“Worthy Of The Top Honor In American Journalism”
By David Cay Johnston
A compelling story about corrupt Washington dealings that needlessly put you and your family at risk of death if you board a Boeing 737 Max 9 jetliner broke last week. This story may come as a surprise because — shockingly — it hasn’t gained any traction with our best and biggest mainstream news organizations.
Today we praise The Lever, one of our competitors in the lightly financed world of online journalism, for breaking the stories behind the Max jetliner catastrophe. Its thoroughly documented coverage, with more coming, connects the dots, showing how greedy Washington and Wall Street practices produce dangerous jetliners.
The surface story about the Jan. 5 door panel blowout receives recurring prominent coverage because passengers shot dramatic cell phone videos. That’s the cheap and easy part of the news.
Digging below the surface, The Lever found a frightening tale of political influence involving former Trump administration official Nikki Haley, dark money campaign contributions, cowed aviation regulators, safety waivers and more.
The foundational problem is the corrosive effects of stock buybacks and government subsidies, elevating executive and corporate director greed above aviation safety.
Most troubling is compelling evidence that executives at a major Boeing contractor, Spirit Aerosystems, ignored safety warnings. An email shows that instead of spending money on safety, employees were ordered to falsify safety records. If those facts make you fear boarding any recent model Boeing plane, they should.
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Cub Reporter
The story was broken by Katya Schwenk, a cub reporter in her first week on The Lever staff, to the shame of all the big-name and well-paid journalists at our major news organizations.
Working with colleagues Freddy Brewster, Helen Santoro and Lucy Dean Stockton, Schwenk expanded the story. Any reporter at The Bigs in journalism could have beaten The Lever, but none did. Indeed, no major news organization has cited The Lever’s reporting as of this writing. That illuminates a gaping hole in how Wall Street and Washington reporters work, as will be examined below.
Schwenk & Co. uncovered robust evidence hiding in plain sight because they researched the public record. The Bigs in American journalism relied on statements, including corporate and government handouts and refusals to comment.
The Lever’s coverage should prompt significant safety and financial reforms. Its reporting on this story is worthy of the top honor in American journalism, the Pulitzer Gold Medal for public service.
As is almost always the case with the most important untold stories, the facts are readily available, provided journalists know where to look and that they understand what often obtuse bureaucratic language means.
Corporate America wants to make such facts less accessible, and to shield some entirely from public inspection. In recent years, governments have enacted many subtle restrictions on access to official data at the behest of companies. That is a large part of what Trump’s calls for abolishing the “deep state” and “deregulation” are about — shutting the windows into corporate conduct.
There is no “deregulation,” only re-regulation that typically favors corporate secrecy over the public’s right to know.
You can read The Lever stories in order here, here, here, here and here.
Pay Before Safety
While Boeing and Spirit executives were too cheap to put safety first, The Lever revealed that executives and company directors spent lavishly to enrich themselves.
Executives and directors paid themselves $800 million, according to public records The Lever consulted.
They also spent an eye-popping $69 billion buying back their companies’ stock.
Stock buybacks reduce the number of shares outstanding. That makes each remaining share more valuable. That, in turn, enriches executives, because most of their lavish pay is in stock options —whose value grows when the stock price rises, as typically happens when there are fewer shares in the market.
The butcher’s bill for this greed:
- 189 people killed when a Boeing Max jet crashed in Indonesia in 2018
- 157 killed when a Max jet crashed in March 2019 in Ethiopia.
Significantly, five years ago during the Trump administration, Chinese aviation authorities, not Americans, were the first to ground all Max jetliners.
On the surface, faulty cockpit software caused those crashes. But the real killer was unbridled greed. Boeing executives and directors were so cheap that instead of hiring the best programmers, Boeing hired part-timers for as little as $9 an hour.
Think about what The Lever showed — jumbo jets full of cash for executive and director enrichment, but a scant $9 an hour for programmers.
As is often the case in corporate cheap skating, the ultimate cost to the companies far outweighs the corner-cutting savings. But since the executives and directors get to keep their ill-gotten gains with no risk of prison or even disgorgement, why not continue with the same practices? After all, what’s 346 dead people in Asia and Africa against taking home millions of dollars in compensation each year?
In addition, consider Nikki Haley’s role as South Carolina governor in arranging a $900 million taxpayer subsidy for Boeing to build its 787 Dreamliners in her state. That profitable companies scoop up such subsidies, sometimes their only source of profits, was the focus of my 2007 book “Free Lunch.”
Inexperienced South Carolina workers, paid less than unionized machinists around Seattle, did such shoddy work that Boeing slowed production, spending a fortune refitting and fixing 787s.
Curious how Boeing management thinks it can’t afford highly skilled union machinists around Seattle, so it hunts for union-free locations and taxpayer subsidies from South Carolina. At the same time, Airbus does just fine in high-cost Europe with its competent, unionized, and well-paid workforce.
Not Just Boeing
The story here is not just about Boeing. It is about how assaults on regulatory systems put your health, life and money at unnecessary risk. The motivating factor in all of this is greed and rules that favor short-term profiteering over enduring profits. That is a story seldom reported in The Bigs.
To be sure, there is a great deal of solid, and at times, extraordinary reporting by finance and politics journalists, many of whom I know personally, have competed against and respect.
But there is a gaping systematic hole in Wall Street and Washington journalism that I’ve been calling out for five decades in books, in columns for many publications — including the Columbia Journalism Review — as well as in lectures and television appearances.
The problem is excessive reliance on interviews instead of checking the robust public record and learning complex systems to understand how they work, especially whether they punish or reward bad behavior.
Newsrooms tend to be rigidly status quo. Calls for reform are routinely dismissed out of hand even as journalists produce stories about the need for others to reform.
The journalism reform America needs grows from an old newsroom adage: the first step in reporting is checking the clips in the morgue, as the newsroom library is known, to learn what’s already known.
The reform needed today: first check the robust public record of government rules, statistics and cases so coverage focuses on what politicians do, not what they say. That has been the motto of DCReport since its founding seven years ago. It’s the same principle applied at The Lever, launched in 2020 by former Capitol Hill aide David Sirota, who lives in Denver.
I’ve known Sirota for more than two decades. His journalism is as important as it is impeccable.
Sirota’s been among the very best at showing how corrupt connections between regulators passing through the revolving door between Washington and banking companies, combined with secretive campaign donations and favors, cause terrible damage to taxpayers and pension funds for public employees like cops and teachers.
The Lever’s coverage draws attention to the lack of focus on how all the pieces of regulation fit together.
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Vicious or Virtuous
Government rules can foster behavior that is vicious or virtuous. Systems can be self-reinforcing of good behavior, in part by making the price of misconduct much higher than the financial rewards for dangerous, bad behavior.
Fines alone cannot overcome greed because companies can find ways to make executives and managers whole. That’s why rules making it easier to prosecute corporate crime and mandatory prison sentences for white-collar crime are the potent integrity vaccines America needs.
Our entire regulatory system has been under assault since the American people chose Ronald Reagan in 1980, abandoning the New Deal that brought prosperity to the middle class in favor of a promise of universal prosperity through the idea that government is our problem. Instead, we got government just as big as it ever was as a share of the economy along with new policies of, by and for the rich.
Donald Trump promises that if he returns to the White House, he will finish what he says he only partly accomplished in his first term: the destruction of what he and Steve Bannon call the administrative state.
Regulations ensuring that the air you breathe and water you drink are free of toxic elements, rules that make it almost impossible for crooked bosses to steal your retirement savings and many other protections would be flushed by a second Trump administration. Your opportunity to seek redress by taking wrongdoers to court, already tightly restricted, would go away if Trump does what he says.
That would create quick and huge fortunes through short-term economic exploitation while making America worse again. Polluters, price-gouging monopolists and makers of unsafe products would be free to jack up their pay and profits while shifting risks onto you.
Haley, who seeks the Republican nomination for president, left the Trump administration to become a Boeing director in February 2019. The Lever showed how Haley peddled influence for Boeing.
As The Lever reported:
Haley helped kill an initiative designed to force the company to more comprehensively disclose its spending to influence politicians and safety regulators, government filings show.
“Haley was a member of Boeing’s board when it unanimously opposed shareholders’ transparency proposal, which proponents said was designed to uncover whether Boeing had bought itself regulatory relief from federal safety officials.
“In the wake of the two 737 Max jet crashes, questions have been raised whether Boeing’s lobbying led to relaxed Federal Aviation Administration oversight,” shareholders wrote in urging passage of their proposal, noting that the company spent a staggering $153 million on federal lobbying from 2010 to 2018.
Haley and her fellow board members urged a “no” vote, insisting in Boeing’s proxy statement prior to the shareholder meeting that the company has “instituted full transparency into — and extensive oversight of — any political expenditures.”
The Lever’s reporting of the story behind the terrifying Alaska Airlines catastrophe — and others — involving newer model Boeing jetliners isn’t limited to Boeing.
Who Benefits?
The system encourages and rewards dark money support for politicians who do donors’ bidding rather than work for voters. It helps hide this influence. And it diverts corporate spending from adequate pay to hire competent talent, such as software programmers, to instead boost the pay of executives and directors.
Whether processed foods, medicines or vehicles, the regulatory system works for greedsters, less for the people.
We can fix that. The Lever focused a spotlight on Boeing and its shorting safety for executive and director pay. That spotlight should be much broader and brighter, a job only The Bigs in American journalism can do. So far, The Bigs haven’t even told their audiences what The Lever first reported. That’s shameful.
