Tuesday, September 16, 2008

Two items

This blog is designed to be one of information-sharing. Commenters are showing themselves to be insightful. We direct you to two recent items.

1) A management source placed the number of Dallas Morning News buyout takers at 24, according to one commenter. The Rock and a predecessor blog run by Mr. Sunbeam had identified 22 employees who were departing through the VSO. The newsroom needed to have roughly 40 job cuts.

2) Another reported that human resources notified top newsroom editors of a layoff date sometime in mid-October. This is similar to the timeframe that Corporate previously announced.

Caveats apply as usual. Until management speaks, nothing is set in stone.


Anonymous said...

Your updated rumor on the layoff date is Friday, Oct. 17.

Anonymous said...

Here's the pushback elsewhere in the industry:


Scroll down for details on Zell lawsuit
12:44 PM Tuesday

A few minutes ago I added the names of the Los Angeles Times columnist and former reporters who sued Sam Zell in federal court today, alleging he messed with the employees' stock plan. Here's the link.

Here's a wrinkle: Many of the Times staffers who were laid off in July have to decide this week whether to sign the waiver promising not to sue the company. I've already heard from a few who say it's a personal conundrum: sign the waiver and get the severance package, or refuse to sign and possibly lose the money.


Ex-Times reporters sue Zell *
Kevin Roderick • Bio • Email

I'm told that lawyers representing current and former Los Angeles Times newsroom staffers are filing a class-action federal lawsuit against Sam Zell and Tribune this morning in Los Angeles, alleging breaches of fiduciary duty, conflicts of interest and other violations of ERISA, the law that safeguards the proper handling of retirement benefits like pensions and trusts. The plaintiffs include several familiar bylines and at least one current Times star. A team has been looking into Zell's leveraged takeover of Tribune almost since he used employee money to get the company. Details to come.

* Can now report: The suit has been formally filed and the plaintiffs include Dan Neil, the paper's Pulitzer-winning auto columnist; Jack Nelson, the much-honored retired Washington bureau chief; Henry Weinstein, the legal affairs writer who took a buyout to join the UC Irvine School of Law; Myron Levin, an investigative reporter who left recently; and Corie Brown, who most recently covered food and wine.

The gist, from the release:

...since completing his takeover of the Tribune Company in December 2007, Sam Zell’s illegal and irresponsible actions and public statements have damaged the reputation and business of the company he purports to want to preserve. According to the filed complaint, through both the structure of his takeover and his subsequent conduct, Zell and his accessories have diminished the value of the employee-owned company to benefit himself and his fellow board members. It alleges further that through their destructive management and self-dealings at the expense of employees, Zell and his co-fiduciaries have repeatedly breached their fiduciary duties to beneficiaries of the Tribune Employee Stock Ownership Plan (ESOP).

Release follows after the jump.

LOS ANGELES, Sept. 16, 2008 -- Today current and former employees of the Los Angeles Times and the Tribune Company filed a class-action lawsuit in federal court against Sam Zell, a Chicago billionaire real-estate speculator who in December 2007 took control of the Tribune Company in a controversial deal that has mired the company in more than $13 billion of debt. The lawsuit was filed by Joseph Cotchett and Philip Gregory of the law firm of Cotchett, Pitre & McCarthy.

As current and former members of the Employee Stock Option Plan that owns 100% of the Tribune Company and participants in various Tribune retirement plans, the plaintiffs filed this action alleging it is time to call the Zell-orchestrated acquisition what it really is: A scam. The lawsuit contends that, since the inception of the deal, it appears that Zell and his accessories have planned to enrich themselves, tax-free, by perverting laws passed by Congress intended to benefit rank and file American workers. The employee-owners of Tribune Company have everything, including their retirement plans, at great risk and little to gain in this deal, while Zell has everything to gain and little at risk. Among the deal's outrages outlined in the complaint: Zell has set up a mechanism to buy 40% of the company – valued at more than $8 billion at the time the ESOP took ownership – for as little as $500 million. It’s a classic grift, played out under the cover of legal technicalities. The real losers in this deal, however, are Americans who rely on news and information collected and disseminated by the respected Tribune news organizations.

The plaintiff-employees in this suit do not seek to enrich themselves. Rather, their announced intentions are: to protect Tribune Company’s pension and retirement funds; to give the employee-owners a place at the table with regard to management of their assets; and to remove Zell and his cronies from the Tribune Company’s board in order to save what is left of a still great news gathering operation.

In the 1970s and later in the 1980s when Senators Bob Dole (R-Kansas), Russell Long (D-Louisiana) and others in Congress spearheaded efforts to promote ESOPs with generous tax benefits, the intent was to empower employees eager to own and manage the companies where they work. When it comes to Tribune Company’s ESOP, nothing could be further from the truth. Employees were never asked if they wanted to own Tribune Company. They had no opportunity to question the wisdom of saddling a media company with $13 billion in debt at a time when the industry faces serious challenges. Even though they are nominally the owners, they have no voice on the company’s board and no say in its management.

When Zell hung “You own this place now” banners at the Los Angeles Times, employees could not know the high price they would pay for this “privilege.” According to the complaint, Zell has de-funded employees retirement packages, raided the employee pension fund for more than $400 million, and eliminated more than a thousand Tribune Co. jobs. Meanwhile, Zell and his band of publishing rookies are wrecking the company’s marquee properties – including the Los Angeles Times, the Baltimore Sun, and the Chicago Tribune – alienating readers by launching aimless redesigns while dramatically cutting coverage. Seemingly ignorant of journalistic ethics, they have, for instance, turned control of the Los Angeles Times Magazine over to the advertising staff, with no indication to the reader that this product is now a “pay-to-play” advertorial. All the while, revenues have continued to decline.

The saga of the Los Angeles Times follows a familiar path in American media. Los Angeles’ Chandler family controlled the newspaper for generations, making it the flagship of the powerful Times-Mirror Company. In 2000, the Chandler heirs merged the family-controlled company with the Chicago-based Tribune Company. Even considering the debt to finance the merger, the company maintained profit margins in excess of 20%.

Despite a slowing economy, a precipitous drop in ad revenue in the real estate, classified, and automotive sectors along with the de-monetizing of content put on the web and the spiraling cost of newsprint – the Tribune Company continued to be profitable throughout this decade. Without the staggering debt load from the Zell deal, the Los Angeles Times would be solidly profitable today – without eviscerating news gathering operations.

It is flat wrong to regard the Tribune Company's troubles as the death throes of the newspaper industry. Americans are not rejecting the industry’s editorial product. The Los Angeles Times has millions more readers than it did a few years ago – over 20 million discrete readers at latimes.com in August 2008. In that month alone, the paper chalked up more than 120 million page views. Its besieged editorial staff continues to produce some of America’s finest journalism.

The media landscape is changing and, yes, newspapers are just learning how to navigate this new world. Unfortunately, current management is making things worse, led by Zell and his Chicago gang who can't shoot straight. Zell does not consider himself a publisher and has shown nothing but contempt for journalism. He notoriously said “F… you” to an employee-photographer who dared question his leadership. Speaking to the Washington bureau of the Los Angeles Times, Zell referred to the staff as “overhead, not producing any revenue.” Zell’s history is specializing in profiting from the purchase and sale of distressed properties. He has said he expects to make a fortune for himself during his tenure at the Tribune Company. And, as it stands, he can do that while leaving the coffers of the Tribune ESOP empty and the readers of the Los Angeles Times, the Chicago Tribune and Tribune Company’s other news outlets without an authoritative local source for news and information.

Should these institutions, vitally important to the life of the nation – indeed, never more so – be allowed to fall victim to ruthless corporate raiding and the pump-and-dump machinations of predatory “investors”? News organizations are both businesses and public trusts. A free press is the only business stipulated by the Constitution. No other entity – no website, no blogger – is on the horizon to replace the boots on the ground around the world providing Americans with the information we need to function in a global economy. The Los Angeles Times, alone, spends $2 million a month to support its Baghdad bureau, making its war coverage among the finest in the world. If Zell and his cronies continue to cut the staffs of these news organizations, it means inevitably that they will give their readers less content that is valuable to them. As these newspapers become less valuable to readers, they become less valuable to advertisers as well.

To that point, Zell and his cronies say they plan to close the Los Angeles Times’ Baghdad bureau.

-- Dan Neil, Corie Brown, Henry Weinstein, Walter Roche, Myron Levin & Jack Nelson
For more information contact:
Attorney for the Plaintiffs Plaintiffs’ spokesman
Joseph W. Cotchett Dan Neil
Philip L. Gregory (818) 508-1000
Cotchett, Pitre & McCarthy
San Francisco Airport Office Center
840 Malcolm Road, Suite 200
Burlingame, CA 94010

Anonymous said...

Another caveat: Even if management speaks, nothing is set in stone.

If the stock drops, there are reductions. If business Web sites say we're tumbling, there will be reductions. If there are buyouts, there will also be reductions. It's easier to rely on that than to wait for what legal wants you to hear. So far, what legal wants you to hear is nothing, which should tell you what they think of you as a person.

Executives get stock options, so the stock price is more important than your contributions or the company's goal. When you have no solutions to your problems, reductions help the stock price.

That doesn't make them better or worse in the business world, but don't look at this as a "what about journalism?" or "what about my hard work?" issue.