The Freedom Forum’s Shrinking Endowment   

Severe stock-market losses cause the nonprofit foundation to close its satellite offices and significantly reduce its staff, in favor of continuing the relocation of its popular Newseum.

With bad news coming in from the accountants, the top executives at the Freedom Forum had to make a choice: Keep all of the 285 employees and satellite offices the nonprofit foundation had set up over the last decade. Or follow through with ambitious plans to move its headquarters and its popular journalism museum from Virginia to a can't-miss-it complex between the White House and the Capitol.

In the end, the new building won out. "We chose Washington," said Charles Overby, chairman and chief executive officer of the Freedom Forum.

In September, Overby announced that severe losses in the stock market will force the high-profile journalism foundation to close its New York, London, Johannesburg, Hong Kong and Buenos Aires offices by the end of the year. Employees were told to expect buyouts, early retirements and a "significant reduction in staff." Programs, including many supporting foreign journalists in their home countries, will be cut or eliminated.

Overby portrayed the changes as a "reorganization." But it was clearly more painful than that. "Every one of our priorities is important. It was not easy to cut," Overby says.

It was a stunning stumble for a journalism foundation that had been riding high for a decade. The Freedom Forum was founded in 1991 when the 56-year-old Gannett Foundation sold its name and assets back to Gannett Co. for $670 million. Newly retired Gannett Chairman and USA Today founder Al Neuharth took the money and the skeleton of the old charitable foundation and formed the Freedom Forum, with a mission of fostering "free press, free speech and free spirit."

It became one of the world's largest journalism-oriented foundations, using the earnings from its investments to fund its operating expenses and grants. (During the 1990s, AJR was a beneficiary of Freedom Forum funds.) An impressive headquarters was built across the street from Gannett's main offices in Virginia, and the foundation's board, under the colorful Neuharth, traveled in style to board meetings and fact-finding missions around the world.

The foundation's most visible project was the Newseum, a heavily visited interactive museum just outside Washington, D.C., in Arlington, Virginia, dedicated to the history of journalism. But the foundation also took on less visible projects, including bringing together foreign journalists for the first time in Latin America, Asia and Africa to offer training and talk about freedom of the press.

The loss of the Freedom Forum's overseas programs, just as the U.S. is going to war on foreign soil, will hurt, says David Anable, president of the International Center for Journalists, a Washington, D.C.-based organization that offers training and fellowships for journalists. "There are several other journalism foundations, but they operate from a slightly different base. Quite honestly, I don't know who's going to pick up the slack," Anable says.

Overby says the Freedom Forum's money troubles are due to poor luck in the stock market, not mismanagement. Foundation officials declined to discuss the financial problems in detail. But according to its 1999 tax return, the Freedom Forum had assets in excess of $1.1 billion and spent nearly $80 million running the foundation and handing out grants. Its money was being invested by a long list of banks and firms, including JP Morgan, Provident Investment and Scudder Kemper.

Overby says the endowment has shrunk by more than a third to $700 million as the stock market foundered over the last two years.

"They are not unique," says Dorothy Ridings, president and chief executive officer of the Council on Foundations and the former publisher of Florida's Bradenton Herald.

The last few years of stock market gyrations have left some foundations raking in money, while others lost chunks of their endowments in what turned out to be poor investments. The Freedom Forum was fairly conventionally invested and took a big hit when the markets fell, Ridings says.

"I know they are really bleeding. I know Charles [Overby]...is just really hurting," says Ridings, who spoke with Overby about the foundation's financial troubles. "The older foundations like Ford and Rockefeller have been up and down lots of times," she adds. "This is the Freedom Forum's first setback.... They'll come back. I have no doubt about it."

Overby says the foundation is reconsidering how it invests its money, including diversifying into hedge funds and venture capital funds.

Insiders say 2001 has been a year of dramatic highs and lows at the foundation's Virginia headquarters. The year started with a newly inked $100 million deal with the District of Columbia to buy the last developable space on Pennsylvania Avenue between the White House and the Capitol. The Freedom Forum plans to move its headquarters and Newseum by 2005 to the complex that will also include 100 luxury condominiums, a restaurant and retail space.

In August, the Freedom Forum gave $5 million to the University of Mississippi's journalism program, the foundation's largest-ever cash donation to a university. In exchange, the university named its Center for Southern Journalism & Politics after Overby, a 1968 Ole Miss alumnus who spent 16 years as a reporter, editor and executive at Gannett. (Overby says it was the Freedom Forum trustees' decision to make the donation, not his, and the one-time-only grant had no impact on the foundation's current financial situation.)

That same month the Freedom Forum ended up in the gossip columns when the foundation dedicated to free speech abruptly quashed the independent biography it commissioned of founder Neuharth. Red-faced foundation executives said they called off the book, which was to be written by former NBC News President Michael Gartner, because they no longer felt comfortable with the nine-month-old deal, according to the New York Times. Reports surfaced in the New York Post that the book was to contain an interview with a woman claiming to be Neuharth's illegitimate daughter.

The year of ups and downs will end at a low point with closed offices, slashed budgets, early retirements and buyouts. Overby says he doesn't yet know by how much the workforce will need to be cut. Several staff members say they saw it coming, but the loss of the New York office and the key international programs still hurts.

John Schidlovsky, director of the Pew International Journalism Program, opened the Freedom Forum's Hong Kong office in 1994 and stayed four years. He says the Freedom Forum fought to overcome a lot of mistrust of American journalists in Asia and brought together journalists from China, India and other nations in the region for the first time. With the war on terrorism under way, the office is closing perhaps just when it is needed most, he says.

"The Freedom Forum's great contribution was a huge presence overseas and work with international journalists in their regions," Schidlovsky says. "I think it's sad.... It's needed more than ever when the U.S. is involved in a global story."

But Overby concludes the sacrifices will all be worth it when the Freedom Forum and the Newseum take their symbolic place in the heart of the nation's capital in 2005.

"The Newseum is going to attract more than a million people each year," Overby says. "While I regret closing the international offices, there is no doubt in my mind our priorities are more important than ever before."

Edited by Lori Robertson