Jon Stewart has already cornered the market on lampooning CNBC for the chronic lack of skepticism that characterized its coverage of the financial world during the boom years.
But the network’s failure wasn’t just a case of cheer-leading for Wall Street banks that made bad bets on the housing market. Both before and after last fall’s financial crisis, CNBC has lavished fawning coverage on several high-flying financiers who later, say prosecutors, turned out to be little more than frauds. And this past week offered the latest example.
Tim Durham, a politically-connected Indiana businessman, was accused by the Feds of using money from new purchasers of his company’s investment certificates to pay off earlier investors — in other words, running a Ponzi scheme. Prosecutors acted a month after an investigative report in the Indianapolis Business Journal had raised questions about the ability of Durham’s company to pay back investors.
CNBC had taken its own look at Durham in 2008. But unlike IBJ, it didn’t bother itself with the pesky details of his company’s financial profile. Instead, it profiled Durham in a segment entitled: “Untold Wealth: The Rise Of The Super-Rich.” The network reported that Durham’s 30,000 square-foot home has 20 TVs, and that he owns almost 70 cars, “but sometimes loses count.” On its website, it posted a slideshow celebrating Durham’s conspicuous consumption.
In his now-legendary take-down, Stewart included another example — which we ourselves had noted back in February. In a 2008 CNBC interview (now sadly no longer available on YouTube), accused $8 billion Ponzi schemer Allen Stanford explained to a boosterish Carl Quintanilla how his company wisely avoided the sub-prime crisis. “Is it fun being a billionaire?” Quintanilla asked Stanford. “It is fun being a billionaire,” Stanford replied.
One final example, which may not be exactly in line with the previous two, but nonetheless helps show how easily CNBC has been dazzled by the appearance of success. During the boom years, Angelo Mozilo, the CEO of Countrywide Financial, was a frequent guest on the network. He received an especially warm welcome from Larry Kudlow, who in a 2006 segment (via Nexis) described Mozilo as a “good friend,” — “Hope you’re doing great. You look fine,” said Kudlow — before asking for Mozilo’s advice on how to ward off inflation. Moments later, CNBC contributor Ben Stein added: “I love Countrywide. I think it’s an amazingly well-run company. It is the hallmark of the business.”
In June, Mozilo was charged in a civil lawsuit filed by the SEC with insider trading. And Portfolio ranked Mozilo second on its list of “Worst American CEOs of All Time.”
So the next time you see CNBC star-struck by the glamorous lifestyle of some high-living master of the universe, it might be worth taking a close look at his company’s finances. Because the nation’s most prominent business network probably didn’t.
