A billionaire who has been crusading to cut public pensions stands at the center of a controversy that has embarrassed the Public Broadcasting Service and raised questions about the financing of modern news-gathering operations.
The Laura and John Arnold Foundation, headed by billionaire former energy trader John Arnold, financed a series of reports called “Pension Peril,” donating $3.5 million to WNET, public television’s New York-based flagship station, which produced the series.
According to an expose published February 12 on PandoDaily, a Silicon Valley technology website, the reports promoted public pension cuts – a central objective of the Arnold Foundation – without informing viewers that the foundation was the sole underwriter of the series. Instead, the segments, which aired on hundreds of public television stations nationwide, were presented as objective news, with some airing on the weekend edition of the PBS News Hour.
While the Arnold Foundation’s name appeared on a list of donors shown at the end of the News Hour broadcast, it did not disclose that they were the sole funders of the pension series or that Arnold had taken an aggressive political stand on the issue.
After the PandoDaily article appeared, the PBS ombudsman acknowledged that the funding arrangement had failed “PBS’s own ‘perception test'” and criticized the network for a lack of transparency. Shortly thereafter, WNET and PBS issued a joint statement saying they would return the $3.5 million “to eliminate any perception” that its reporting had been compromised. The station stood by the content of the series, however, asserting that it had not yielded editorial control.
“Perhaps what is saddest about this episode is that PBS and WNET failed to acknowledge that using money from the Arnold Foundation to underwrite a report on pensions was, in and of itself, a conflict, not merely the appearance of one,” said Richard Lorant, a former Associated Press journalist and director of client relations for Berman DeValerio.
“John Arnold and his allies have for years promoted a distorted view that both exaggerates the problems of traditional public pension funds and blames public employees for those problems,” Lorant said. “They don’t just have a dog in that hunt. They’ve got a whole pack.”
The Laura and John Arnold Foundation says that cutting public pensions is a necessary step in stabilizing the precarious finances of many American states and cities whose pension obligations are badly underfunded. It advocates replacing defined benefit plans with 401K plans, with both employers and employees contributing financing. Perhaps most controversially, the foundation argues that governments can and should reduce pension liabilities by modifying formulas established at the time of employment. In most states, such established formulas – unlike cost of living adjustments, for example – are treated as contracts that cannot be diminished or impaired.
The PandoDaily article was written by journalist David Sirota, who described John Arnold, who worked for Enron until its 2002 collapse, as “the nation’s leading anti-pension political activist.” Arnold’s foundation has funded various ballot initiatives, politicians, PACs and think tanks dedicated to restructuring public pensions.
The Arnold Foundation is not the only charitable organization pushing questionable pension “reform.” In California, Arnold has teamed with the Pew Center on the States, part of the Pew Charitable Trusts, to promote a ballot initiative that would alter the state’s constitution to allow for wide-ranging cuts in benefits to both current and future retirees. The initiative was proposed by San Jose Mayor Chuck Reed, who has raised most of the money for his supposedly “bipartisan” campaign from conservatives.
The alliance between Arnold and the Pew Center on the States is particularly troubling because of the Pew Charitable Trusts’ reputation for integrity.
“It’s a shame that the Pew Charitable Trusts, an otherwise well respected organization, is letting itself be used by the John Arnold Foundation in an effort to deprive public employees of their hard-earned and well deserved pensions,” said Kevin Shelley, special counsel to Berman DeValerio and former California Secretary of State.
The same might be said for PBS and for WNET, which said it sought funding from the Laura and John Arnold Foundation for the series of pension reports, which were slated to run over two years on scores of public television stations.
Although it receives taxpayer support, public broadcasting has relied increasingly on corporate and foundation funding for financial support in recent years. To protect against the potential conflicts that such funding arrangements present, PBS has rules prohibiting a donor from exercising editorial control or “pre-ordaining” the conclusion a viewer should draw from a program’s content.
By failing to enforce those rules in the case of “Pension Perils,” the PandoDaily article concluded, PBS produced “an ideological advertisement funded by a billionaire trying to manipulate public policy.”
*In August 2017, our firm name changed to Berman Tabacco. Case references and content published before that date may refer to the firm under our prior name, Berman DeValerio.