Six Questions Bloomberg LP Needs To Answer
Bloomberg LP's response to its privacy scandal is coming under increasing criticism despite more than a week of statements from the company.
Wall Street banks and global central banks continue to wait for answers, some more patiently than others. Business journalism professor Chris Roush told CNBC: "If Bloomberg would disclose this information, this whole story would go away. They have made this a longer story in the news media than it needs to be, assuming the answers are benign," Roush said. Bloomberg is under scrutiny for a privacy breach by allowing its reporters access to usage data from its terminal clients.
On Friday, Bloomberg announced it had appointed former IBM CEO Sam Palmisano to serve as an independent advisor for the company's privacy and data standards. In addition, it said Clark Hoyt, the former public editor at the New York Times and now an editor-at-large at Bloomberg, would review the news side's relationship with the business side, regarding privacy and data issues.
Still, what follows are some of the most pressing issues that clients say Bloomberg has yet to answer. The company, a competitor to CNBC in gathering and distributing business news both on television and on the web, declined to comment.
How was the information used?
Bloomberg has disclosed that its reporters had access to certain private information but has not so far said how, or if, that information might have made it into news stories. JP Morgan Chase has suggested that historical log-in information was used to help Bloomberg break the London Whale story and possibly break stories in other instances. The bank believes reporters could see when traders logged in, and from where, over a period of time and that gave them insight into the firings and travels of their employees.
JP Morgan said in a statement this week: "Our legal department sent a formal request to Bloomberg to verify exactly what information reporters had access to and confirmation of their controls to prevent future breaches."
Bloomberg News Editor-In-Chief Matt Winkler, in an op-ed, has insisted the information was confined to historical log-on information and "high-level types of user functions" that Winkler compared to knowing if someone used a software program. like Microsoft Word.
Still, central banks and other government officials say they want more specifics about how mundane the user function information might have been.
What is the process for Bloomberg determining how the information was used?
The New York Times referenced an internal inquiry that found that "several hundred" reporters had used the function allowing them to track a user's log-on information. But it remains unclear what process, if any, is being used by Bloomberg to determine if the information found its way into stories. Bloomberg CEO Daniel Doctoroff said in a blog earlier this week that the company was reaching out individually to clients.
When did Bloomberg executives know about the use of this information and what did management do when they learned?
Reports that a Bloomberg television anchor publicly discussed the private client information in 2011 raises the question about what was known, and for how long, and by whom, and what was done, if anything, when it was learned.
If editors knew about the issue in 2011, why was the practice only banned in 2013 after Goldman Sachs complained?
The appearance, according to Roush, is that clients are calling the shots on journalistic ethics at Bloomberg. "That causes me to worry what's going to happen the next time a large client of Bloomberg comes to the company and says 'We don't like what you're doing,' " Roush said.
What changes have really been made?
Doctoroff said the company has created a new position of client data compliance officer, "who is responsible for centralizing our data security efforts." He also said the company now prohibits access to the private information for "reporters." But the company has said nothing about editors and news executives, such as Winkler, who could potentially tell reporters what they have gleaned from the information.
Where's Bloomberg's coverage of the breach?
Roush points out that the New York Times was able to put the Jayson Blair plagiarism scandal behind it a decade ago because it wrote the definitive story on the incident. Roush and others say Bloomberg's coverage has been non-existent. There appears to be a company policy that it does not write about itself. That policy conflicts with its otherwise blanket coverage of central banks, many of which have made public statements about the breach. The company has declined requests from CNBC to interview its executives.
_By CNBC's Steve Liesman. Follow him on Twitter at @steveliesman