Auctioning Journalistic Integrity
T. Christian Miller works hard year after year as a reporter for the Los Angeles Times. He has reported on topics ranging from gross corporate profiteering in Iraq to the production and use here and overseas of older, dangerous pesticides that are either shunned or restricted for use in this country.
Mr. Miller spent months of his life on this latter story. He cares about the well-being of his readers.
Working for the 9 daily newspapers and 23 television stations owned by the Tribune company are hundreds of reporters who sweat the violent streets and neighborhoods, probe the corporate suites, and cover the doings of politicians. They also take some pretty dangerous assignments covering wars, riots and natural disasters in foreign countries.
Together with their editors and support staff, they have a very large stake in their company — both professionally and in terms of their livelihoods.
But they do not have any say about their future. A wealthy real estate speculator, Sam Zell, now has the say. And what he says in the coming months will decide who stays and who has to leave, what will be covered and what will be neglected, what stations and newspapers remain and which are sold off, what is left of any labor contracts, and what powerless new shareholders—namely a corporate tax dodge in which ESOP members have to suffer without any voice.
Finally, Sam Zell has already decreed an arrangement that the Tribune company, still making money, will no longer have to pay federal income taxes to Uncle Sam on its profits.
One man, Sam Zell, has all this massive power, thanks to a legal system rigged in favor of capital — borrowed at that — and against labor that puts these newspapers and television stations in front of you seven days a week.
The taking of the Tribune company private, via an exotically complex transaction, started with a sluggish stock price that the impatient Chandler family, who sold the Los Angeles Times to the Tribune, found intolerable. As the largest shareholders, the Chandler family was pressing for a restructuring of the company or an outright sale.
Sam Zell won the auction in an $8.2 billion deal. Larded with tax avoidance schemes and hefty guarantees for Sam Zell, the new company, if it clears regulatory approvals, will be loaded with huge debts (reaching $13 billion or ten times the Tribunes’s annual cash flow).
How else could Sam Zell put only $315 million of his own money into the pot, most of it a loan no less, take control of this media conglomerate as chairman of the board and retain the right later to buy 40 percent of the stock for only $500 million.
As an “S” corporation with a porous and powerless employee stock ownership plan, or ESOP, “the company is treated, effectively, like a charity. It’ll be a tax-exempt entity,” declared Robert Willens of Lehman Brothers. See what a bargain Washington is for corporatists making campaign contributions year after year.
Mr. Willens adds “This is going to be the wave of the future.” Unless I might add, workers politically organize and campaigns become publicly funded, instead of being offered to the highest cash bidders.
Under Mr. Zell’s plan, the employees will no longer receive 401(k) contributions from the company. They will not be permitted to cash in any of their shares for a decade or more — and then only if they retire or have worked for the Tribune for at least 10 years. They are trapped by Zell who has veto power over all major decisions.
Immediately, there were reports of more staff cuts at the newspapers which already have suffered losses of reporters and editors in recent years. The most experienced reporters and editors are usually the first to go.
Sam Zell says he is in this private buyout to make more money, not for pushing any journalistic ideology. So the questions and the rumors are circulating in the newsrooms.
Will Sam Zell sell off the Los Angeles Times or the Baltimore Sun or the Hartford Courant to local wealthies? What will happen to the workers if that happens, especially if these new spinoffs are loaded further with debt? Will the newsrooms be further stripmined?
Sam Zell will decide. The media has been taken over in the past by larger media, by industrial companies like General Electric, by entertainment companies like Disney.
Now it is being taken over by tax-avoiding speculators whose monetized mind sweeps aside the fiduciary duties of journalism that is supposed to nurture a trust so important that our founding fathers made it the only business protected by the First Amendment.
When Rupert Murdoch’s News Corp. recently offered to buy the Dow Jones & Co. (publisher of the Wall Street Journal) for $5 billion, sharply elevating its share prices, recently retired chairman, Peter Kann, wrote to the majority shareholding Bancroft family applauding their initial rejection of the offer and calling their continued ownership “a public trust.” “There is a higher calling to what the people of Dow Jones do each day. They are not merely producing and selling products like corn flakes or computer chips.”
Mr. Kann went on to say that the reporters and editors of the Journal could have made more money as lawyers or bankers. But they chose to devote their careers “to something more important.” So too he urged the Bancrofts to “forego some financial benefits” for other “even higher priorities.”
What now with the Tribune’s workers and their “higher priorities?” Some are hoping that their newspapers will be sold to local buyers by Sam Zell.
Don’t bet on the results if this happens. Ted Venetoulis, speaking for a group of investors in Baltimore, interested in the Baltimore Sun, told the New York Times, in reaction to Zell’s deal: “Why didn’t I think of that?”