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SCHOTLINE EXCLUSIVE: “JOURNALISTIC BLACKMAIL” AT THE STATE NEWSPAPER

May 20, 2008

By Jeffrey Sewell

SCHotline has exclusively obtained copies of communications between the marketing department of South Carolina’s largest newspaper and the payday lending industry which raise serious questions about the newspaper’s journalistic ethics – or lack thereof.

One former Palmetto State reporter we spoke with even described The State newspaper as engaging in “extremely unethical” conduct in the documents we uncovered.

For those of you who are unfamiliar with The State, it has a long history of singling out those whose positions run counter to the newspaper’s ideology. Despite a recent change in ownership, The State has remained a very agenda-driven newspaper that is frequently criticized for leaning to the left on many issues, and failing to give fair treatment to all sides of important public debates.

Over the last two years, for example, The State has made the payday lending industry its whipping boy, targeting the industry for elimination by publishing dozens of slanted articles and dozens more scathing editorials.

In addition to the almost daily barrage of editorial attacks, The State’s reporters also frequently use misleading 300% interest rates in describing the “danger” of payday loans, despite the fact that these percentages are artificially inflated by annualizing interest rates for loans that in reality only cover a period of a few weeks.

The newspaper has also refused to cover a major ethical scandal involving several State Senators looking to make millions of dollars off of suing the payday lending industry (a blatant conflict of interest), yet it has treated legal campaign contributions to other legislators from the industry as the second coming of Watergate.

Now, SCHotline has discovered that while The State’s newsroom and editorial board were both busy bashing the payday lending industry, the newspaper’s marketing department was using these attacks to try and convince the industry to advertise in the paper in an effort to counter its “distorted” information.

This major lapse in journalistic integrity is reminiscent of the mob-style tactics used by gangsters in movies like Goodfellas – repeatedly bullying an industry and then turning around and asking them for money so that they can fix all the damage they have done.

Below is a quote from a letter sent by The State’s marketing department to Advance America’s South Carolina-based advertising firm in February of this year. Keep in mind that this letter included a copy of a negative article that The State had written about the industry:

“Apparently there has been an increased focus on payday lending and cash advance institutions here. It would seem as though the South Carolina government is moving to influence the operations of these businesses. This would be an excellent time for Advance America to reinforce their stance on responsible lending practices as well as educate those whose understanding may be distorted.”

The letter goes on to say that there are “a couple of ways the State can assist Advance America in communicating a very important message, effectively.”

A month after this letter was sent, Advance America’s CEO Ken E. Compton wrote The State’s publisher the following:

“I am particularly concerned about the letter from your consultant, a copy of which I have enclosed, because of the implication that our company might be able to correct distortions and communicate ‘a very important message’ by paying for advertising in The State.”

SCHotline attempted to reach Advance America for further comment, but a spokesman for the company told us this was a private correspondence and declined to comment further.

We called a former Palmetto political reporter who is now working for a newspaper in another state and asked him to comment “off the record” about these sorts of journalistic tactics.

“I would be embarrassed for my paper if they did something like this,” he said. “It is extremely unethical. It would be one thing if this was a neutral letter offering advertising information, but by attaching a negative article and hinting that things could be better if only they cough up some dollars, it really does cross the line.”

One legislator we spoke with called the letter “journalistic blackmail.”

“This is so typical of that newspaper,” the legislator said. “They bully you and if you don’t play ball with them, they bully you some more.”

SCHotline will continue to follow this issue as more details of this journalistic scandal become available …

PS… And for the record Aaron Shenin is not the former Palmetto State reporter we spoke with.

[Click here to read the documents for yourself]

[Back to SCHotline.com]

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21 Comments leave one →
  1. Jimmy permalink
    May 20, 2008 1:16 PM

    I know it would be a mistake of asking you to be intelligent about something, but advertising and editorial don’t talk at newspapers.

    What you described would be unethical advertising, not unethical journalism.

  2. David Byrd permalink
    May 20, 2008 1:32 PM

    Great article, do you remember years ago the bumper stickers that were around Columbia? “Don’t Believe the State”. I do have one question, why did Mr. Sewell use quotes for a legislator but not the legislator’s name? I have to agree also with “Jimmy’s” comment, this is unethical advertising, we give them to much credit when you call them journalist. But wait, they are in the same building are they not? They get paid out of the same checking account don’t they? I would suggest that all of the “State” departments talk to each other.

  3. joe permalink
    May 20, 2008 1:49 PM

    Just now folks are catching on to the fact that The State has no journalistic integrity? Heck, they have reporters who work for the editorial board, they have “news columnists” ( a mutant creation that allows them to write editorials and place it in the “news ” sections of the paper) and they were shaking down video poker the same way they are now doing the Payday lending industry. This stuff hsa been going on for years!!!!

  4. May 20, 2008 2:16 PM

    Good article, but readers shouldn’t (again) be misled to believe that a 300% APR on a payday loan is anything but ludicrous. What gets people in trouble with these loans is when they take out multiple loans merely to pay off the balance of their previous loans, prolonging the interest and increasing their balance. The proposed law, with changes added after pressure from lobbyists, would do a bit to change that (assuming it gets out of committee), but would still do little to fix the problems created by the high interest, unsecured loans have created throughout SC.

  5. Freddy permalink
    May 20, 2008 2:27 PM

    Hand in the cookie jar. AGAIN!

  6. Bill Rogers permalink
    May 20, 2008 2:43 PM

    The folks bashing The State for selling advertising to a company wishing to improve image miss the point.
    First, there is separation between the news, advertising and editorial departments at The State.
    The newsroom covers the news — such as payday lending — as it chooses. It is their responsiblity to present a fair report covering all sides of an issue.
    The advertising department is there to help companies and causes deliver their messages — unfiltered by the newspaper editors.
    It is perfectly ethical and legitimate for an advertising representative to approach a company to help them do that. Where a problem would arise would be if the newspaper offered better news coverage in return for advertising. That didn’t happen.
    Newspapers remain a forum for public discussion, and the advertising pages are a legitimate part of that forum. I suggest that instead of blasting The State for soliciting advertising, a better use of time and money would be to craft an ad touting the benefits of payday lending.

    Bill Rogers
    Executive Director
    S.C. Press Association

    (The State is one of our 105 members.)

  7. JMP permalink
    May 20, 2008 3:06 PM

    While I by no means would ever defend The State newspaper, to refer to the multimillion dollar a year payday lending industry as The State’s “whipping boy” is laughable. I will also cry a tear for the poor and exploited oil companies while I pump $4.00/gallon gas into my car. What The State did was ridiculous, but “whipping boy”? That may just be about as absurd.

  8. Jon Schultz permalink
    May 20, 2008 3:42 PM

    The APR of a payday loan tells you nothing about how profitable the loan is for the lender, because it ignores his cost in making the loan, and it tells you nothing about how wise the transaction is for the consumer, because it ignores his other alternatives. The APR of small-dollar short-term loans must be high compared to other types of loans, due to the high ratio of the cost of making the loan to the amount being lent. But that doesn’t mean a payday loan isn’t a valuable option for people who don’t qualify for cheaper forms of credit. Researchers from George Mason University and Colby College recently found that “access to payday loans in their environment, all else fixed, increases a borrower’s probability of financial survival by 31%.”See http://www.reuters.com/article/pressRelease/idUS164798+06-Feb-2008+PRN20080206

    If a 365% APR was “outrageous” then the statement “I will lend you $100 today if you will pay me back $101 tomorrow” would be outrageous, but it obviously isn’t. In fact most people would not make that statement because they wouldn’t want to risk losing $100 for just $1 in profit. And that doesn’t even consider any cost whatsoever in making the loan!

    Of course some people take out too many payday loans and get themselves into a bind. Many people eat overeat desserts and make themselves sick, but does that mean we should place a cap on the amount of fat and sugar in ice cream? Of course not.

    Despite their success convincing some politicians who are looking for scandalous greed to criticize in promoting their careers, the critics of payday lending are in fact rebels without a cause.

  9. WPL permalink
    May 20, 2008 4:52 PM

    “Editorial and advertising never speak”…

    Wow…the fox guarding the hen house? Are we supposed to take their word for it?

    Are we to believe that advertising has to be directly told something in order for it to act or to know what is wanted?

    A good journalist would never take the fox’s word for something like this…but then again, we are talking about the State and their lackeys.

    Good work Sewell…

  10. May 20, 2008 11:24 PM

    Great piece of reporting. The MSM is like the ABA they are in total control and have all the power to edit and manipulate without recourse for those that at their mercy.

  11. May 21, 2008 3:37 AM

    Ok, this whole argument is just such a joke. Daily newspapers have a physical wall between the newsroom and the advertising room.

    And this whole “episode” just proves that.

    Think about the NEWS STORIES that The State’s reporters did about how the proposed coal-fired plant on the Pee Dee River was dangerous because of mercury levels.

    Right above that story online was an ad for Americans for Balanced Energy Choices (ABEC), an industry trade group pushing the coal plant’s proposal.

    So, that The State’s editorial board, which is separate from their newsroom, which is separate from their advertising employees, aren’t connected at the hip — and that’s a big deal to you?

    There are bloggers that YOU are friends with who get PAID to write POSITIVE stories about candidates and you seem to have NO problem with that.

    That’s just funny.

  12. May 21, 2008 4:02 AM

    P, Our thoughts exactly, for the SC Press Association to give us this ethics 101 BS post as if were hanging by tree limbs as sloths is ridiculous! Not the sharpest knife in the drawer admittedly but what the hell are they trying to convince us of???

  13. May 21, 2008 11:11 AM

    By far one of the most interesting blogs I’ve read lately. Thanks Jeff.

  14. Luke permalink
    May 21, 2008 12:23 PM

    Mr. Rogers, of the Press Association, is missing a point too – one that is about perception and accountability.

    The advertising department took a strong position on its own newspaper’s news coverage by asserting that the payday lenders could “educate those whose understanding may have been distorted” by that coverage. Such a statement suggests that the coverage had, in fact, not included “a fair report covering all sides,” as Mr. Rogers describes the responsibility of the newsroom.

    The approach taken by The State advertising department blurs the separation of news, advertising and editorial departments, and raises valid questions about the newspaper’s policies for ethics and accountability governing the whole operation.

  15. May 21, 2008 12:38 PM

    Angie,

    Thank you and Congrats!

  16. May 21, 2008 3:16 PM

    While The State has been very kind to SCHotline.com, we have to call a situation, like the apparent shakedown of Advance America, just as they would.

    It will be interesting, to say the least, how they deal with this situation. Their writing effects the opinions of thousands of South Carolinians, and their presence and opinion is an important element in the debates that rage throughout our state.

    While we may disagree on the way to handle the tough issues facing our state, we have a great appreciation for many of the editorial staff.

  17. rhet permalink
    May 22, 2008 3:24 AM

    Geez.

    I am no great fan of the State Paper, but…

    Why not ask J. Sewell to reveal his funding sources. Who contributes to his efforts?

    He is not objective and is always pushing an ideological agenda. Don’t believe everything he writes. You have to verify it yourself.

  18. liz permalink
    May 22, 2008 10:48 AM

    The State has not been a real newspaper for a long long time , that is if it ever was. The State fails to tell the stories about the news happening in South Carolina. They have biased stories . The State supports corrupt political people. They promote all the things that really need changing in South Carolina. Since readership is down, I keep hoping they will one day fold up and go out of biz. Blogs are better. They let real people tell real stories without editing, so the TRUTH ( I know , foreign concept right?) finally gets out to the people who NEED TO KNOW

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