Reporter’s ‘Tape Saga’ Prompts a Legal Battle : Her Carelessness in Handling Recorded Notes Leads to Constitutional Issues

PHOENIX — It started with simple carelessness: A reporter inadvertently left a cassette tape in the office of a real estate developer she had interviewed as part of a big financial news story.

By the time Phoenix Gazette reporter Leslie Irwin returned to retrieve the cassette, however, she knew the developer had listened to the tape and heard, among other things, unflattering remarks she made about him to other sources.

Worse, the sources were federal banking regulators leaking confidential information to Irwin as part of her coverage of the legal battle over control of Lincoln Savings & Loan Assn.

Refuses to Return Tape

Irwin asked for the tape back. The developer, Conley Wolfswinkel, refused, and instead gave the tape to the attorneys for Charles H. Keating Jr., chairman of Lincoln’s parent company, American Continental Corp.

By the time she left the Gazette in late August to go back to school, Irwin saw the conflict over the tape grow into a First and Fourth Amendment battle that reached the Arizona Supreme Court.

In addition, the issue has raised new questions about the relationship between reporters, their sources and their increasing use of tape recordings as notes. The incident illustrated how important such tapes have become to most reporters, and the horrendous legal problems that can result when the reporter loses control of them.

For example, it is against federal law for regulators to release confidential information about banks’ clients, and the Justice Department is now contemplating asking a grand jury to hear the tape and consider issuing subpoenas. That could force a fight if Irwin and the Gazette are asked by a grand jury to reveal the names of Irwin’s contacts on the tape.

The “tape saga” began weeks before Irwin’s June 2 interview with Wolfswinkel. Phoenix-based American Continental declared bankruptcy on April 13, and federal regulators took over its Lincoln subsidiary the next day. Irwin, working for the 112,000-circulation afternoon Gazette, was one of the reporters scoring exclusives on the American/Lincoln story based on reports from unnamed regulators.

A. Melvin McDonald, a former U.S. attorney retained by Keating, charged that regulators leaked confidential (and in some cases inaccurate) information to friendly reporters to improperly build a case for taking over Lincoln.

In this atmosphere, Irwin arranged the interview with Wolfswinkel, a friend of Keating’s. She brought her cassette recorder, which was loaded with a tape containing interviews with federal banking regulators, among other conversations.

She realized her recorder was low on power, and Wolfswinkel offered her use of his office cassette machine, which, they quickly found, was a player only. He found a third machine, and she finished the interview using a cassette that was in the third recorder, inadvertently leaving her cassette in Wolfswinkel’s player.

Arranges for Pickup

Wolfswinkel telephoned her and arranged for her to pick it up, but he listened to the tape in the meantime.

The tape, a portion of which was subsequently played at a press conference called by Keating’s lawyers, showed that Irwin was receiving confidential information and that one source, apparently a federal regulator, was willing to help her interpret it and fill in other information. In addition, Irwin told her source that she was working on a story on the “incestuous relationship” between Lincoln and its major borrowers, including Wolfswinkel.

Wolfswinkel had changed his mind about surrendering the tape when Irwin returned to his office.

Instead, he forwarded the tape to McDonald, who played it to several people involved in American Continental’s bankruptcy and litigation, sent a copy to the Public Integrity section of the Department of Justice in Washington and gave the original to the Phoenix FBI office.

The Gazette sued Wolfswinkel and McDonald for the return of the tape. In an unusual ruling, Maricopa County Superior Court Judge Stanley Goldfarb issued a temporary restraining order entitling the Gazette to the return of the tape, and preventing the defendants from making the contents public--but only for 10 days.

Goldfarb said that he wanted the Gazette to have enough time to publish a story from the tape, but that after that period of time, Keating’s attorneys were free to make the contents public.

Keating’s legal team appealed, contending that the newspaper had no right to the tape until the Justice Department finished its probe. But an appellate court and the Arizona Supreme Court upheld Goldfarb’s decision.

The paper never did publish a story exclusively based on the tape. In a July 6 column about the tape controversy, Pam Johnson, managing editor of the Gazette, said the tape’s only value was as background on a continuing story. She also said the tape’s contents did not support American Continental’s claims that regulators were undermining the company with leaks.

McDonald responded by playing reporters about 15 minutes worth of the tape. American Continental attorneys are now considering whether to enter the tape into evidence in their three suits against the federal government over the Lincoln takeover.

The tape saga clearly has affected reporters covering the S&L; crisis. Irwin declined to be interviewed. But Steve Pizzo, a writer for National Thrift and co-writer of “Inside Job: The Looting of America’s Savings and Loans,” said government sources he uses were surprised by Irwin’s sloppy handling of her tape.

“Everybody is interested now in the ground rules,” Pizzo said. “I’ve been on the beat long enough that my sources are still talking, but they are more likely to ask: Do I tape? Do the tapes leave my office? Do I erase tapes regularly?”

Steve Webb is a free-lance writer based in Phoenix.