Wednesday, February 15, 2012

Cash Injections: At union request, Sussman steps up for Press Herald

Published in the Portland Phoenix

It was not the owners of the Portland Press Herald who sought out Maine hedge-fund mogul S. Donald Sussman to proffer a cash infusion to save the ailing newspaper. Rather, it was the idea of the Press Herald's unionized employees.

Sussman, the paper announced late Friday, will lend the Press Herald and its sister papers between $3 million and $4 million in exchange for five percent of the company and a seat on its board of directors. Sussman is also a philanthropist and the husband of Maine Democratic Congresswoman Chellie Pingree.
Tom Bell, a Press Herald reporter and president of the local Newspaper Guild union representing many of the company's workers, confirms that neither the company's owners, Texas-based HM Capital Partners, nor Sussman himself who initiated the deal.
"We didn't speak to him directly," Bell says. "It was through a third-party intermediary," whom he declined to name. Another person (a fourth party?) had mentioned to union leaders that Sussman had some interest, so the union got in touch late last year.
"It was prior to our negotiations with Kushner and Harte," Bell says, referring to the bid by the 2100 Trust, owned by Massachusetts entrepreneur Aaron Kushner and former Press Herald president Chris Harte, to purchase a majority stake in the company and institute significant cuts and reforms. That effort, in which Harte and Kushner proposed significant cuts to union workers' pay and benefits packages, failed to get union support last month (see for details on that).
When that deal fell through, Bell says there had yet been "no sign" Sussman was interested. Rather, there were what Bell calls "two likely scenarios," one in which the company would go into bankruptcy protection, and the other in which Kushner and Harte would buy the company despite the union objections.
Then Sussman stepped forward, and the union's outreach efforts bore fruit. Even as far back as early 2010, when the Blethens were seeking to sell the company, union representatives had "spent a lot of time calling around the state" seeking investors, Bell says. Those inquiries hadn't turned out, but the attempt to pique Sussman's interest did.
What happens now remains a bit unclear. While the company's announcement of the investment said "one of the first steps . . . would be to hire a top notch CEO with media experience," Bell indicated that the existing interim CEO, Neil Heyside of rescue firm CRG Partners, was likely to stay for at least several months to oversee some in-house technology transitions.
That includes a new computers and new software that on the editorial side integrates story publication online and in print, and on the advertising side makes everything much clearer and easier. "We have a very Byzantine system that makes it hard to know on a day-to-day basis how the company's performing," Bell says.
Bell says the company and the union hope those changes really boost the newspapers into a much stronger position; the size of the required investment remains unclear, and the dent Sussman's loan to the papers will make in its existing debt is also uncertain, leaving the full impact of the new deal fairly foggy.
The deal may take "a few weeks" to close, according to Guild vice-president Greg Kesich, an editorial writer at the paper who sits on the board as one of two Guild reps (a third seat is shared by two smaller unions representing company employees).
Kesich also says the company's board will be reconstituted to accommodate Sussman's new position. It will still have seven members, and the unions will not lose any seats, Kesich says.
With the cash infusion, other changes may occur, including changes to reporting duties. The paper is planning to begin employing local correspondents, Bell says, who will be union-member part-time staffers that cover their communities closely, at meetings and other events. "We've fallen behind on local coverage," Bell admits. Help with more routine duties could free up full-time reporters to do larger projects and more significant stories.
What many in the newsroom are talking about are the ethical quandaries posed by having such a prominent, powerful, politically active investor in the company. It's a fairly new conversation, despite major local players like local real-estate mogul Robert C.S. "Bobby" Monks and his cousin, financial-services player John P.M. Higgins having backed the paper since 2010. They are part of the extended Sprague family of Cape Elizabeth, and are both active in local business, charity, and other pursuits.
Their ownership has been disclosed sporadically, and infrequently, in Press Herald articles. With Sussman on board, Bell says, "We need to at a minimum be transparent and mention his role in the newspaper," suggesting that failures to do so with Monks and Higgins are the result of management intervention and not omission of facts by reporters or copy editors.
Sussman's prominence has raised the idea of the company hiring an ombudsman to critique and comment publicly on transparency issues, along the lines of similar positions at the New York Times and the Washington Post.
"We'd welcome an outside critic to evaluate us. We think that would help give the public some assurance that we're doing our jobs," Bell says. He says he sees no difference in ethical concerns stemming from the union's role in attracting Sussman's investment, as distinct from any that would arise from his involvement by other means.
"If we feel that we're being leaned on in any way, we're going to be vocal," Bell says, including bringing the issue to the company's board of directors, as well as taking other steps (which could include withholding their bylines). He looks at the alternative — which is indeed the future, since he admits HM Capital, as an equity firm seeking profits, will sell "someday." "We could be owned by a corporation from another state." Instead, "we're going to have owners that are really here in the community and are business leaders . . . I think Mainers would rather the papers be owned by Mainers," even if that means additional attention to disclosing interconnections between the paper and other parts of Maine's small community.