Competitive disadvantage

Business blindsided by unnamed sources

When a story could have critical consequences, readers should be fully informed of the identities and motives of sources.

By Tim Mullaney

Tim Mullaney is a business reporter for The Baltimore Sun.

Author bio information is from the time of article submission and may not be current.

Source: FineLine: The Newsletter On Journalism Ethics, vol. 2, no. 6 (September 1990), p. 2.

This case was produced for FineLine, a publication of Billy Goat Strut Publishing, 600 East Main Street, Louisville, Kentucky 40202. Reprinted with the permission of Billy Goat Strut Publishing. This case may be reproduced for classroom and research purposes. Publication of this case in electronic or printed form requires written permission from the publisher and Indiana University. An exception is granted for use in readers designed for specific academic courses.


“Hello, Tim,” said the PR executive from NVR L.P. “Your story has had a profound impact on our company.”

They don’t say that when they’re happy.

NVR is one of the biggest home-building companies in the country and certainly one of the most troubled. My April 22 story for The Baltimore Sun didn’t say NVR had committed any crimes or even say it was going broke. It did say that NVR had told suppliers it would slow down its bill payments because of slow housing sales, and predict that NVR’s dividend was history.

But NVR’s Doug Poretz had more on his mind than the fact that his company’s partnership units (or stock) fell 40 percent in value the week after my story ran. Poretz’s complaint was about anonymous sources.

I had used them freely without giving it much thought, and my editors hadn’t flagged me on it either. They knew the level of sources I was dealing with and trusted my abilities as a reporter.

In my story, an unidentified “investment banker” said a cyclical company like NVR was a prime candidate for a failed LBO. Sources identified only as “competitors” supplied the tidbit about payments to suppliers (one even had a copy of the letter) and characterized NVR ‘s marketing ploys as desperation measures to cover its huge debt payments. With NVR involved in tough negotiations to extend a critical $250 million credit line and suffering from an already-falling stock price, NVR felt sideswiped by the publicity.

Most times, I accept the usual rationale for using anonymous sources. The occasional insight from someone who doesn’t want his or her name in the paper can add much more than the absence of the name subtracts. The anonymous source is often the only way to get the story; other times, the anonymous source simply makes the best points.

Poretz wasn’t disputing any of that; his point was that this situation was different. NVR, which employs about 2,500 people, was at a critical turning point. We both knew the company could be on the line. Customer confidence was essential for the company to survive the soft real estate cycle; bank and investor confidence was equally critical as NVR tried to fix its finances.

Considering the situation, Doug said NVR deserved better — it deserved that I be more skeptical of the motives of the people I was talking to, and that I explain the identities and motives of my sources fully to my readers.

Competitors knew NVR was having trouble, so Poretz thought they would be even more eager than usual to dump on NVR. Poretz had a point.

While I trusted my sources, one or two had been notably more willing to criticize NVR than they had in the past. Along with the obvious problems of quoting competitors, the analysts had clients who either had already lost money investing in NVR or clients who could be short selling the units.

Selling short is a risky investment that bets the company’s value will fall, and short sellers are well-known for leaking their views to the press in hopes of helping their investments.

All of this was still in my mind when events forced me to confront NVR’s future in a story published late in July. Since April, Standard & Poor’s had downgraded NVR’s bonds, an NVR subsidiary had missed debt payments, and NVR had said it would post a first-ever quarterly loss. It was time to question openly whether NVR would go broke.

The easy thing to do would have been to call the competitors again. They certainly think NVR might collapse. My editors wouldn’t have had a major problem with using more anonymous sources. As the Sun’s assistant business editor Michael Pollick later told me, “There’s no embargo on unnamed sources. The reader has a right to know what axe the source has to grind . . . (In the first story) you helped the reader by letting him know the sources were competitors.”

But even though no one was making me change my methods, I wanted to play things safer the second time. When you are going to come out and say a company will either go broke or dramatically restructure itself to avoid going broke, it’s only right to have all your cards showing.

That’s what I did. Using on-the-record sources and documents, I showed that NVR is in terrible shape and that every way out of their situation is fraught with obstacles. They aren’t broke yet as I write this, but they are basically at the mercy of their banks.

I passed up a lot of juicy stuff for the second story; my old sources had fresh tales. But I’d made the decision that stories with special consequences— such as the possible loss of 2500 jobs — demand especially careful handling. 

If NVR had committed a crime, I would have done whatever was necessary to get at the truth. But this wasn’t Watergate, NVR had just screwed up.

There wasn’t enough there to justify gray-area reporting tactics.

Steering away from anonymous sources doesn’t mean writing a soft story. It does mean you have to work a little harder to get the truth. But in NVR’s kind of situation, the newsmaker has the right to expect you to do it.