WSJ Admits its Merrill Story was False

Do you remember those heady days at the beginning of November when the WSJ went on the warpath? First there was the failed take-down of Jimmy Cayne (he plays golf!), and then, the next day, came a front-page article by Susan Pulliam which conjured up visions of Enron-style accounting at Merrill Lynch. I was not alone in being very suspicious of the article, and today, finally, comes the correction:

ON NOV. 2, the Journal published a page-one article on Merrill Lynch & Co. that was based on incorrect information that the firm had engaged in off-balance-sheet deals with hedge funds in a possible bid to delay the recognition of losses connected to the firm's mortgage-securities exposure. In fact, Merrill proposed a deal with a hedge fund involving $1 billion in commercial paper issued by a Merrill-related entity containing mortgage securities. In exchange, the hedge fund would have had the right to sell the mortgage securities back to Merrill after one year for a guaranteed minimum return. However, Merrill didn't complete the deal after the firm's finance department determined it didn't meet proper accounting criteria. In addition, Merrill says it has accounted properly for all its transactions with hedge funds.

Unbelievably, the correction does not seem to have been appended to the original article on the WSJ's website: there's no excuse for that at all. (Update: The correction has now made it onto the original article.) The original story was the lead article on both the front page of the newspaper and on WSJ.com; the correction is buried and almost impossible to find if you're not looking for it. (I only found it thanks to the eagle eyes of my colleague Jeff Cane.) The Journal can and must do a much better job of correcting its mistakes, especially glaring front-page ones like this.