Knight-Ridder's Labor Daze/ Sun-Times for Sale? | Media | Chicago Reader

Knight-Ridder's Labor Daze/ Sun-Times for Sale? 

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By Michael Miner

Labor in America in these postmodern times has had more downs than UPS, and it was just paid a poignant insult in Gary. The Knight-Ridder chain put the city's newspaper up for sale, but not to the people who run it.

In 1989, the last time the Post-Tribune was for sale, the employees organized, incorporated, and submitted an ESOP bid of $40 million. That's Employee Stock Ownership Plan, which under federal law gives workers a leg up on buying their workplace by allowing them various tax advantages. Eventually Knight-Ridder decided to keep the paper. But when the Miami-based chain announced in June that the Post-Tribune was back on the auction block, the staff already knew the drill.

Will you consider selling it to us? a Post-Tribune photographer asked Mindi Kiernan, the Knight-Ridder vice president sent to Gary to assemble the staff and deliver the doleful news. Kiernan--so I'm told--replied that an employee bid would be considered along with any others. And reporter Joe Conn says that a few days later he and the employees' ESOP adviser, David Shapiro of New York, were encouraged by Knight-Ridder broker Lee Dirks to submit a bid.

Then the wind shifted. In late July Dirks's office informed Shapiro that he wouldn't be given a bid prospectus, the set of numbers a bidder needs to study in order to make a reasonable offer or to decide whether to make any offer at all. "My guess is," says Shapiro, "it reflects less a change of heart than a message from above that wasn't delivered early. You had some mid-level people at Knight-Ridder who said, 'We'll sell to anybody,' but they were saying it without guidance from above."

Knight-Ridder would rather we thought that its broker acted on his own authority. "They evaluate people requesting records, and based on a number of criteria they do or don't allow people to have the prospectus, which has a lot of financial information on the company," said corporate spokeswoman Lee Ann Schlatter. "That's what happened in this case." And the other day Knight-Ridder CEO Tony Ridder dropped the employees a note reminding them, "The screening process to determine qualified bidders...is being handled by a broker....I will make sure he is aware of your concerns."

Conn laughs. "For Ridder to lay it off on Lee Dirks is just absurd."

Whether it was Ridder or Dirks (whose office wouldn't comment to me) telling the employees to drop dead, the important question is why. Conn says he's mystified. Even if the company has no intention of selling to its employees, he thinks it would want them in the auction anyway to bid the price up. "If you're going to be ruthless and cynical, why not do it in a way that's going to benefit you--and cut our throats later?"

Besides, how many other offers does management expect? The Post-Tribune isn't minting money; it's a paper with dwindling circulation in a brutal market. In 1989 Knight-Ridder received only two bids--the staff's and one from Howard Publications, which owns the archrival Times, to the east in Hammond, and has since bought the Vidette Messenger, to the west in Valparaiso. Conn expects Howard to bid again for the Post-Tribune--and if it buys to close it as a separate paper.

"Which they probably would do," says David Radler, publisher of the Sun-Times and chairman of Hollinger International. Radler's also looking at the Post-Tribune--with an eye to adding it to the cluster of papers, anchored by the Sun-Times, that Hollinger's assembled to fight the Chicago Tribune for advertisers.

There might be other bidders, Radler told me, but "for most of them it's a financial deal. Most aren't newspaper companies. They'll try to package it with another couple of papers in better locations and sell them all. If I bought it, it's for keeps."

If the alternatives are oblivion, resale, or subservience to bean counters out of Vancouver instead of Miami, that's all the more reason for the Post-Tribune's 300-some employees to want to run the paper themselves. And last month 165 of them put their names on petitions asking Tony Ridder to let them bid. It couldn't have helped that their leader, Conn, is president of the Gary Newspaper Guild or that their crusade has been waged largely on guild stationery. As the New York Times observed Monday, reporting union-smashing tactics at a paper Knight-Ridder just bought in Monterey, California, the chain "has not yet quite shaken off the effects of an acrid, sometimes violent strike at its Detroit paper," the Free Press.

Labor relations in Gary haven't been chummy. Conn tells me the last guild contract expired almost three years ago and the staff haven't had raises for almost four. A right of first refusal, in the event Knight-Ridder decides to sell the paper, is a guild bargaining proposal management has been rejecting since 1994.

"I think they don't want to provide information on their businesses to the unions--it might get in the wrong hands," says David Shapiro, who observes that Knight-Ridder has also frustrated an ESOP bid for a paper up for sale in Long Beach, California. And Shapiro wonders if Knight-Ridder fears that a staff that's in the running for the paper would sabotage its competitors' inspections.

The employees aren't without resources. They've waged an aggressive public relations campaign. In 1989 a letter from the governor of Indiana, Evan Bayh, was pivotal in persuading Knight-Ridder to release its prospectus to Post-Tribune employees. This year a letter from the office of Governor Frank O'Bannon reminded Tony Ridder of O'Bannon's "vital interest in protecting jobs and preserving competition" and warned him that "if the effect of the proposed sale...might be substantially to lessen competition, then we would expect and encourage the federal antitrust authorities to take appropriate action." A copy of this letter was sent to the CEO of the Indianapolis-based pharmaceutical company Eli Lilly, who sits on Knight-Ridder's board of directors.

Ridder has heard from the mayor of Gary ("At least give these employees a fair chance to bid"), Valparaiso ("The potential purchase of the newspaper by the employees would allow for the competitive local news coverage to continue"), and of Crown Point. The president of the University of California, which owns more than five million shares of Knight-Ridder stock, heard from Joe Conn, who pleaded with him to intervene. "It would be a mistake to suggest this is solely a union endeavor," Conn wrote. "All of the employees here want to be treated fairly in one of the last acts of an employer they have served loyally for [a total of] 1,849 years."

The Lake County Board of Commissioners formally resolved that it supports the release of the prospectus to Post-Tribune employees to protect the paper's voice in the "competition of ideas."

But this campaign has netted nothing besides Tony Ridder's two-paragraph note assuring Conn that his "concerns" will be passed along to Knight-Ridder's broker. Things might go better for Conn if the chairman of the company were in a position of authority.

Sun-Times for Sale?

Incredible but true! Two weeks ago I told the amazing story of an upstanding suburban youth identified by his local paper as a condemned killer. A guilt-stricken editor went the extra mile to make amends, not only running a correction but ordering a feature story that sang the teen's praises.

Could a fiasco so improbable happen twice? It already has. The Sun-Times just dealt in the same bold, gallant manner with a blunder that in its eyes was every bit as enormous: It misreported the quarterly earnings of an advertiser.

A one-paragraph item on page 50 of the August 22 Sun-Times began this way: "Sportmart Inc. said it earned $2.5 million, or 2 cents a share, in the second quarter, compared with earnings of $4.4 million, or 35 cents a share, in the year-age period."

Wrong. Sportmart actually reported earnings of 20 cents a share. The Wheeling-based chain has been struggling lately, but its fortunes haven't fallen that low. CEO Andrew Hochberg read the item and picked up the phone.

Details become hard to get at this point in the narrative, but I'm told Hochberg talked to Joseph Sherman, assistant publisher of the Sun-Times, and his tone was not mild vexation. Hochberg has a reputation as a stormer, and he'd already been hounding the Chicago papers to print happier news about his company.

He had the Sun-Times dead to rights. The next morning the paper published a correction.

But that wasn't the end of it. Just as the Daily Herald had made up to young Christopher Thomas by celebrating his life in a feature story, the Sun-Times decided to celebrate Sportmart. The most efficient way to tell the upbeat, buoyant tale of a corporation's inspiring triumphs in the marketplace is to print verbatim one of that corporation's press releases. And that, in effect, is what the Sun-Times did.

The following Monday, August 25, the Sun-Times published a three-columns-wide "article" at the top of one of its business pages. The headline announced, "Sportmart reports gains in private-label apparel." The story rang with buoyant phrases such as "sales gains," "sales increases," "expanded development," and "continued strong performance." "We are satisfied," said Hochberg, surveying the quarterly report. Mark Scott, the president, said, "We are optimistic about our prospects."

Every fact in the story and every word of every quote was lifted from a Sportmart press release, the one it had issued to frame its quarterly earnings in the kindest possible light. There was no trace of original reporting. A good trooper, consumer writer Mary Ellen Podmolik prepared the story, but at her request it ran without a byline.

There's more than one way of looking at the newspaper's behavior. There are, to be exact, two. One is to be mortified. The other is to rejoice that fair play triumphed. "They made a mistake, and they took care of it," Hochberg told me. Publisher David Radler was much more garrulous, but his point of view matched Hochberg's.

I reached Radler at his office in Vancouver. He said he'd already left town when the Sun-Times misreported Sportmart's earnings per share, and he said that since he knew hardly anything about what happened next I should talk to assistant publisher Joseph Sherman. But he invited me to put myself in Hochberg's sneakers. "If I've harmed you at your publication and it's my mistake, and you come to me and you say, 'You've caused me harm,' I have to do something to make you whole," Radler said. "We've got to make good to anybody. It has nothing to do with whether he's the biggest advertiser in the world or the smallest."

On his desk lay a letter from an advertiser in another paper in the Hollinger chain. He read from it over the phone. "'A free ad is not going to solve my problem. My problem was I sat there and waited for customers that didn't come.' So I'm going to do something for this guy. He gave them corrected copy, and apparently it didn't get in. I guess he got the wrong ad in.

"Here's a case--this is a little guy. In fact, he says to me, 'Basically I'm too small probably to merit your attention.' Well, damn well he's not too small! He's going to get some satisfaction. If that means I have to run some promo piece for him that helps him, that's the least I should do."

Promo piece? Shouldn't a promo piece at least be labeled "promo piece"? I asked Radler.

"Probably not," he said.

Radler's compassion for his advertisers, big and small, impelled him to speak on. "If I'm violating some standard, so be it!" he asserted. "That's the Hollinger way. We don't leave people in the lurch. We help people. We're loyal to people who are loyal to us. If that's wrong I'm prepared to accept all the blame. If what was done in Chicago was wrong you can blame the kind of standards I set."

By the tenets of American orthodox journalism, what happened in Chicago was wrong. Publicity masqueraded as reporting to appease an aggrieved advertiser who'd complained to a publisher. I wish I could give you more of the specifics. But Andrew Hochberg was curt. Joseph Sherman didn't get back to me. Mary Ellen Podmolik didn't return my calls. Michael Arnold, the acting financial editor, told me to talk to executive editor Larry Green, and Green didn't return my call either.

I had good news for them--David Radler said they'd done it the Hollinger way! Obviously no one had told them this yet, because everyone was behaving as if they had something to be ashamed of.

Art accompanying story in printed newspaper (not available in this archive): Joe Conn photo by Peter Barreras.

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