‘Leaks’ Were Only Guesses, Baldrige Says : Two Rumors Wrong; Inquiry Finds No Early Data Release

Commerce Secretary Malcolm Baldrige said today that a spate of rumored leaks of sensitive economic data turned out to be nothing more than lucky guesses. He said investors who trade on such rumors are fools.

Baldrige said that an investigation by the department’s inspector general had found no evidence of premature release of government statistics despite rumored leaks of the data in financial markets on four occasions in recent weeks.

The rumors were accurate in predicting a sharp downward revision in the gross national product to annual growth of just 0.6% in the second quarter. The rumors were also correct in predicting a 1.1% rise for July in the index of leading indicators.

Two Rumors Flat Wrong

However, rumors about the July report on the trade deficit and the August report on retail sales proved to be wide of the mark.

“In two of the four cases, the rumors were flat wrong,” Baldrige said in a statement.

He said in the two times the rumors were correct, investigators had determined that the figures began circulating in financial markets before they were even compiled by the government’s statisticians.

In the case of the leading index, officials said, it would not be hard to make a lucky guess about what the number would be since it is a consolidation of other government indicators, most of them already public.

Workers Profited From Data

Baldrige said the department had never had a documented leak of economic data, although there had been one instance where investigators found that employees of the department’s Bureau of Economic Analysis had used advance knowledge of the data for personal gain.

One employee has resigned, another has been fired and three others were reprimanded following that investigation, which was concluded in July.

In addition, the department instituted new procedures to guard against premature release by cutting the number of employees with advance knowledge of the statistics and reducing the length of time between when the reports are prepared and when they are released.

“All evidence to date shows our strengthened system has more than adequate safeguards against leaks,” Baldrige said.

The secretary noted that millions of dollars can be won or lost in the markets based on unfounded rumors, and he urged investors to be cautious.

“Any investor basing decisions on rumored leaks is a fool. The rumors are almost never right, and then only by coincidence,” he said.