The Journal's Russia Scandal
Then again, lack of empathy for the plight of ordinary Russians was a consistent feature not only of Liesman's coverage but of US policy toward Russia in general. Like the IMF and the World Bank, both of which felt that Russia's need to pay their high-priced consultants was greater than its need to pay many of its "economically unnecessary" workers, Liesman revealed a concern for wage-earning Russians that extended only as far as their perceived utility in the service of global capitalism. When asked why he hadn't covered the nonpayment crisis, he replied: "Yeah, but nonpayment for what kind of labor?"
"Coal that was needed, or not needed?" he snapped.
In that same June 5 article, Liesman also suggested that Russia might have been better off if it had been more corrupt, not less. "Another policy change also hurt," he wrote. "For years, the government had used commercial banks to pay its bills. Last year, it moved to a US-style treasury system, with branches of its own. The change saved money, reduced corruption and made payments more timely. But an unforeseen result was a fall in the cash moving through banks--money that these banks once used to play the government bond market.
"So when the crunch hit, the Russian banks couldn't help."
Liesman wasn't the only major-market bureau chief to blow the Russia story. The Washington Post and the Los Angeles Times both described Chubais as a "lightning rod" for unfair criticism when he was fired, downplaying or ignoring the many scandals he'd been linked to. Business Week wrote a glowing profile of banker Vladimir Potanin after he had been linked to an apparent bribe of officials in charge of a major auction Potanin had just won. In fact, most of the Western press, like the US government, got the Russia story wrong before the crash; as Liesman said, most of them really were on the Chubais/reform bandwagon right up until the August crash, when the position became untenable. In a 1995 article for the New York Times, John Lloyd, onetime Moscow bureau chief of London's Financial Times, dismissed as "facile pessimism" claims that Russia was sinking into a quagmire. Like Liesman, he would eventually change his tune, writing a much-ballyhooed eulogy of the Russian reform effort in the New York Times Magazine this past summer that railed theatrically against the corruption in the Yeltsin regime. In that article Lloyd even denounced the loans-for-shares auctions as acts of "colossal criminality"--language far stronger than he had ever used when privatization was actually taking place.
Liesman was replaced by Andrew Higgins in July 1998, but he returned to Moscow in August to participate in the writing of a series of articles explaining how the crisis had unfolded. Apparently realizing he was on to a Pulitzer-caliber story, Liesman backed off every position he had taken in the previous two years and enthusiastically volunteered the new conventional wisdom: that the fundamentals for an Asia-plus meltdown had been there all along. In a prizewinning September 23 article co-written with Higgins, Liesman recounted grotesque anecdotes illustrating how Russia's crony capitalism was one of the fundamental reasons behind the country's collapse, concluding: "All the while, the government was going broke. It couldn't collect the taxes it needed to pay its bills. So it built a rickety structure of domestic and foreign debt, creating the pyramid that collapsed in August and pushed Russia into default."
What about loans-for-shares, which Liesman had lumped in with "the most successful and important of Russia's reforms"? At the time, he had dismissed critics of the auctions as Communists. But in preparation for the Pulitzer ball, Liesman and Higgins sneered that only a fool could have missed the overt criminality of the auctions:
Desperate for cash, the government mortgaged some of its most lucrative assets for a fraction of their real value in return for loans from a handful of bankers. Meeting in secret, they carved up the spoils. Government bureaucrats colluded in the so-called loans-for-shares deals, allowing ownership of the stock-in-trust to be awarded at rigged auctions.
There wasn't even a semblance of propriety. At a news conference in 1996, a Menatep executive could hardly contain his laughter when he claimed, implausibly, that he didn't know who owned the subsidiary that had just bought Yukos, Russia's second-biggest oil company. Russian journalists, served cognac by the bank's staff, guffawed in disbelief. Menatep had run the auction and the bank, it would later disclose, controlled the firm that entered the winning bid.
None of the above, or even a hint of it, was in Liesman's coverage of loans-for-shares when the story first happened. And none of it was new news.
Pulitzer candidates, like defendants in murder trials, are ostensibly judged by what they did, not by who they are--character and past behavior theoretically being irrelevant to the jury's decision. In this case, Liesman, Higgins and the four other Journal staffers who won were judged by what they did in ten post-crisis articles, written between June and December of 1998.
But there are times when who a journalist is and what he does coincide. The record shows that Liesman's bureau was little more than a PR conduit for a corrupt regime, consistently averting its eyes from the ugly truth. It cleaned up its act just in time to win the most coveted award in American journalism. The Pulitzer committee, as a body composed of journalism experts, either knew of the Journal's past record and chose to ignore it, or was negligently unaware of the Journal's body of work on Russia. If the former is true, it's time to stop taking the Pulitzer Prize seriously as a standard-setter for the journalism profession. If the latter, the board should reconsider its award.