Adam Penenberg has a deep, passionate love for old-fashioned investigative reporting, but he is also a child of the Internet. So, when he felt that old-fashioned journalistic ethics were being compromised by the Department of Justice and his editor-bosses at Forbes, he used the Internet to present his case to the court of public opinion.

In my view, Penenberg has the best sources among hackers of any reporter in the nation. In fall 1998, he tapped those sources, painstakingly chronicling in the pages of Forbes the details of an attack on The New York Times Web site by a gang of hackers calling themselves HFG.

On Sept. 13, 1998, HFG, an acronym for "Hacking for Girlies," defaced the home page of The New York Times on the Web as retribution for what they considered biased coverage of the arrest and prosecution of hacker Kevin Mitnick. They were angered by the fact that Times reporter John Markoff wrote a book with Mitnick's nemesis, Tsutomu Shimomura, titled Takedown: The Pursuit and Capture of Kevin Mitnick, America's Most Wanted Computer Outlaw (Hyperion 1996). They were even more upset that Markoff and Shimomura had sold movie rights to the book. In their minds, the authors were profiting from distorted reporting.

HFG also bragged of other illegal hacks they got away with. Penenberg put it all into a 2,300-word article, which Forbes published in its Nov. 18, 1998 issue.

Penenberg had joined Forbes in 1998. He quickly became a star reporter, was named a senior editor and, when the Internet came along, was given his own column for Forbes.com, the magazine's monthly technology publication. In return for a six-figure salary, Penenberg gave Forbes exclusive stories about the world of hackers.

About a year after Penenberg's HFG story appeared, he received a phone call from Forbes attorney Tennyson Schad, who informed him the Department of Justice was threatening to subpoena Penenberg to testify before a grand jury, where he would have to reveal his sources for the story.

Penenberg told Schad, a highly regarded civil-libel attorney, that he had two words for the feds and their investigation - the second of which was "off."

Penenberg recalls that Schad "started to argue with me, to tell me I was being naive and inflexible and that the courts had been packed with Reagan appointees and that I'd never win this." Penenberg recalls telling the lawyer, "I can't become an informer. It would ruin my career and ruin Forbes' credibility."

A week later, Schad called and said the feds had amended their demands. Now all Penenberg had to do was testify that every fact in his story was true and accurate. Penenberg recalls that the conversation got heated when he pointed out the feds' obvious ruse. Once they got him before the grand jury, all deals would be off; he'd have to answer any question the U.S. Attorney or any grand juror might ask.

Instinctively, Penenberg believed that Justice lawyers couldn't be trusted, a suspicion confirmed by a number of criminal lawyers. Schad denies "pushing" any deal with the feds. He asserts that he was presenting Penenberg with the facts as they then stood.

Penenberg lawyers up

Penenberg decided to hire his own counsel, James Rehnquist, a Boston lawyer who had worked for the Justice Department. Rehnquist, the son of Supreme Court Chief Justice William Rehnquist, agreed to take the case. Since Penenberg could ruin his career if he were to cooperate with the feds, Rehnquist counseled him to refuse any requests for cooperation from Justice. Penenberg had already come to the same conclusion. Between testifying and jail, he'd choose jail.

Penenberg's relationship with the magazine, its editors and owners was sealed June 7 in a letter Schad wrote to Rehnquist. The letter called Penenberg's retention of his own attorney, a "belts-and-suspenders approach." In fact, it is not unusual for reporters to hire their own lawyers in civil or criminal cases. Some publications even pick up the tab for this, recognizing an inherent conflict of interest, since it is the reporter, not the publisher, publishing executives or editors, who could ultimately land in a jail cell.

"Adam has taken the position," Schad wrote, "that he will not testify before the grand jury, nor will he go before the jury in a prearranged compromise to testify as to the truthfulness of the article, despite the fact that such a failure could give rise to a suspicion that the article is not true and accurate. He maintains he will go to jail first."

Just as ominous was Schad's own ambivalence about the magazine's level of support for Penenberg.

"While Forbes itself has yet to decide just how far it is willing to go to fight any government subpoena," he wrote, "it will not be put in a position of having to fight an endless series of legal maneuvers and possible appeals without having any control over such litigation."

Schad concluded that the U.S. Attorney "once again is trying to arrange a meeting with Forbes to work out an accommodation." In other words, there were limits to how far Forbes would go to protect Penenberg's First Amendment privileges, and an "accommodation" was being considered without consulting Penenberg.

In Penenberg's mind, Forbes had abandoned him; in terms of journalistic ethics, there could be no accommodating the feds. He felt he had no alternative but to resign. But he was determined to resign on his own terms.

Penenberg's resignation, his masterful spin control and the consequences of his actions will be the subject of next week's column.