PEOPLE : Dorfman’s ‘Scoops’ Often Don’t Pan Out, but Few Doubt His Influence : USA Today columnist defends his sources and says he checks out tips thoroughly.
Stock market investors who picked up a copy of USA Today on June 6 had a nice, fat tip waiting for them. Paramount Communications, reported the newspaper’s financial columnist, Dan Dorfman, was “seriously weighing” a $175-a-share bid for Time Inc.
Dorfman had the story down cold. Later that day Paramount announced a hostile offer for Time, at precisely $175 a share.
Two weeks later Dorfman did it again, breaking the news that Paramount would raise the ante on its stalled takeover to $200 a share.
“I had two great scoops,” said Dorfman. “I live for that kind of thrill.”
Dorfman, 57, may have bagged those two, but he isn’t always so prescient. More often than not, the tips and tidbits that he passes on in his USA Today column and in his frequent appearances on CNN’s “Moneyline” TV show never quite pan out as reported.
‘Scuttlebutt’ and ‘Gossip’
Perhaps less remembered than his Time-Paramount scoops, for instance, was the Dorfman-reported speculation that Marvin Davis was considering buying Warner Communications, or columns that Donald J. Trump was thinking about taking over Caesar’s World, MCA Inc. and Gillette Co. So far, none of this has happened.
While those blind alleys were properly labeled “rumor,” “gossip” or “scuttlebutt” by Dorfman, his news stories don’t carry such qualifiers--and can be just as speculative.
In September Dorfman’s front-page article in USA Today’s Money section had raider Irwin L. Jacobs “seriously interested” in buying Greyhound Corp.; Jacobs never bid for it and disclaims an interest in doing so. Reebok International, Dorfman reported last March, was “in hush-hush talks to go private”; Reebok is still public.
In April, Dorfman passed on the news that Mark IV Industries was “seriously intent” on buying Johnson Controls Inc.; Mark IV instead bought a large block of another company. Dorfman’s takeover story, said a Johnson Controls employee last week, “just faded into never-never land.”
The erratic course of Dorfman’s exclusives has done little to tarnish his status as the most prominent and influential financial journalist in the nation.
Enormous Influence
The stocks of companies discussed prominently in his on-air work and bite-size news stories often move up or down on his mention alone.
Earlier this month in an awesome display of Dorfman’s power, Walt Disney Co. rose $6.37 the day before a Dorfman column on the company ran--apparently on the basis of a small promotion box mentioning that Dorfman would discuss takeover speculation about the company the next day. When the column threw water on the notion of a Disney takeover, the company’s shares fell $4.87.
Dorfman, a compact, bushy-browed man whose voice retains the accent of his Brooklyn upbringing, professes indifference to his clout: “What a stock does after I write about it is not my concern.”
Yet Dorfman’s dramatic influence and numerous wide-of-the-mark tips raise questions that aren’t so easily waved off. In a business where rumor can have as much currency as fact, the role of the press is pivotal.
An unscrupulous investment adviser hoping for a quick profit could feed information about a possible takeover to a member of the media, then sell out after the published tip--whether accurate or not--drives the stock’s price up.
This line of discussion predictably agitates Dorfman. Sitting in his quiet office above Madison Avenue last week, he placed the heel of his hand on his forehead and fired back at a questioner.
A Window on Big Money
His sources, he said, have been culled from his 30 years of experience reporting for publications ranging from Women’s Wear Daily to New York magazine and the Wall Street Journal. His news tips, he said, are checked so thoroughly that he sometimes loses an exclusive because he is unable to properly confirm it.
He is careful, he added, to call a rumor exactly that, and maintained, as does his USA Today editor, Tom Petruno, that his news stories have been accurate. “I am not a tout,” Dorfman said.
If he is being used by his sources, Dorfman argued, then it’s a two-way street.
“I’m using the user,” he said. “The average guy out there has got a right to every fact I can give him. Doesn’t every guy have a right to know what the chosen few know? What is the average guy anyway, a leper?”
Dorfman’s stock and trade is to report that a well-heeled investor has purchased a small equity stake in a company, invariably one rumored as a takeover target. This information is valuable, he argued, because it provides a window “on what the big money is doing” before the investor must publicly disclose his holdings.
Although Dorfman said, “It’s not my job to predict mergers and acquisitions,” he will often describe the investor as a “raider” who is “seriously considering” launching a takeover.
The problem is that the alleged takeovers often do not occur, but anticipation that they might frequently sends the stocks running up. Dorfman said this is not his concern, nor is it when stocks tumble back down when the “serious consideration” turns out otherwise.
Jacobs Comments
“Is it news when a big-name investor is dallying around in a stock?” Petruno asked. “I maintain that it is. Yeah, it doesn’t always pan out, but the stories are written to say that someone “may’ or “might’ do something.”
The targets of Dorfman’s stories say that it is impossible for him to make such observations based on any real knowledge. “I can tell you there is nobody that knows what I’m doing until I do it,” said Irwin Jacobs, a frequent subject of Dorfman columns. “I’ve always had a real problem with speculation. If I’m not quoted as saying I’m going to do it, I surely wouldn’t guarantee it’s going to happen.”
In the past year, Dorfman has reported that Jacobs-led takeover offers were imminent for Greyhound, CBI Industries, Avon Products and CML Group. Only the Avon report was solid. Meanwhile, Dorfman did not report Jacobs’ moves on Tidewater Inc. and Shaklee Corp., or the leveraged buyout of the company Jacobs heads, Minstar Inc.
Some people believe the lack of access to a putative raider can leave Dorfman in the position of passing on information from second-hand sources who may not have as much insight as Dorfman implies.
A Dorfman column last month about Campbell Soup Co. reported the possibility that friction within the controlling Dorrance family would lead it to sell off assets. The story had been making the rounds in the three months since the death of family patriarch John Dorrance Jr. and Dorfman added no new details to the old scuttlebutt.
“It made it sound as if he was privy to all kinds of information,” said Marcia Atcheson, Campbell’s director of investor relations. “As far as I know there is no substance to any of that.” Last week’s restructuring announcement did not follow Dorfman’s scenario.
Some of Dorfman’s peers, while generally expressing admiration for him, wonder if the pressure to come up with big scoops can take its toll. “Dan is too smart to do anything that would violate ethical standards,” said Gene Marcial, who writes the influential “Inside Wall Street” column at Business Week. “I think his biggest problem is to get the story from the right sources. He really tries to be as accurate as he can. But in the process he probably gets his share of bum stories.”
Dorfman dismisses criticism as merely the product of jealousy. He suggested that it has something to do with his fame and power, and his salary.
Workaholic Loner
Dorfman won’t confirm a figure except to say he has a five-year contract with USA Today, but it has been reported at $250,000 a year, plus additional income from CNN, which easily places him among the highest-paid financial reporters, if not the highest.
Instead of living the sybaritic life style that his income and position might entitle him to, Dorfman characterized his daily existence as that of a workaholic loner.
He lives in a rented one-bedroom apartment in Manhattan; he recently traded up from a studio. He walks the 18 blocks to his office each morning, usually has a low-cholesterol lunch at his desk and has dinner with sources.
With two jobs, he claims to put in an average work week of 75 hours. For relaxation, he likes to “get lost in some place where no one knows me.” Divorced, the father of a grown daughter, Dorfman expressed a desire to remarry and raise another child.
To those skeptical of his work, Dorfman allowed that a certain amount of skepticism is appropriate. “You’re off your rocker if you trade just on the basis of what I or any other journalist reports,” he said.
Then again, that’s not to say Dan Dorfman doesn’t believe in Dan Dorfman. “I don’t want to come off like a (expletive) braggart,” he said, “but my point is, if I’m the highest paid, maybe I’m worth it.”
