The Battle of Salt Lake
The management team running the Tribune thought it was on the verge of buying the paper from AT&T, but it was outflanked by Dean Singleton. Now the managers are suing their new owner, who they claim is a stalking horse for the Mormon Church--which owns the rival Deseret News. Call it the JOA from hell.
By Lucinda Fleeson
Lucinda Fleeson is director of the Hubert H. Humphrey Fellowship Program at the University of Maryland. She has trained journalists in Eastern and Central Europe, Africa, Latin America and, most recently, Sri Lanka, where she was a Fulbright Scholar. Her training manual for teaching investigative reporting in developing democracies has been published in 18 languages by the International Center for Journalists.
SHE HAD SAVED THE CRUSHED skulls of the smallest children for last. It was past midnight in the University of Utah forensic anthropology lab as Dr. Shannon Novak examined the 142-year-old bones of Western pioneers slaughtered by Indians and Mormon zealots. The adult skulls had been easier to reconstruct, as most of them had died from gunshots. Most of the tiny heads had been smashed to bits by blunt blows.
The Mountain Meadows massacre was the blackest moment in Mormon history, and troubling questions about the involvement of church leaders remain, despite more than a century of denials. Some closure to the painful episode was sought by Mormon Church President Gordon B. Hinckley two years ago, after he discovered that a small monument marking Mountain Meadows had fallen into disrepair. He vowed to transform it, building a two-acre park.
But on August 3, 1999, a back-hoe accidentally unearthed the bone cache. Novak, an expert in trauma analysis of skeletons, was called in for a state-required archaeological examination.
Not until March 12, 2000, when the Salt Lake Tribune began a three-part series, did the public learn of Novak's startling findings. The 37-year-old anthropologist discovered evidence that some Arkansas emigrants had been shot at close range in the face and forehead, counter to folklore that they were shot in the back of the head; and children as young as five had been killed, not rescued by sympathetic Mormons. The Tribune series also disclosed that Mormon Church leadership and Utah Gov. Mike Leavitt had prevented Novak from making any other further revelations by cutting short her probe and reburying the bones, along with the remains of the other hundred or so Arkansas pioneers, in a remote spot in southeastern Utah.
Shortly after the Tribune devoted most of its Sunday front page to the story, the office of the First Presidency of the Church of Jesus Christ of Latter-day Saints summoned Tribune Publisher Dominic Welch to 47 East South Temple Street, the imposing columned granite Mormon headquarters. There, Welch remembers, Mormon leaders castigated the Tribune for bringing up old history at a time when they sought healing.
The Tribune's managers charge that news stories about the massacre and other matters the church would just as soon keep quiet are responsible, at least in part, for what they portray as a recent Mormon Church-led raid on their newspaper. In December, the Salt Lake Tribune was sold in a hostile takeover to Denver-based media mogul William Dean Singleton and his MediaNews Group. The Tribune's managers--who wanted to buy the paper--went to court, charging that Mormon Church leaders pressured Tribune owner AT&T and conspired with Singleton, who in their view acted as a front for the Mormon Church.
Singleton, AT&T executives and managers at the Mormon Church-owned Deseret News, Salt Lake City's afternoon daily, all deny such conspiracy assertions. The Tribune managers were unsuccessful in winning a restraining order against the sale but are pursuing a suit against Singleton, the phone company and the Deseret News for changing the joint operating agreement governing the two papers.
The events leading to the takeover of the Tribune are far more complex than a series of news stories. They involve 150 years of bad blood between Salt Lake City's two dailies, as well as unexpected repercussions that reverberate from media mergers.
The immediate effect of the sale is Singleton's agreement to modify the JOA that weds the two arch rivals, clearing the way for the afternoon News to begin publishing in the morning, in head-to-head competition with the larger Tribune. Perhaps more lasting will be questions over the wisdom of a JOA linking two parties united in their quest for higher profits but bitterly opposed in just about every other way.
THE MOOD WAS BLACK, and so was the humor the week after Singleton took over on January 2. Tribune Editorial Page Editor Randy Frisch's desk was cluttered with gifts left by consoling colleagues: a lit religious candle and a voodoo doll with a picture of Singleton. "Pins are inside," read a note.
Frisch has a fresh-faced, eager appearance that belies his 41 years and his feisty actions as the former treasurer for the JOA executive committee and chief operating officer of the Tribune. He served as one of the chief negotiators for the newspaper's management team in its ill-fated effort to purchase the paper from AT&T. It was Frisch who had the final talks with AT&T lawyers on November 17, when he thought he was about to seal a deal.
Frisch was preparing for a final conference call on December 1. Instead, he received a telephone call that morning from the Tribune lobby security guard, with the news that AT&T Broadband Chief Financial Officer Michael Huseby was downstairs and wanted to speak to him. When Frisch went down, he says Huseby greeted him with the word "surprise!" They rode, silently, in the elevator to the executive conference room, where Huseby broke the news that AT&T had sold the newspaper to Singleton, who was waiting outside in an SUV. Huseby asked if Singleton could come in and address the staff, but Frisch refused.
The other member of the negotiating team was Tribune Publisher Welch. He also was in a dark state of mind as he walked through the executive suite in early January and joked that he now had time to look for a job at the local convenience store. Welch, 68, is an imposingly tall native Utahn who grew up in a small mining community in the southeastern part of the state and devoted a 35-year career to the Tribune. Most of the complaints from the rival Deseret News center around Welch's dominance over both papers. In addition to serving as the Tribune's publisher, he has been JOA president since 1983.
Although Welch argues that such control by the larger paper is routine for JOAs, Deseret News executives contend it has led to their oppression. Their complaints are ignored, and worse, says Deseret News Publisher James Wall, their paper has been treated as expendable. Most offensive, he says, was Welch's resistance to the News' desire to publish in the morning--a move which he claimed would be prohibitively expensive.
In the complex negotiations over buying the Tribune from AT&T, which had acquired the paper when it merged with cable TV giant TeleCommunications Inc., Welch acknowledges that he and Frisch were relative newcomers to the world of high-flying corporate mergers. "We're not financial people, we're newspaper people. The main point is we were honest and felt we were dealing with honorable people," he says. "We were rubes, no question."
TENSIONS BETWEEN THE Mormon Church and the Tribune have abounded since 1873, when three Kansans purchased the Tribune to give non-Mormons their own voice in territory increasingly dominated by the church. In those early days in the shoot-'em-up West, the Tribune engaged in vitriolic Mormon-bashing, referring to church founder Brigham Young as a "Mormon Profit" and "Fat Briggy."
In November 1884, a Tribune editorial lashed out at the Deseret News editor as "the bastard in charge of the News" for naming a local doctor charged with procuring an abortion for a young woman. Also that week, Tribune City Editor Joseph Lippman wrote an item about how Deseret News Editor John Q. Cannon had taken a young "plural" wife and arranged for a rival to be sent on a faraway church mission. Cannon accosted the city editor on a downtown Salt Lake City corner, demanding an apology. When the city editor refused, Cannon knocked him off his feet and horsewhipped him.
Ancient history, of course, but some of its tentacles reach disturbingly deep into modern Utah. Gov. Leavitt, who ordered a stop to further archaeological investigations of the Mountain Meadows victims, for instance, is a descendant of Dudley Leavitt, one of the Mormon participants in the mass murder. And it was a Tribune editor, William Nelson, who served as U.S. Marshal in 1877, when he supervised the execution of John D. Lee, the sole Mormon held responsible for Mountain Meadows.
The horsewhips and fisticuffs used to settle newspaper disputes during the Wild West days were long ago put away, as arguments have moved into the court and board rooms. But it is debatable whether the combat has grown any less fierce.
Circulation battles and editorial clashes over liquor laws and other matters continued after silver mining king Sen. Thomas Kearns bought the Tribune in 1901 as an anti-Mormon platform. The fights for subscribers weakened both papers, and by 1949 the Deseret News teetered toward closing. Instead, in 1952 the two newspaper owners entered a JOA, forming the Newspaper Agency Corporation to oversee production, advertising and distribution for both papers.
The deal was brokered largely by John W. Gallivan, whose 60-year career at the Tribune brought more peace and accommodation than contention and confrontation. Profits swelled, to $60 million last year, split 58 percent for the Tribune (circulation 137,000) and 42 percent for the News (circulation 70,000).
"This JOA has been a license to print money," says Christopher Smart, the insouciant editor of Salt Lake's alternative City Weekly. "Their ad salesmen don't sell ads--they take orders."
In 1956, Jack Gallivan, by then the Tribune's assistant publisher, engineered another deal that would have seismic repercussions: He persuaded the Kearns-Tribune Publishing Corp. owners to buy a small stake in a new cable television system in Elko, Nevada. By 1970, the modest venture had grown into a 15 percent interest in TCI, the cable television giant. "I remember talking to Gallivan in the 1970s," recalls Tribune reporter Jim Woolf. "Gallivan said that someday we'll deliver newspapers on television. I thought, 'Man, what is he smoking?' "
In July 1997, another great accommodation was hatched, this time between Gallivan and cable titan and TCI chief John Malone. By then, Kearns stockholders and heirs numbered 147, many of them eager to cash out if it weren't for punishing capital gains taxes that would be assessed on any dispersal of their shares. Malone had his own problems--partner Bob Magness had died in 1996 without a will, entangling his estate in probate. Fearful of a takeover, Malone desperately wanted the Kearns-Tribune interest in TCI, which at that point amounted to 7 percent. Moreover, Kearns-Tribune shares were Class B "super-voting" stock, with 10 times the weight of regular shares. To the delight of all, TCI agreed to acquire Kearns-Tribune and all its assets; in a tax-free exchange, Kearns-Tribune and about 250 shareholders received TCI stock, then worth more than $650 million.
Even the newsroom got in on the action. More than 30 veteran employees--mostly reporters and photographers--turned into overnight millionaires. Many retired, but about a half-dozen or so continue to work as Tribune journalists.
About half a dozen Kearns descendants, mostly cousins, regarded the Tribune as the "family heirloom." They and Welch formed a small holding company, the Salt Lake Tribune Publishing Co., and negotiated a management contract to run the newspaper. They paid $1 million for an option to buy it back in July 2002. "The marriage is going to guarantee the newspaper's future," Gallivan was quoted as saying at the time. Instead, the tax-free bonanza ended up putting the family jewels into play in an unanticipated fashion.
The TCI deal had barely closed when, in October 1997, TCI's then-President Leo Hindery began offering the Tribune for sale. He wrote to L. Glenn Snarr, chairman of the Deseret Publishing Co., seeking a meeting. He also sent a feeler to Singleton, who had long eyed the Tribune as an attractive addition to his collection of daily newspapers.
"We always meant to get the paper back," says Bob Steiner, 50, a great-grandson of Sen. Kearns and a 40 percent owner of the Tribune management company. "What we didn't anticipate was that TCI would be shopping around the Tribune within three months."
TCI executives were unable to sell the Tribune, but just two years later, in 1999, they crafted one of the largest deals in U.S. history when they merged TCI, the nation's largest cable TV operation, with AT&T, the largest telecommunications company. Suddenly, the Salt Lake Tribune was owned by Ma Bell. From the beginning, AT&T executives wanted to dump the Tribune, now branded "a non-strategic asset." "We're not in the newspaper business and don't want to be," a company spokesman said.
In court papers, AT&T executives describe their increasing frustration as they were drawn into escalating squabbles between the Deseret News and the Tribune. The News' executives complained bitterly that the Tribune controlled the JOA and had prevented them from implementing their 1997 decision to become a morning paper--a move they had agitated for since 1985 and which they contended was crucial to the paper's survival. Deseret News executives feared their paper might join the lengthy roster of p.m. papers that have gone out of business across the country. They had a long list of other complaints, including that they were billed for too much of the agency's newsprint costs, and that the agency was not doing its best to promote the paper.
AT&T general attorney and deal negotiator Steven Garfinkel laid out in a 22-page affidavit in December how the company had "attempted to broker a truce between the two warring factions" and had, in March 1999, offered to sell the Tribune to management at both papers.
Tribune managers did not respond. AT&T again wrote on May 12, 1999, asking for an offer "no later than May 24, 1999." That day, Tribune Publisher Welch wrote that he wanted "to begin discussing this possible purchase" of newspaper stock, not the newspaper assets themselves. AT&T deemed this unacceptable.
Meanwhile, AT&T was quietly exploring a deal with the Deseret News. But the Tribune "threatened suit and a public relations disaster" if such a transaction were consummated, according to Garfinkel. The News in turn threatened to recover damages stemming from the alleged mismanagement of the JOA. The News also threatened to play its trump card: A clause in the JOA agreement that it said stipulated that both papers were required to consent to any sale of JOA stock, a contention disputed by the Tribune but interpreted by the Deseret News as grounds for challenging the validity of the 1997 sale of the Tribune to TCI.
In October 1999, the AT&T board backed off from selling the Tribune to the News. While the News decided that acquiring its foe would cause antitrust problems, it nonetheless drafted a suit against the telephone giant for not going through with the deal.
"By late 1999, AT&T was caught in the middle of an impossible, and deteriorating situation," wrote Garfinkel. "Both sides, however, were intractable."
UTAH IS THE ONLY state in the Union where ordering a cup of coffee--much less a martini--identifies one's religious and political affiliations. Caffeine, alcohol and nicotine are eschewed by devout Mormons, although the so-called "Jack Mormons" or non-practicing Mormons may indulge. Mormons account for 70 percent of the state's 2.2 million population. They largely vote as a block, are invariably Republican, and as such control the state Legislature, the congressional delegation and most of the judiciary and other state offices. Salt Lake City (population 174,000), however, is a no-man's island that is closely divided between Mormon and non-Mormon voters.
In many respects, the Latter-day Saint establishment has never been more powerful--international church membership stands at more than 11 million, double the number in 1983. In his five years of leadership, Hinckley has presided over the building of 55 new temples around the world, more than any of his predecessors, as well as the expansion of the downtown Salt Lake City church campus with a two-acre park and an adjacent 21,000-seat convention center--all ready to show off during the 2002 Winter Olympics. City Weekly Editor Smart sees evidence of a new aggressiveness by the Church hierarchy. "They're feeling their oats right now," he says, "feeling that this is their time."
Salt Lake City Mayor Ross C. "Rocky" Anderson, a non-Mormon Democrat who serves coffee in City Hall, says that the delicate balance between Mormon and non-Mormon in the city seems strained. "What has been smoldering for years has burst into a conflagration," he acknowledges.
Not only have the gloves been taken off at the two newspapers, but citizens groups have clashed over the unveiling of the church's new downtown park, now filled with waterfalls, ponds and religious icons. The church bought the former city property for $8.1 million, promising to turn it into a "little bit of Paris." Not until just before a final vote by the City Council was it disclosed that the church intended to erect religious statues and impose rules on what activities and speech could occur there, enforced by its private security force. The rules would prevent protest rallies and violate free speech tenets, argued the National Organization for Women and other organizations who joined an ACLU lawsuit. The Salt Lake Tribune gave prominent play to every wrinkle in the ongoing dispute, prompting an unusually public display of church pique in a terse press release lambasting the Tribune for "false assertions."
That kind of news coverage has caused John Hughes, the distinguished Pulitzer Prize-winning editor of the rival Deseret News, to describe the Tribune as "in-your-face" in comparison with his stuffier News. Both papers have credibility problems when it comes to the Mormon Church. A Brigham Young University professor polled voters after the November 2000 election and found that 29 percent ranked the Tribune as the most anti-Mormon of Utah's major media outlets. But more than 65 percent of those polled believed that reporting on the church by the Deseret News was biased in favor of the Mormon organization.
Hughes, the former editor of the Christian Science Monitor, says he has worked hard in the last four years to change that perception. He has added religion coverage to include other faiths and makes a point of covering Mormon peccadilloes. Before he took the job, Church President Hinckley promised him editorial independence. "Those assurances were adequate and have been honored," he says.
Even so, Hughes faxes editorials over to the church headquarters for review, a practice he deems appropriate, and similar to that at the Monitor. All of his newspaper's profits revert to church coffers and have been enough to buy Hughes a stunning paneled office with a view of the mountains in a new nine-story downtown building.
Hughes' counterpart, Tribune Editor James E. "Jay" Shelledy, is unabashed about most of his paper's aggressive postures, saying: "We don't just take press releases. We hammer hard on diversity, on the Legislature's conflicts of interest. We tend to give women, minorities, Democrats more ink than their numbers and power bases would otherwise dictate." Shelledy picked up a recent Sunday section devoted to gays in Utah and waved it. "They never would have done this story. Never."
(Hughes concedes the point, saying he thought the story was "irrelevant.") Shelledy also seems to take delight in tweaking the nose of the Mormon Church, with stories focusing on the church's practice of baptizing the deceased and polygamy, which is still practiced by about 30,000 renegades in southern Utah.
One story that Shelledy kept quiet, however, was about attempts by the Tribune management and the News to buy the Tribune from AT&T. Tribune reporter Chris Smith says he learned in February 2000 that U.S. Sen. Orrin Hatch (R-Utah) had met with AT&T executives in mid-1999 on behalf of the Deseret News, regarding its possible acquisition of the Tribune. Not until more than 50 staff members signed an October 2 petition asking management to run a story about Hatch's intervention did the piece surface.
"The petition was a good prompt," says Shelledy, who says that the paper had been holding off on coverage because it had been contemplating a suit against AT&T at the time. The incident spotlights the inherent conflicts of interest that arise when a newspaper covers, or doesn't cover, itself or its business partner.
"You've got to wonder what we're doing in partnership with the Mormon Church, anyway," says reporter Smith, "as it is the major institution that we cover."
The church hierarchy at first denied that it was trying to buy a controlling interest in the rival and only admitted it when court papers became public. President Hinckley contended then that the church would have spun off the property, as it supports two independent editorial voices for Utah's largest city.
Hatch, who is public about his membership in the Mormon Church, is chairman of the Senate Judiciary Committee, which has broad oversight over mergers--including those involving AT&T. The senator has since stated that he was only meeting with AT&T on behalf of a constituent to advise the phone company that he didn't see any antitrust problems if the Deseret News acquired another newspaper. Hatch has also conceded the meeting was an error, as it created what he says was the false appearance that he was trying to influence AT&T. "That's like the elephant saying, 'Please disregard that I was having sex with the mouse,' " contends Shelledy.
AS THE PAPERS squabbled, AT&T was running out of patience. In a letter last June 22, the telephone company warned executives at the Tribune and News that if they could not resolve their differences by August 31, then both could submit bids for the Tribune on September 30. Bids were required to include full indemnification against any claims made by the losing bidder. When August 31 arrived and the logjam endured, AT&T wrote again, this time including a draft acquisition agreement and extending the deadline by six weeks.
While the News opted out, the Tribune managers made a serious run at buying the paper, bidding $175 million. On November 17, AT&T's Huseby advised the Tribune's Frisch and Welch to increase their bid to $180 million, which they did in a series of long-distance conference calls between New York, Washington and Utah.
But while Frisch and Welch thought the deal was virtually done, AT&T saw significant roadblocks, according to Garfinkel. The Tribune still hadn't resolved all of its disputes with the Deseret News about the cost of the latter's conversion to morning publication, among other things. Nor had the Deseret News agreed to the sale. Garfinkel was concerned that the Tribune's Wells Fargo financing would be jeopardized if the rival News filed suit. The indemnification issue was also not resolved--Randy Frisch offered $25 million, which was rejected. Garfinkel recounts that Frisch "then asked whether AT&T would accept another amount, offering $26, $27 or $28 million, laughing and asking, 'What do you want?' "
On November 27, Garfinkel complained that the Tribune executives' proposed revisions to the agreement contained surprise changes to which AT&T had not agreed: AT&T wanted $50 million in indemnification; the Tribune team had written in $33 million. Tribune managers had also changed a dispute resolution mechanism.
The Tribune negotiators thought they were merely tying up a few loose ends, but AT&T was losing interest--a more attractive suitor had come calling. Newspaper magnate Singleton, 49, head of a $1 billion media empire of 49 dailies and 94 nondailies, had also received a draft sale agreement from AT&T just before Labor Day. In late October, he sent back a written proposal, offering $200 million--in cash. Flush from forging a new JOA ending the bitter war between his Denver Post and the rival Denver Rocky Mountain News, with his paper clearly on top, Singleton was no neophyte when it came to media deals.
In face-to-face negotiations with AT&T top brass in their Manhattan attorney's offices on November 28, Singleton's top negotiators hammered out an agreement. The sale was approved by the AT&T board the following day, and the agreement was executed about 11 p.m. November 30.
AT&T officials say they viewed the deal as favorable on several fronts. It involved strictly cash, so no financing was required. Singleton delivered a written promise from the Deseret News that it would drop any plans to sue AT&T, so indemnification was not an issue. Furthermore, AT&T had feared that a sale back to the Tribune management group could trigger an Internal Revenue Service attempt to seek back taxes from the 1997 tax-free stock swap. (IRS rules allowed the tax-free exchange with TCI but mandated the family owners could not buy back the paper for five years. That's why the Tribune managers set July 31, 2002, as the date for their option to purchase the Tribune. If they bought the paper before July 2002, the family would owe back taxes amounting to "hundreds of millions of dollars," Jack Gallivan would later testify.) With Singleton there was no such risk. "We were in a position to give AT&T everything they asked for and they were not," Singleton says.
Singleton asserts that the Tribune management company would never have been able to come to terms: "I wasn't trying to interfere in anybody else's deal. I told Jack Gallivan, who is a dear friend, that if they could work things out I'd step aside.... But they would never have had enough money, they would never have gotten consent from the Deseret News, and they would not have gotten indemnification from the Deseret News."
On January 2, Singleton tried once again to visit his newest property. "I'd like to come over tomorrow at 10:30 a.m. and show you the new joint operating agreement," he told Welch over the phone. When Singleton arrived, his manner was charming but his words were blunt: "MediaNews Group owns the Salt Lake Tribune now."
Singleton summarized orally, then gave Tribune executives copies of the new joint operating agreement allowing the Deseret News to go morning, and informed them that from now on, he and another MediaNews official would represent the Tribune in the Newspaper Agency Corporation, which oversees the two papers. Frisch and Welch were fired from their positions in the corporation. (They retain their jobs at the Tribune.)
DESERET NEWS EXECUTIVES are barely trying to conceal their glee as they gear up for the long-coveted switch to a.m. publication, planned for September.
Publisher Wall, 55, has a glass-walled eighth-floor office with a view of the nearby spires of the Mormon Temple. Wall previously worked for Singleton, most recently at the Denver Post as executive vice president and general manager. He sought the Salt Lake City job not only because he is a Mormon, but because he knew that management ranks in Denver would be thinned with the new JOA and his job would be eliminated. He arrived in Salt Lake City September 5.
Although the new agreement worked out with Singleton calls for the JOA to shoulder some of the costs of the News' morning conversion, the News itself will have to pay for a new press--a cost that could consume up to $20 million--as well as other expenses resulting from the change. Wall says he's not worried. "The Deseret News has the money. We've saved it. If it costs me $20 million, I've got it covered. If it costs me $30 million, I've got it covered."
When asked how he knows the investment in switching to morning will pan out, Wall got excited, booming: "Because I'm a good newspaper man and I've done the research. Focus groups have identified an increase of 6,000 new subscriptions in Salt Lake and Utah counties, where readers say they want a conservative morning alternative to the liberal Tribune."
THE COURT BATTLE CONTINUES over the Tribune managers' contention that Singleton doesn't have the right to amend the JOA. No matter what the outcome of that skirmish, both sides are likely to be back in court again, as come July 2002, the Tribune management owners say they plan to exercise their option to buy back the paper. ###
Singleton has said he does not expect to change the direction or management team at the Tribune. While both sides are confident that they will be the final victors, Singleton feels he has the biggest piece of ammunition--the disputed clause in the JOA agreement, which he contends requires the Deseret News to approve any sale of the Tribune. As for the Tribune managers getting the OK from the News, Singleton drawls: "You can draw your own conclusions about how likely that is going to be."