Sad sad tale...

Plenty of people seem to be pretty upset about the sad tale of Jared Paul Stern and his alleged attempts to shakedown billionaire entrepreneur Ron Burkle. But why? The accusations, if true, would only take the lead from some awfully large and very legitimate businesses. Here’s how:

You will likely recall that Stern is the gossip-mongering New York Post freelancer who allegedly demanded that Burkle pony-up $220,000 in exchange for killing potentially scandalous stories that would otherwise be published in the Post’s scurrilous Page Six column. Stern says there was a misunderstanding and that he really only wanted investment capital for his clothing line company, Skull & Bones.

What struck me, however, was not so much the entrepreneurial audacity of Stern, or even that journalism may have hit a new low (it hasn’t, we still have Jayson Blair). Rather, I noted how similar the alleged scam seems to be to the business practices of some very large and legitimate U.S. businesses. The only major difference is that Stern seems to be thinking small in comparison.

Consider Richard Smith. He’s chairman and chief executive of Equifax, one the country’s three largest consumer credit rating agencies. Like the other two firms, Experian and TransUnion, Smith’s company makes money collecting and selling information on how you pay your bills to interested parties such as banks, credit card companies and potential employers.

It’s lucrative business. Last year’s revenue at Equifax totaled $1.4 billion. And Smith is doing a hell of a lot better than Stern. He only joined the company in September last year, but his 2005 pay package included $4.8 million in cash, plus another $2.9 million in stock. Not bad for four months work!

Now here’s the similarity with the New York Post scandal. While Stern was allegedly seeking to profit by trading in Burkle’s social character, Equifax, and the others, make money by dealing in your financial reputation.

The Stern-type offer is to let your reputation stay free of rumors, if you pay. Although I can’t be sure, I bet Stern would have honored the deal.

Contrast that with what Equifax offers customers. Company marketing geniuses know that damning information routinely appears on credit reports, much to your detriment. Therefore, they’ve created the idea of selling you information about yourself. For instance, an advertisement on the Equifax website screams, “Don't Let Identity Thieves Ruin Your Credit.” Then they offer to tell you if anyone is besmirching your good name for a mere $9.95 a month subscription.

There is no hint of irony that if credit agencies actually bothered to check out what they posted then you wouldn’t need any protection.

And that is why their deal is inherently much worse than Stern’s. These companies are quite happy to take the money from you and yet still keep bad-mouthing you to the world, even when what they say might not be true.

If you have any doubts, try getting a credit agency to fix inaccurate data.