FORBES’ BIG CYBERFLAP

FORBES is in a tussle with its cybersleuth columnist, Adam Penenberg.

The situation between them has been strained, to say the least, in recent weeks as the magazine responded to requests for information to testify in a federal investigation into cyberhacking.

Penenberg felt that cooperating in any way would compromise his journalistic integrity.

Forbes officials say they were trying to work out a deal where Penenberg would testify but not reveal sources from his Nov. 16, 1998, story about the hacker who busted into The New York Times.

Despite the worsening relations, Forbes Managing Editor Dennis Kneale says he was flabbergasted to read in Howard Kurtz‘s media column in the Washington Post on Monday that Penenberg had resigned in protest.

“This comes as a complete shock to us at Forbes,” says Kneale. “We didn’t know anything about it until we read it in the Washington Post.”

Penenberg rocketed to fame in May 1998 when, as a writer for the Forbes Web site, he exposed that prolific New Republic writer Stephen Glass had fabricated a story on hackers. It lead to an expose in which Glass was forced to resign after admitting he had fabricated sources and anecdotes throughout his journalism career at the New Republic and elsewhere.

Penenberg got a big promotion to write about cybercrime for the ink-on-paper edition of Forbes. His first big story was “Inside the Secret World of Hackers.”

“I tracked the hacker and did the story from inside their lair,” says Penenberg.

Penenberg says he feels any hint of cooperating with the Department of Justice would compromise him.

“The only way I get these stories is because my sources trust me. If anyone thought I was cooperating with the Department of Justice, it would ruin my career.”

Kneale thinks the resignation is a publicity stunt to help sell a book that Penenberg is writing for Perseus Press. “Inside the Secret World of Hackers” is being co-written with Marc Barry.

“He’s a talented writer, but he’s a little precious,” says Kneale.

Kneale says that Forbes lawyers had worked out a compromise to testify only that the story was accurate – without revealing sources. “Nobody is above the law,” insists Kneale. “If he had come to me, we could have worked something out.”

Penenberg shoots back, “The last thing I wanted at this time in my life was to resign.

He hired a lawyer, who told him that no prearranged deal with the Department of Justice was enforceable and that investigators could widen the scope of their questions once he got on the stand. Penenberg says he asked Forbes to pay his legal bills. When it refused, Penenberg says he decided to quit.

*

The New Yorker is beefing up its Talk of the Town section, raiding The New York Observer for Nick Paumgarten, to be its deputy editor. He replaces Sue Kelly Welsh, who left last month to be a senior editor of W.

Sources say Paumgarten beat out five other contenders – Talk’s Virginia Heffernan, freelancer Emily Aiken, Lingua Franca’s Sarah Smith and two in-house candidates: Andy Young (who has since decamped for Brill’s Content) and Emily Nunn.

New Yorker Editor-in-Chief David Remnick says Paumgarten will do both editing and writing for Talk of the Town and will edit financial columnist James Surowiecki. At the Observer, Paumgarten was responsible for the Financial Observer and New York World sections.

“He has a great news sense, a good sense of story and he’s funny,” says Remnick. “Funny is the hardest thing to find.”

*

George magazine will go with split covers for its August issue, with half showing the late President John F. Kennedy and the other half showing former President Ronald Reagan.

George Editor-in-Chief Frank Lalli is gambling that the split covers will help maintain the magazine’s strong newsstand sales streak of the past year.

In year-to-year comparisons, George is now going up against last August’s issue – which hit newsstands at the time of John’s death and quickly sold out.

Both covers of the current edition will carry the cutline, “Who Will Make Us Proud Again?”

The newsstand sale results should serve as a rough barometer as to who was really the most popular president of the last half-century.

“At the end, we’ll be able to tell you who sold better – Kennedy or Reagan,” says Lalli.

Even before John Kennedy Jr.’s death a year ago on July 16, the magazine was experiencing an advertising erosion. The ad shortfall only worsened after JFK Jr. died. But the magazine has shown surprisingly strong circulation gains.

Though George is believed to be losing about $7 million a year, Hachette Filipacchi CEO Jack Kliger expects advertising to eventually catch up to the gains the magazine has made on the circulation and design side.

“Our commitment is open-ended,” insists Kliger. “We’ve set our editorial and circulation goals and we’ve met them. The third step is getting the advertising back, and we think that will happen.”

* Please send e-mail to

kkelly@nypost.com