Saturday, March 21, 2009

Fidelity Pays NBC To Bash AIG

It is incomprehensible that NBC would allow Fidelity Investments to sponsor the entire Nightly News broadcast for Tuesday, March 17. The first ten minutes of the broadcast was devoted to bashing AIG for distributing $165 million in bonuses after receiving more than $170 billion in government bailout funds. As Brian Williams introduced the AIG story, the on-screen graphic displayed the AIG logo with the word "Outrage" below it. Later, the phrase "Bonus Backlash" was shown below the AIG logo. For ten minutes, angry, unflattering comments from lawmakers, academics, journalists and people-on-the-street poured off the screen. Clearly, NBC's goal was to denigrate AIG in the harshest possible terms. But Brian Williams did not disclose that Fidelity (the broadcast's sole sponsor) and AIG are both involved in the insurance and financial services businesses. They are, in effect, direct competitors. This is from the website: "Investment Services are offered to high-net-worth clients, and include providing advice on Institutional Investment, Mutual Funds, Private Equity Investment, Real Estate Investment and Annuities." And the website clearly states that they sell insurance. Allowing Fidelity to sponsor a broadcast that bashes one of its competitors is a massive conflict of interest and a huge breach of ethical trust on the part of NBC.
Fidelity at one time held $4 billion in AIG stock (the current value may be less)--meaning that Fidelity could lose a ton of money as a result of AIG's problems. According to an on-line article in the 9/18/08 Boston Business Journal ( titled "AIG Could Cost Fidelity, Wellington, MFS Billions":

"Boston’s largest money managers and their clients could face billions in losses tied to the government bailout of American International Group, as local holdings that once exceeded $9 billion have lost more than 90 percent of their value in recent weeks. Fidelity Investments held $4 billion in AIG shares — by far the largest allotment among local investment houses — as of June 30 (2008), the most recent regulatory reporting period. It is unclear whether the mutual fund giant lightened its position during the rocky two-month period that has unfolded since its last filing with the Securities and Exchange Commission." Clearly, Fidelity has a right to be furious at AIG. Did the sponsorship money that Fidelity paid NBC for the March 17 "Nightly News" influence the way in which Nightly News covered AIG? That's certainly a possibility.
There was even an article in the March 21, 2009 edition of the newsletter titled "AIG massive payments to banks stoke bailout rage". Here is an excerpt: "The revelation on Sunday by American International Group Inc was another potential public relations nightmare, coming on the same weekend that the Obama administration expressed outrage over AIG's plan to pay massive bonuses to the people in the very division that destroyed the company by issuing billions of dollars in derivatives insuring risky assets....AIG, an embattled insurance giant that has received federal bailouts totaling $173 billion and is now paying $165 million in employee bonuses, is at the heart of a global financial crisis that President Barack Obama is trying to address with plans for trillions of dollars in spending. The fact that billions of dollars given to prop up giant insurer AIG were then transferred to European banks and Wall Street investment houses could raise new doubts about whether the rescue was really economically necessary. 'It doesn't to me seem fair that the American taxpayer has got to bear the 100 percent of the downside,' said Campbell Harvey, a finance professor at Duke University. (Lawrence) Summers -- speaking before the payments to banks were made public -- called the AIG bonuses 'outrageous' but said contracts must be honored, even though Treasury Secretary Timothy Geithner had 'negotiated very forcefully' with AIG and done all that was 'legally permissible' to limit the payments."

So Fidelity is on record--on their own website--bashing AIG. Was it appropriate for Nightly News to allow Fidelity to sponsor a broadcast that also bashes AIG? The answer, of course, is no. At the very least, Brian Williams should have disclosed the relationship between Fidelity and AIG. It appears as if NBC took sponsorship money from Fidelity in exchange for espousing Fidelity's views on AIG. NBC would no doubt argue that Fidelity's position on AIG had no bearing whatsoever on the way Nightly News presented the story. But as a news provider, NBC must avoid not only impropriety, but even the appearance of impropriety. It was the responsibility of NBC News to avoid the perception that for a certain amount of money, Brian Williams will speak on behalf of a sponsor. In that regard, NBC failed. I think that people have higher expectations for NBC News and Brian Williams.

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