Prepare for the Hunt

What sets investigative business reporting apart from the daily fare of business news, for me, is its mission: holding those with financial and economic power accountable for the impact they have on the rest of us.

But how do you prepare yourself to do that? First, by mastering the documents in the case. There is a reason that investigative reporting is often called "document-based" reporting -- some of the best stories are found in the fine print!?And some of the best fine print is found at the Securities and Exchange Commission, where every publicly traded company must regularly file reports on its financial condition and business activities. The bad news is that there are dozens of SEC forms and filings, but the good news is that you really only need to become fluent in five of them.

The first is the registration statement, which is also called the Form S-1. For companies new to the marketplace, it usually includes a prospectus.?For maximum usefulness, order the exhibits too -- they may include such jewels as the CEO's employment contract or a list of the company's real estate around the world.

The second is the Form 10-K, and its quarterly version, the Form 10-Q. (Foreign companies file a similar report called a Form 20-F.) It is much richer than the glossy annual report, which is chiefly useful as a barometer of the CEO's ego. To satisfy the federal full disclosure requirements, a material fact must be in the company's Form 10 filings -- it need not be in the annual report.?So if you only read the annual report, you may miss all the juicy stuff.

The third form, and my personal favorite, is the proxy statement.?The proxy statement is the equivalent of those voter information booklets you get from City Hall before the election.?It announces the time and place of the annual meeting; discloses how much executives and board members are paid; describes any side deals they have with the company; provides their resumes; and lists any questions that shareholders will vote on at the meeting.

The Form 13-D must be filed by any outside investor who buys 5 percent or more of a public company's stock. It can reveal interesting information about those outside investors, even if the investor is a private partnership or individual.?And finally, the Form 8-K is the official press release, a report of material event in the life of the company.

These five documents constitute the basic information kit on any publicly traded company. But you also want to become adept at researching federal and state court records, federal bankruptcy court records, and the records of the various agencies that regulate businesses. (Okay, it will take a lifetime, but it will be fun!)

But don't forget that documents are just the beginning of your search, not the end.?At their best, they steer you to people, arm you with questions, and help you assemble the background information.?You still need sources -- human beings!?? and business sources are much harder to cultivate than government sources.?You should think of "source cultivation" as a major part of your job: attend conferences, collect business cards, follow up with telephone calls or personal meetings, read trade journals, seek out industry consultants, and get acquainted with the lawyers who specialize in the business you're interested in.

Then, sit down and plan. Most investigative projects are won or lost on the drawing board. When you think you see a project ahead, try to reduce it to a simple thesis, a question you're going to try to answer.?Then ask yourself, "Why does the answer matter?" That's the litmus test -- the piece of the puzzle that has to persuade your editor to turn you loose and, later, persuade your reader to stick with you. Then, try to list everything you already know about this topic.?Follow that with a list, as detailed as possible, of everything you need to learn to test your thesis.?Who would know that information??Who would be most likely to share it with you?

Once you have broken the enterprise into as many small pieces as possible, you have a credible idea of the magnitude of your task.?Is your project going to take a month??A year??The rest of your life? Armed with that sense of scale, you can make reasonable promises to editors, with a shot at keeping them. And keeping your promises to editors is the best way to gain credibility as an investigative reporter.

Happy hunting!

Copyright © 2008 Donald W. Reynolds National Center for Business Journalism