers have lost about $4.5 million, a fact that has previously gone unacknowledged. That article was behind the Examiner’s pay wall, but I’ve made it available to everyone for the purposes of this post. You can read it here.

All journalists and media outlets have limited time, staff, and resources. We can’t catch every story. It’s the nature of things that we journalists are going to miss all sorts of stories and, being human, we’ll make mistakes.

But the Chronicle Herald didn’t just miss the Unique Solutions story, and it didn’t just make a couple of mistakes. Rather, the paper falsely framed the story, failed to publish facts it should’ve been aware of, published facts that were incorrect, and otherwise misled and deceived their readers. To recap:

➡ From 2005 to 2009, Nova Scotia Business, Inc. invested $5.6 million in Unique Solutions, all of which was converted to an equity stake in 2009.

➡ In December, 2012, Chronicle Herald columnist Peter Moreira reported favourably on Unique Solutions’ then-ongoing roll-out “body scan” kiosks in shopping malls across the US.

Earlier this year, I pointed out that Moreira is in the employ of provincial economic development agencies that fund the very companies he writes about in his column, a clear conflict of interest.

As a result of my article, the Chronicle Herald changed its policies, and now appends a statement to the columns calling attention to the conflict. (The policy change also revealed a conflict with columnist Gail Lethbridge, who had written favourably about opening up off-shore gas and oil drilling without disclosing she owns a company that services off-shore operations.)

With Moreira’s December 2012 column promoting Unique Solutions, however, he got it right. At the end of the column, he wrote: “Full disclosure: The principals of Entrevestor have a small investment in Unique Solutions.” This is good, but it is precisely that investment that becomes problematic in the Chronicle Herald’s subsequent coverage of Unique Solutions.

➡ In early October of this year, Chronicle Herald reporter Patricia Brooks provided an overview of the province’s equity investment in corporations, including $5.6 million invested in Unique Solutions, but failed to attempt to value those investments now, or to even question the companies’ performance.

Had Brooks taken even a cursory look at Unique Solutions, she would have discovered that the very expansion plans Moreira had written about in 2012 had collapsed. While body scan kiosks were placed in over 70 malls in the United States, they were all abruptly pulled from those malls last year, a fact I discovered simply by calling the malls and asking.

➡ In August, 2013, after the kiosks were removed from malls, five of them were repurposed for use in Bloomingdales stores. The drop from 70 to five kiosks was a substantial set-back for the company, but Chronicle Herald reporter Bill Powers failed to mention that kiosks had been removed from malls and uncritically regurgitated the company’s positive spin on the issue.

➡ A few months later, even those five Unique Solution kiosks were removed from Bloomingdales, another downturn for the company unnoticed (or purposefully ignored) by the Chronicle Herald.

➡ Having so uncritically plugged the company, the Chronicle Herald gave short-shift to last month’s Nova Scotia Securities Commission ruling against Unique CEDC, a community economic development investment fund (CEDIF) established for the sole purpose of raising money for Unique Solutions. The Chronicle Herald did not send a reporter to the hearing, and its coverage of the ruling consisted entirely of a re-written press release.

The paper made no apparent attempt to contact either the CEDIF or Unique Solutions for comment, and evidently no reporter was assigned to look into issues related to the CEDIF.

➡ Had the Chronicle Herald assigned a reporter to the CEDIF issue—which after all concerned a company the paper had given significant promotional plugs to, and which Brooks had failed to further investigate for her piece on equity investments—the reporter may have discovered, as did I, that last year the CEDIF devalued its investment in Unique Solutions by over 80 percent—a $2 million investment was reassessed at just $349,332. Assuming Nova Scotia Business, Inc. had a similar write-down, the initial $5.6 million in public investment is now worth about $1 million.

➡ Since publishing the article last week, I’ve learned that all investors—both investors in the CEDIF and directly into Unique Solutions—have been kept abreast of the devaluation of their investment. That means that Moreira—who plugged the company as a worthy investment in 2012, and who has a personal investment in the company— has been fully aware of the tanking performance of Unique Solutions, but has not kept his readers up to date on the story.

As Moreira is an investor with direct knowledge of the company’s financial position, his failure to convey that knowledge to Chronicle Herald readers is at best a disservice to those readers, and at worst dishonesty in order to protect his own investment. The failure to tell readers of the company’s falling financial position also underscores Moreira’s continued conflict of interest as a paid promoter for start-ups while writing about the same companies for the Chronicle Herald.

➡ In the wake of 2013’s devaluation, SEC documents show that Unique Solutions has raised another $4.5 million through investors. I’m told that local investors who had already lost money on their investment were urged to invest more so that their initial investment wouldn’t be completely worthless. Shouldn’t the Chronicle Herald have been aware of these events and have reported on them?

➡ Apparently in a bid to respond to my story on Friday, Unique Solutions has found a sympathetic ear at the Chronicle Herald, and today the paper has published a puff piece promoting the company.

The article contains this bit: “Unique Solutions has attracted attention for the scanning booths it has installed in large American shopping malls. The booths scan consumers’ bodies and then recommend retailers with the best-fitting clothes.”

Of course, those scanning booths are no longer in malls, but the article fails to mention that important point.

How is this responsible journalism? How is the Chronicle Herald not out-right lying to its readers? With the company now trying to raise more capital, this reporting looks to me like borderline investment fraud.

I’ve asked Chronicle Herald business editor JoAnn Alberstat and associate publisher Ian Thompson to comment on the issues I’ve raised above and will publish their response when and if I get them.

Business journalism

But back to the question of the role of the free press. I get it: it’s easy, re-writing press releases and regurgitating the chamber of commerce line. Reporters and columnists make lots of friends that way, and then late in their career they land cushy plum jobs with government or business agencies.

Moreover, there’s a view of the world that reporters are supposed to be local boosters, that as good citizens they should be plugging the local business scene. And if that brings in advertisers, all the better.

But is that uncritical boosterism actually journalism?

We in the west are good at lecturing people in the rest of the world about the value of the free press as an agent toward democratization and capitalism. The argument is that in order for capitalism to work, you need “informed markets”—investors can’t make good decisions through a mediated, frightened, or state-owned media. It takes a free press, courageous in reporting the truth, no matter who suffers. I think there’s a chicken-and-egg problem here, but the broad outline of this view of the free press is right: it’s important for the press, and particularly the business press, to be independent and to challenge official doctrine.

Unfortunately, as Dean Starkman demonstrates in his book “The Watchdog That Didn’t Bark,” the business press in the west has generally failed to provide that independent view. Business reporters increasingly have traded independence for access, and as a result investors and the public generally have been ill served. One result was the financial collapse of 2008.

Here in Nova Scotia, we have a government that has “invested” about $100 million into companies in the form of equity stakes. Hundreds of millions more have been handed out in loans, payroll rebates, and other assistance. Supposedly, this is done to promote local business, and therefore the provincial economy, but the formulation is fraught with the possibility of nepotism, favouritism, insider trading, and worse. And a free business press should be asking a fundamental question: Is the “investment” working?

As with the developing world countries we lecture, given the depth of government intervention in the Nova Scotian economy, it is absolutely imperative that we have a courageous, independent business press that is willing to challenge the government and business elite.

Alas, the Chronicle Herald is not up to the job. Its columnists have economic interests intertwined with the agencies and businesses they write about. Its reporters can’t seem to challenge the prevailing party line, and have failed to demonstrate the curiosity and questioning needed for the job. Access has trumped independence. Boosterism has trumped thinking.

The Unique Solutions story is not an isolated incident. I’m currently working on a story about another Nova Scotia company that has received millions of dollars in financial assistance from the provincial government, with similar disastrous results, a story the Chronicle Herald has also ignored. There are others.

The horrid Chronicle Herald business reporting is not just a failure of journalism. It’s a disservice to our economy.

Update, November 7: 

One thing I neglected to mention is that Ian Thompson, the Associate Publisher at the Chronicle Herald, was deputy minister at the Department of Economic and Rural Development and Tourism from 2008 through 2011, and so in charge of the NSBI file. Moreover, Thompson was appointed to the NSBI board in January 2009, and so oversaw both $2 million in assistance extended to Unique Solutions in March 2009 and the conversion of the entire $5.6 million to an equity stake in June 2009.

Thompson, in his previous career as a provincial manager in charge of economic development, oversaw the Unique Solutions mess, and now he’s in charge at the Chronicle Herald. It is perhaps no surprise that Chronicle Herald business reporters take a “see no evil” approach to Unique Solutions.