The New York Times is investigating its sports reporter Karen Crouse after she failed to disclose a book deal with Michael Phelps when she covered the Olympic swimming legend for the paper, which the Gray Lady considers a "significant lapse in judgment" and a clear conflict of interest. 

"Our guidelines state that no staff member may serve as a ghost writer or co-author for individuals who figure or are likely to figure in coverage they provide, edit, package or supervise," a New York Times spokesperson told Fox News. 

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United States' Michael Phelps leaves the pool deck after his team won gold in the men's 4 x 100-meter medley relay final during the swimming competitions at the 2016 Summer Olympics, Saturday, Aug. 13, 2016, in Rio de Janeiro, Brazil. (AP Photo/Lee Jin-man)

The New York Times is investigating sports reporter Karen Crouse after she failed to disclose a book deal with Michael Phelps when she covered the Olympic swimming legend for the paper,  (AP Photo/Lee Jin-man)

Last month, the Times published a story by Crouse headlined, "Michael Phelps Is Not Going to the Olympics, but His Wake Is," which painted the 23-time gold medalist in a highly positive light with multiple tidbits about Phelps mentoring youth athletes. 

 But a month after the piece was initially published, it was updated with a scathing editor’s note. 

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"After this article was published, editors learned that the reporter had entered an agreement to co-write a book with Michael Phelps. If editors had been aware of the conflict, the reporter would not have been given the assignment," New York Times editors wrote atop Crouse’s piece. 

"As the editors’ note makes clear, the arrangement was a conflict of interest. This was a significant lapse in judgment. We are reviewing this matter and will take appropriate action once the investigation has concluded," the Times spokesperson added. 

Washington Post media critic Erik Wemple pointed out that what was "unstated in the editor’s note is how this omission evolved in the first place." 

Sports Illustrated reported on July 9 that "Phelps is working on a book with Karen Crouse of The New York Times that he says goes into greater detail about his struggles outside the pool."

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Crouse graduated of the University of Southern California and started her career at local papers before joining the Times in 2005, according to her bio