In case you missed the news just before the long holiday weekend, Pando's "Wolf of Sesame Street" investigation into rule-breaking and conflicts of interest in public broadcasting led New York's WNET to return $3.5 million to anti-pension activist John Arnold. It has also led to calls for reform by the ombudsmen from both PBS and the larger Corporation for Public Broadcasting.

Though the WNET announcement came (perhaps deliberately) late in the day, it quickly reverberated throughout the Internet and became one of those perfect stories they recount to you in journalism school but which rarely play out so straightforwardly in real life.

You know how it goes: reporters diligently research a story about clear wrongdoing inside a powerful institution, a news outlet publishes said story, and the powerful institution is forced to change its ways. J-school professors love tales like these because they prove that journalism is a worthy profession that can have real-world results.

Amid all the congratulations and digital high-fives I and my editors received over the weekend, I found myself at once exhilarated, exhausted and a bit depressed (I've written a bit more about my own personal emotional roller coaster over at futureofpando.com). I also realized that what happened last week didn't happen in a vacuum and isn't the end. There are some big takeaways that are worth pondering as we move forward.

Takeaway no. 1: What public broadcasting's response to Pando's reporting says about public accountability

Public broadcasting officials spent most of last week defiantly insisting that the "Pension Peril" series would continue. But after Pando's story spread like wildfire and PBS member stations in Oregon and Arizona demanded answers, WNET officials reversed course and shut the project down. They deserve some credit for reacting comparatively quickly.

"Comparatively" is the operative word - frankly, I was fairly stunned that WNET returned the money within a few days because, having covered media, politics and business for the better part of a decade, I know powerful institutions almost never admit error, much less send millions of dollars back to a politically powerful billionaire. Indeed, had this been a major for-profit media conglomerate rather than a quasi-public one, the response to Pando's reporting probably would have been a big middle finger.

The relative speed with which public broadcasting officials responded highlights a key upside of public media, or at least the PBS image being tied to the core idea of a public media. Though public broadcasting is increasingly being taken over by for-profit corporate interests, its overall brand is that of a public institution. This, in fact, is precisely why ideological billionaires like John Arnold want their propaganda on PBS - it launders their special-interest agenda and presents it as public-minded.

Unlike for-profit media executives who answer only to shareholders, public broadcasting officials ultimately felt they had to reject Arnold's money in order to protect the idea that they are publicly accountable to member stations and "viewers like you." Whether or not public broadcasting really is as publicly controlled and accountable to the public as it wants to seem - and there's plenty of evidence it is not - it is not a bad thing that public broadcasting officials felt they had to pretend to try to live up to their brand.

Takeaway no. 2: What public broadcasting's response refuses to acknowledge about the need for transparency

That said, while returning the money, public broadcasting officials are still not releasing the terms of the grant agreement that they signed with the Arnold Foundation. Because of this, we plan to follow previous precedent and file a Freedom of Information Act request of the Corporation for Public Broadcasting for the terms of this agreement, and hope that such a FOIA request prompts a larger discussion of why any such contracts with PBS are secret.

Additionally, public broadcasting officials are not admitting there was anything actually wrong with soliciting an anti-pension ideologue to secretly fund anti-pension programming, and then embedding that programming in PBS News Hour broadcasts without explicit disclosure. Instead, WNET officials are doubling down on the same kind of deception and dissembling that led them to originally try to hide the fact that they had solicited an anti-pension billionaire to finance the series.

For instance, as the New York Times notes, WNET officials insisted that while the grant may violate the "perception" test, in practice the $3.5 million grant is perfectly acceptable "because the foundation’s goals of encouraging public discussion were separate from Mr. and Mrs. Arnold’s desire for reform." Yes, that's right - public broadcasting officials would have us believe that for the purposes of deciding what is and isn't a conflict of interest, there is supposedly a major difference between Laura and John Arnold and the Laura and John Arnold Foundation - even though the foundation is funded by the Arnolds and exists as the Arnolds' tax-exempt vehicle to champion their political agenda.

Foundation spokesperson Leila Walsh - perhaps nervous about losing that lucrative tax-exempt 501c3 status - desperately tried to reinforce this distinction without a difference by insisting the Laura and John Arnold foundation is separate from Laura and John Arnold. But on its face, this is ridiculous.

Takeaway no. 3: What public broadcasting's response refuses to admit about the way editorial control really operates

Additionally, WNET officials are only admitting to a "perception problem" of "optics." Somehow, they are still not acknowledging an actual problem of skewing the entire series frame ("peril") to presuppose the demonstrable falsehood that pensions are singularly bankrupting state and local governments. Somehow, they are still not acknowledging the actual problem of the de facto editorial influence that comes from a political ideologue reserving the right to cut off funding in the event that he doesn't like the views of the people running the program in question.

As Reuters Felix Salmon notes, public broadcasting officials are effectively saying they are returning the money only "because Sirota’s article came out, and it made PBS look bad" - not because there was an actual problem. Salmon goes on to describe why this is so dishonest:

The conflict here is, in reality, clear as day. Firstly, The Laura and John Arnold Foundation was the only sponsor of the Pensions in Peril series. (This despite the fact that, as LJAF spokeswoman Leila Walsh told me, “the grant to WNET was made with the explicit understanding that WNET would secure multiple funders for the project”.) Secondly, the Pensions in Peril series covered a California ballot initiative on pensions being run by San Jose mayor Chuck Reed. Thirdly, the ballot initiative was directly funded by John Arnold, and Reed himself thanked “people from the Arnold Foundation” for putting him in touch with other funders. In other words, the TV program covering the initiative got all of its funding from someone with an unapologetic dog in the fight. It’s hard to come up with a clearer conflict than that.

Of course, public broadcasting officials continue to insist that because Arnold allegedly exerted no direct editorial control over the content, this may look bad, but it is not nefarious. Yet, not only have they still not released the contract to let the public actually see if that's true in the editorial-control language in the agreement, they also fail to acknowledge the way editorial control really works in these matters.

As I documented in a series of Harper's magazine reports on newspaper moguls skewing coverage, editorial control rarely comes from direct orders. Typically, it comes from the overall frame, angle and assumptions being put in place to satisfy the obvious desires of financier in question. The same principle holds true in television matters.

As the Los Angeles Times' Michael Hiltzik notes in his report about the WNET/Arnold scandal, "What's insidious about this sort of corporate funding is that the real influence is implicit." In order to exert editorial control, Arnold didn't need to have the power to give orders to individual WNET reporters. Why? Because, as we noted in Pando's original report, the series was constructed to attract his financing (and prevent that financing from being cut off) by framing the series' around Arnold's biased propaganda that implies pensions are singularly bankrupting governments (they are not). Hiltzik goes on to explain how that skewed view then expressed itself in the "Pension Peril" series:

The "Pension Peril" installment on California paints municipal employee benefits as a driver of the bankruptcy of the city of Vallejo; you have to listen very carefully for the fleeting references to the role of the loss of a shipyard -- a major employer in town -- and the overall economic downturn.

Nor will you hear any reference to the real cause of underfunding of public employee pensions in California, which was the foolhardy decision in the 1990s to give municipalities a "holiday" on their annual pension contributions because the stock market was soaring so high. When the markets crashed in 2008, the rot created by that decision was exposed by the receding tide. (More recently, the rising markets have begun to restore health to the pension funds.) So why all the dissembling and parsing from public broadcasting officials? Why can't they just admit there is a real problem, not just a problem of "perception"?

My guess is that public broadcasting officials may not just be defending themselves and trying to save face in only this instance. They may know that they are have been and currently are engaged in plenty of deals like the Arnold/Pension Peril series - they may know, in other words, that there are many wolves lurking on Sesame Street. And so they may be preemptively defending themselves for fear that those other shady arrangements get exposed.

Takeaway no. 4: Public media has been put in a terrible position

Salmon points out that "the big problem is that public broadcasting has become dependent on corporate financing." That's because, as I noted in my syndicated newspaper column this week, the U.S. Congress has refused to adequately fund public media in the way most other industrialized nations do.

The result is a public media that's public mostly in name, but not in practice, governance or structure. Indeed, as Salmon notes, without adequate funding public television officials have "become very good at coming up with programming which represents corporate interests." They've done this because that - as opposed to honest journalism - is what will raise them the most money from those interests. After all, corporations with business before Congress and billionaires pushing their pension-cutting agenda in state legislatures are more willing to pay a premium for content that explicitly echoes their political messages.

To those interests, the native advertising potential of public television is, in marketing lingo, public broadcasting's unique selling proposition. And those special interests are far less willing to underwrite content that is just good independent journalism - especially since that might direct scrutiny at those funders.

So we end up with more propaganda like "The Pension Peril" and less reporting like, say, Frontline.

One solution to this is Congress simply funding public media at a similar level to other advanced industrial democracies, and then banning corporate contributions to that public media.

Another partial solution is for the Corporation for Public Broadcasting to ask the largest foundations like Ford, Rockefeller and Gates to establish a joint multi-billion-dollar trust whose annual interest earnings fund public broadcasting in much the same way endowments fund universities. It's not a perfect model, but it might mitigate the worst abuses happening now.

But then, right now, monied interests have the best of both worlds - a seemingly nonpartisan public institution so desperate for resources it is willing to rent its brand to those who will pony up a big enough grant. Why would they want to submit to a trust fund model?

Takeaway no. 5: This story embodies bigger questions in the political arena, and bigger changes in the media world

As we aggressively reported this story over the course of a few days, some critics of ours claimed on Twitter and in comments that we were making much ado about nothing. The funding of PBS by billionaires, some argued, is not a serious matter. In response, just read the reports by the PBS and CPB ombudsmen, or listen to the president of WNET, who in a letter to PBS stations said: "I want to assure you I understand how serious this is."

He is absolutely right that this is a serious issue, and in a few particular ways, you can't overstate the significance of the scandal and WNET's decision to return the $3.5 million.

From a purely political perspective, this story is a huge blow to John Arnold's legislative crusade to slash the pensions of police officers, firefighters, teachers and other public workers. This is a crusade we've been doggedly covering here at Pando - and will continue to doggedly cover because with trillions in retirees' pension cash on the line, the pension-slashing effort by Arnold and others is one of the biggest political stories of the era.

The WNET scandal potentially changes the dynamics of that political story. That's because when a venerable institution like PBS's flagship station says no to his money, it raises questions about why so many other institutions and individuals purporting to represent the public interest nonetheless accept his money. If we cannot trust PBS's Arnold-funded "Pension Peril" to be dispassionate and objective, why should anyone trust the anti-pension propaganda put out by the Pew Center on the States' pension project, which is also funded by a massive $4.8 million grant from Arnold? Likewise, why should anyone believe Arnold-funded politicians who have slashed public workers' pensions are doing so for any other reason than to attract his massive checks?

From a media perspective, WNET's decision is a big reminder that accountability journalism can have real results - and it can have those results without the help of the corporate media establishment that was once seen to be essential to any successful investigative journalism endeavor.

Remember, after Pando broke this story, the New York Times reported the outcome, but to date, not a single corporate-owned cable television outlet has dared to touch it (not even allegedly progressive leaning ones that purport to have an interest in covering the right-wing effort to slash public employee retirement benefits). Likewise, the Times only reported the story after the fact, even though WNET is right in its backyard.

Yet, despite all this, WNET and the larger public broadcasting system ultimately felt compelled to respond because - as I've previously reported - there now exists an entire alternate distribution system for journalism that doesn't play by the establishment's money- and power-worshiping rules.

In the old days - which is to say, a few years ago when this alternate distribution system didn't exist - there was far less chance that scandals like the Arnold/WNET scandal ever got reported, because most investigative reporting was done at conglomerates that have a vested financial interest in, say, avoiding a fight with a billionaire. As important, there was even less chance that if a story like that did happen to get reported, the story would get enough exposure to actually force a change.

Today, that news monopoly is finally ending. Major stories like the WNET/Arnold story that are there for the taking, but ignored by the legacy media - these and so many other stories like them can be broken at smaller outlets committed to journalism like Pando. And they can not only be broken open, they can also find a massive audience, whether or not the Old Media dinosaurs approve of the story.

As if deliberately underscoring that truism, consider that in the days since we broke our story, LittleSis broke a huge story about U.S. Senator Charles Schumer's (D-NY) conflict in the Time Warner-Comcast deal, and Schumer was forced to recuse himself from involvement in that deal. As with our story, the Old Media dinosaurs with far more resources didn't break the story about this powerful lawmaker, even though it was a secret hidden in plain sight, and even though it was connected to the hugely important story of the merger. They only covered it when LittleSis's report went viral and they were shamed into playing catchup - and when they did, many of them didn't even bother to mention which outlet originally broke it.

The point here is that our scoop on the Arnold/WNET scandal was merely one of many investigative revelations that have been broken -- and will continue to be broken -- at Pando, and, more generally, that have been broken in recent months by so many outlets challenging the Old Media monopoly. These episodes succinctly sum up how the power dynamics in the media world are changing - and changing for the better.

[Image credit: PBS]