Money Columnist Dorfman Is Fired Amid Investigation

Dan Dorfman, the controversial Wall Street commentator whose tips have often jolted stock prices, has been fired by Money magazine amid its internal investigation into his suspected ties to a stock promoter, the publication said Wednesday.

Dorfman has been on a paid leave of absence from the magazine since October, when BusinessWeek magazine broke word that federal authorities were looking into the columnist’s actions in connection with an insider-trading probe. He continues to provide regular commentaries on the stock market for the cable television network CNBC, which said Wednesday that it would stand behind Dorfman.

The continuing controversy surrounding Dorfman has raised anew long-running questions about the value and journalistic ethics of speculative stock market reporting. But the immediate reason for the dismissal on Monday of the popular columnist, Money said, is that he refused to reveal the names of his sources for his columns, hindering the magazine’s internal investigation. The magazine did not accuse him of any wrongdoing.

Money’s managing editor, Frank Lalli, said in a news release that regardless of what the magazine’s continuing probe discovers, “the serious issues raised about Dorfman and his sources convinced me that I had to know his sources for his Money columns. I needed that information to maintain my confidence in the quality of the information we publish.”

Time Inc., the Time Warner Inc. division that publishes Money, “has long understood that it is essential to protect sources,” Lalli continued. “We have defended that principle in court in the past and remain committed to it today. But protecting sources is not the issue.”

Dorfman fired back with a prepared statement of his own, asserting that his former publisher “has made demands on me that no responsible reporter can accept. It has informed me that it has terminated my relationship for refusing to disclose each confidential source for every story that has appeared in the 10 columns I have written for Money magazine, even though I was not asked for those sources before the columns were published and there has been no question about the accuracy and propriety of the stories.”

Dorfman cited his reporting in Money on the dealings of Time Warner as an example of why the request for him to turn over his sources “is so improper.”

“How could I possibly disclose to Time Inc. the source of that material?” Dorfman said.

CNBC, while continuing an internal investigation, supported Dorfman and called him an asset to the network. “We believe that a presumption of guilt coupled with a blanket request for all sources could have a chilling effect on the ability of journalists to do their jobs and protect the public interest,” CNBC said.

The network added that “we still have no reason to believe he has violated any law or failed to adhere to the standards of the company.”

Dorfman spent much of Wednesday closeted in his third-floor office at the CNBC building in Fort Lee, N.J. When he made his regularly scheduled broadcast from the cable channel’s sixth-floor studios, Dorfman made no mention of his Money termination except to quip, “Never a dull day.”

The Dorfman drama began after BusinessWeek, quoting unnamed sources, reported that the columnist and Donald Kessler, a public relations man said to be a frequent source of Dorfman’s stock tips, were under scrutiny by the U.S. attorney in Brooklyn for possible illegal insider trading, wire and mail fraud and violations of securities laws.

BusinessWeek said prosecutors are investigating allegations that Kessler was paid for introducing company managers to Dorfman and that Kessler in turn would pay Dorfman for mentioning his clients.

The Securities and Exchange Commission also is said to be investigating Dorfman’s relationship with Kessler. Neither the U.S. attorney’s office nor the SEC has officially confirmed the investigations.

Dorfman repeatedly has denied any wrongdoing and said he has “never asked for or received payments for any stories.”

Forty years a journalist, Dorfman was hired by CNBC in 1990 and began writing his Money magazine column, called “Flash,” a year ago. Dorfman, 63, previously wrote for such publications as USA Today and the Wall Street Journal.

For investors, financial experts said, the Dorfman affair reflects the hazards inherent in relying uncritically on tips from Wall Street columnists--particularly those who, like Dorfman, often quote unnamed sources. Investors need to be mindful that many so-called tips may be planted by promoters seeking to boost the price of stock in which they have a financial stake.

Published stock tips should be no more than “the starting point for research” into potential investments, said John Markese, president of the American Assn. of Individual Investors, a nonprofit group.

Moreover, even when a published stock tip is based on solid information, Markese said, “by the time an individual investor can act on information in the media, that information has already been impounded in the stock price.” As a result, he said, it’s too late for investors to profit from the information.