A new nonprofit news outlet wants to level the playing field for regular investors

Originally published December 7, 2012.

By Maddy Roth

What began as a hobby is now turning into a full-time effort devoted to reversing the brutal decline in long-form financial investigative reporting.

Former Fortune Magazine and New York Post business reporter Roddy Boyd has launched the Wilmington, North Carolina-based, online Southern Investigative Reporting Foundation, a nonprofit news outlet focused on producing document-driven investigations into companies via old-fashioned shoe leather reporting.

After leaving Fortune Magazine in 2008 during what Boyd calls a “disastrous ad environment where the magazine laid off dozens of people,” the journalist began working for a hedge fund while simultaneously running a Web site called the Financial Investigator. “It was a hobby,” Boyd says. “Some people do woodworking, and I would just kind of speak to sources, nose around quarterly and annual reports, lawsuits about publicly traded companies, and then write stories.”

The Financial Investigator built a following. About 70 percent of its readers were individual investors and the remaining 30 percent were readers interested in the investigative work. The success of this small endeavor led Boyd to believe he could help fill a void in contemporary media.

“I saw clearly that the biggest inequality in America is the information access gap between professional investors and regular investors,” Boyd says. “No one in a nation of 300 million people is regularly doing investigative work into American companies. Whatever you think happened with the credit crisis or economic collapse and then the aftereffects, a big part of that was that the media didn’t understand what was going on, and people who did, didn’t have the horsepower to get it done.”

Boyd saw that as media budgets shrank and investigative reporting sagged under the weight of the financial crisis and the impact of the digital revolution on traditional journalism, business reporting in particular took the hit. And because of this, as SIRF’s brochure reads, “concerned citizens, legislators and regulators have had little insight into the workings of investment and commercial banks, rating agencies and other powerful financial institutions as they have expanded, embarked on complex fiscal arrangements, raked in billions of dollars in profit and, in some cases, abruptly collapsed.”

And so Boyd, author of “Fatal Risk: A Cautionary Tale of AIG’s Corporate Suicide,” launched SIRF last month. He built a board of directors, hired a lawyer and accountants, and is taking the first steps toward constructing a nonprofit news outlet from scratch.

He settled on the nonprofit model because he was determined to avoid conflicts of interest. He wants to make it clear that the foundation and its future employees will possess no economic interest in any companies they report on.

“We do not feel that anyone else is doing anything like this in the mainstream media,” Boyd says. “While some short-sellers do brilliant research, they are doing it to make a short-term profit. We do it for free.”

Charles Lewis, a former “60 Minutes” producer who founded the Center for Public Integrity and currently serves as executive editor of the Investigative Reporting Workshop at American University, finds it interesting that Boyd is going the nonprofit route.

“A lot of Americans are investors and would be willing to pay for premium information that they trust – that’s why publications like the Wall Street Journal never had a problem with a paywall,” Lewis says. He believes Boyd could have constructed SIRF as a for-profit venture.

On the flip side, the fact that Boyd wants to share his content for free is the very reason why Kevin Davis, CEO and executive director of the Investigative News Network, a consortium of 60 nonprofit newsrooms, is so excited about SIRF’s application for INN membership.

“Typically, if you look at the traditional business-focused publications, they all – while they have a stronger subscription base – still heavily rely on advertising from the very sectors and organizations they cover,” Davis says. “While the business model relies on those folks, there is an inherent conflict of interest.”

Moving to a nonprofit model allows publications to steer clear of relying on the sector they’re writing about. “I believe in the long run, the content [a nonprofit] has produced will have less inherent conflict and be of much higher quality,” Davis says.

Still, Boyd, who in June was designated one of the “25 most dangerous people in financial media” by The Huffington Post – dangerous in a good way–will likely encounter fundraising hurdles as he builds his nascent news outlet. Like many nonprofits, SIRF will rely heavily on big-money donors, which may be problematic. Speaking from his extensive personal experience in the nonprofit realm, Lewis says philanthropists are usually interested in more “lofty” subjects such as human rights, democracy and education. “Investigations into a certain company are in most part of less interest to philanthropic donors,” he says.

As for SIRF’s long-term success, Davis says it will have to carve out an audience that craves what it is providing. “It’s not enough to produce good journalism,” he says. “You have to understand that you are educational in nature, and you have to understand what role you play in the marketplace. If you can’t put together a plausible plan with sound business and journalism practices..you’re going to have a hard time surviving.”

Davis hopes that SIRF will be able to create mutually beneficial relationships with other news entities, much like the successful nonprofit investigative news outlet ProPublica has.

Sustainability, of course, is a nonprofit’s major problem. “The key is to find a way to generate multiple revenue streams and not rely on some sort of national foundation funding, because that’s not a sustainable business model,” says Mark Horvit, executive director for Investigative Reporters and Editors.

Horvit believes financial investigation is a great area for SIRF to pursue because it provides a built-in market. “I think there’s a great need for this, from the Occupy [Wall Street] movement to the general dissatisfaction with a lot of what’s going on in business and finance,” he says. “It’s not a tough sell right now.”

Lewis agrees that SIRF’s mission is crucial. He sees financial investigations as a top priority, citing the failures of the mainstream media during the nation’s economic collapse. “Wall Street and Washington have always had a cozy relationship that’s gone largely uncovered by the media, and the daily business press in the U.S., for the most part, failed to predict or to dig deep around the time of the meltdown,” he says. Because much of the mainstream media was so focused on the daily grind, “they missed the significant story of extraordinary fraud that almost brought down America.”

“I’ve been wanting folks to support this kind of work for years and years, and I’m hoping they do, and that someone’s finally come to their senses that this is a very serious problem in this country,” Lewis says.

Boyd says he’s ready for what lies ahead. He says SIRF will seek funding from foundations and individual donors, with an emphasis on major accounting and law firms with foundations, as well as forensic foundations and universities that provide grants. At this point, Boyd has verbal commitments of more than $20,000. However, that funding depends on the 501(c)(3) tax exemption he’s still waiting to receive, which his accountants told him to expect soon.

SIRF has raised about $2,000 from individual readers contributing via Paypal thus far.

Boyd may not have the horsepower yet, but once SIRF is able to secure a real budget, he hopes to build a strong staff. One idea is to look to journalism schools to find young reporters and train them in investigative financial work, since “established reporters tend to be more set in their ways.” Or, he will seek out experienced financial reporters who already know how to carry out intensive document research and how to write strong narratives.

“Every phone call I’ve had someone says, ‘Man, I can’t tell you how important the Wall Street Journal or Fortune Magazine used to be and now no one cares’ – no one does that kind of reporting anymore, and that’s important,” Boyd says. “And that’s my marketing strategy, looking to people who need financial knowledge.. making an appeal to people and saying we’re doing what you can’t.”

AJR editorial assistant Maddy Roth is a student at the Philip Merrill College of Journalism at the University of Maryland.