The Pulse of Paradise
After a new owner rescues it from a near-death experience, Honolulu's aggressive Star-Bulletin gears up for a battle against Gannett's dominant Advertiser.
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.
IT WAS THE BIGGEST STORY in Hawaii since statehood, and the Gannett-owned Honolulu Advertiser is known as the paper that blew it, six ways to Sunday.
A group of prominent Hawaiians was leveling corruption charges against the politicians who were paid $1 million a year to serve as trustees of a $10 billion charitable trust called the Bishop Estate. The accusers came with sterling credentials, and included a retired federal judge, a former appeals court judge, the chairman of the University of Hawaii Board of Regents, a Catholic priest and a prominent educator. The group was led by a distinguished law professor.
In damning detail they wrote an essay alleging that the Bishop Estate trustees had looted the trust in questionable self-dealing business transactions that had racked up more than $50 million in investment losses in one year alone. At the same time, they wrote, the trustees, claiming they were too broke to afford school programs, had neglected their mission to educate native Hawaiian students. The state Supreme Court, argued the authors, had become tainted by its role in selecting Estate trusteeships, which were handed out as plums to political leaders.
It was the kind of story that makes journalists salivate like hungry dogs.
But when the group offered the piece to Honolulu Advertiser Editor Jim Gatti, a relative newcomer to Hawaii imported by Gannett from its Detroit News, the authors say they were coldly rebuffed. In a series of encounters that took place over more than three weeks, they say Gatti canceled one appointment after another, kept the professor waiting outside his office for hours, and declined to say whether the paper would publish the piece.
Frustrated, law professor Randall Roth finally told Gatti they wanted to offer the piece to the rival afternoon daily, the Honolulu Star-Bulletin.
That was Thursday. The professor took the story to the smaller, scrappy Star-Bulletin. There, editors read it overnight and met with the professor the next morning. On Saturday August 16, 1997, the newly named essay "Broken Trust" was splashed over three full pages of the Star-Bulletin's Insight section.
It was the story that rocked Hawaii.
Two days later, Gov. Benjamin J. Cayetano directed his attorney general to investigate the Bishop Estate. The estate's five trustees were ousted. Trustee salaries were slashed to a ninth of their previous level. State Supreme Court justices stopped choosing Bishop Estate trustees.
To many, publication of "Broken Trust" defines the contrast between Hawaii's two major daily newspapers. For the spunky Star-Bulletin, it was another chapter in a 118-year history of independent stands that have challenged the establishment. While retaining its motto as "The Pulse of Paradise," the paper soon adopted a new slogan: "We Make Waves." The story reinvigorated the Star-Bulletin staff, which has since broken so many news and enterprise stories that the paper dominates local newspaper awards and garners national prizes as well. For the Honolulu Advertiser, historically viewed as the voice of the elitist oligarchy, "Broken Trust" became another example to readers that the Virginia-based Gannett Co. owners don't understand Hawaii.
Gatti and Advertiser Editorial Page Editor Jerry Burris present a different version of how "Broken Trust" got away. Gatti says he only canceled one meeting (Burris remembers Gatti canceled "at least two," because he was busy preparing the paper's budget). They say they planned to publish the essay a week later and the authors refused to wait.
Gatti and Burris say they are mystified why the group of Hawaiians left them for the Star-Bulletin. But it's clear that the authors of "Broken Trust" felt publication was uncertain at the Advertiser, while they were welcomed by its competitor. And the lasting impression to readers in Hawaii is that "Broken Trust" powerfully illustrates why Hawaii needs two competing newspapers with islandwide circulation.
IF IT WERE UP TO GANNETT, there would be only one such newspaper in Hawaii. In a bold play to create a monopoly for its Advertiser, it offered to pay $26.5 million to shut down the Star-Bulletin.
On September 16, 1999, Rupert E. Phillips, the Star-Bulletin's Florida-based owner, announced that the paper would cease publication, ending a joint operating agreement with the Advertiser. In recent years it has become relatively common for the weaker partner in JOAs to shut down, with its owner pocketing annual payments until the agreement expires.
But the unexpected took place in Hawaii. Enraged that Gannett, the nation's largest newspaper company, could pay someone to go out of business without the paper going on the market, local residents mobilized. The state government, local governments, political parties, unions, advertisers and citizens groups protested with petition drives and rallies. A citizens group filed an antitrust lawsuit. The state attorney general also filed an antitrust suit, charging Gannett with unfair business practices and trying to create a monopoly.
A federal judge issued a temporary restraining order forbidding closure and ordered the Star-Bulletin owner to put the paper up for sale. For more than a year, it continued to publish. Although Phillips maintained he hadn't originally bothered to put the Star-Bulletin on the block because no one would be interested, two mainland buyers and a group of local businessmen submitted bids. The winner was David Black, a Canadian who owns 80 newspapers and is expected to assume ownership of the Star-Bulletin March 15. He has pledged to spend $20 million to add a Sunday edition and go head-to-head with Gannett, a challenge he and the rest of the Star-Bulletin staff seem to relish.
They'll have to. The enterprise will require starting a newspaper practically from scratch.
THERE ARE MANY HEROES in this story of a small newspaper fighting Goliath Gannett, but there is one in particular who stands out--and, as fate would have it, his name is David. David Shapiro, 52, the Star-Bulletin's managing editor from 1987 until late last year, started at the paper as a cub reporter while a student at the University of Hawaii at Hilo. Since 1996, he has worked from a wheelchair because he suffers from multiple sclerosis. In spite of his ailment, he says the last years "have been the most productive of my life. We've published great stories, I've started writing a column. Everything was clicking."
Shapiro is a well-liked figure in the newsroom, soft-spoken and doggedly rational. With walrus mustache, hefty girth and brown, basset-hound eyes, he resembles Agatha Christie's detective Hercule Poirot.
During the spring of 1999, Shapiro began to detect warning signs that something was amiss. He and Star-Bulletin Publisher John Flanagan were excluded from meetings of the Hawaii Newspaper Association, the corporate entity that operates the JOA. The two executives were kept in the dark about information that they would have routinely seen in the past.
In June, the annual company retreat provided an even darker foreshadowing. The setting was paradisiacal, 16 miles out of Honolulu at the Ihilani Resort in Kapolei on an oasis lagoon. But Shapiro remembers the meeting as relentlessly gloomy. In the past, the two executives had taken part in the entire retreat; in 1999 they were invited for only the last two hours. JOA President and Advertiser Publisher Mike Fisch, who arrived in Hawaii in July 1998, says there's nothing unusual about this--he says that "it's not practical to have all the parties in the same room at the same time." Shapiro and Flanagan confronted the JOA executives about the exclusion. They got few answers.
Phillips, the Star-Bulletin's owner, didn't attend--he hadn't been in Hawaii for years. A little-known figure in journalism circles, Phillips, who has been buying and selling newspapers since 1975, has often done business with Gannett (see "Gannett's Trading Partner").
That summer Shapiro wrestled with whether he should share his concerns with staffers. "I decided not to play God, so I didn't say anything," he remembers.
An overnight voice mail message from Phillips on September 15 ended any doubts. Phillips left word that he would arrive in Honolulu that afternoon to meet with Shapiro and Flanagan. "It could mean only one thing," Shapiro thought.
Shapiro, say staffers, appeared stricken when he returned to the newsroom after meeting with Phillips. He wouldn't comment except to say there would be an announcement the next morning.
But news of the Star-Bulletin's pending demise leaked to Honolulu television stations. Some staffers, like Assistant Editorial Page Editor Mary Poole, start their workday before 6 a.m. and had gone home by the time the rumors reached an afternoon crescendo. She heard the bombshell on the 6 o'clock news along with her two children, who asked what would happen next: Poole and her husband, Burl Burlingame, are both longtime Star-Bulletin staffers.
The next morning, right after the 8 a.m. deadline, about 50 reporters, editors and photographers gathered around the city desk and listened as Phillips told them that he was shutting down the paper. He conceded that he would earn 12 percent that year on his $15 million investment, a sum that was guaranteed to grow to 17 percent by 2012. But he could earn more than 20 percent on the mainland, he told the staff. He and Fisch shamefacedly apologized that the news had been broken on TV.
An hour later, reporter and shop steward Burlingame came into the newsroom and told colleagues he had discovered that the Star-Bulletin sign that had hung for 38 years on the front of the building had been torn down and thrown in the trash.
WHILE EDITORIALLY COMPETITIVE, the two papers have operated under a JOA since 1962, sharing headquarters, printing, advertising and business operations. When Randall Roth, the law professor who led the group that wrote "Broken Trust," grew so frustrated with the Advertiser that he decided to offer the piece to the Star-Bulletin, he didn't have to go far--17 paces. That's the distance between the papers' newsrooms, both located on the second floor in a two-story green stucco building in downtown Honolulu, midway between the glass-walled canyons of the financial district and the sand of Waikiki.
The Honolulu JOA was amended in 1992 in one of the strangest permutations ever constructed under the Newspaper Preservation Act--an amendment that Gov. Cayetano has branded "a perversion." When Congress passed the act in 1964, its intent was to maintain separate editorial voices in communities where rough-and-tumble newspaper economics couldn't support two papers. JOA partners were exempted from rules against monopolies, allowing them to fix advertising prices and share overhead costs.
Back in 1992, Gannett owned the Star-Bulletin, by then a struggling afternoon paper; it coveted the dominant, family-owned morning Advertiser. So Gannett bought the a.m. paper, but rather than immediately fold the Star-Bulletin or sell it to someone who might become a real competitor, the newspaper company did what it has done in several other cities in similar circumstances: It turned to Florida businessman Phillips, owner of Liberty Newspapers Limited Partnership.
Gannett paid $250 million to acquire the Advertiser, but sold the Star-Bulletin to Phillips for a relative song--$15 million. All physical assets became the sole property of the Advertiser: buildings, presses, delivery facilities, news racks--everything. It's common for JOA partners to divide up profits, and previously the Advertiser had reaped 60 percent, the Star-Bulletin 40 percent. But Phillips agreed to what amounted to a guaranteed annuity, beginning with a $1.2 million payment per year that increased to $2.1 million by the end of the 20-year agreement.
"Phillips' sole responsibility to the Star-Bulletin has been to cash a check once a month," says Wayne Cahill, administrative officer of the Hawaii Newspaper Guild. He and other Guild officials lambaste Phillips as a "Gannett shill" and "puppet" who has repeatedly acted as a front to head a competing interest when Gannett confronted antitrust problems. Phillips did not return calls seeking comment for this article.
When Phillips bought the Star-Bulletin, many thought it an odd deal. But nobody did anything--the two newspapers were still alive, the staffers still had jobs.
Soon after Phillips announced in September 1999 that he was dissolving the JOA, court papers revealed that Gannett planned to pay him $26.5 million--a lump sum that represented the remaining annual payments he would have received if the JOA had functioned to its expiration in 2012. JOA President Fisch maintains that the Star-Bulletin was a more attractive property in 1992--before the Asian financial crisis put a hole in Hawaii's tourism economy, which depends heavily on Japanese visitors, and before changes in the retail business reduced advertising lineage.
It was this promised payment to Phillips that fueled powerful anti-Gannett spirit in Hawaii--in employees, in island residents, in the governor and ultimately in U.S. Magistrate Barry Kurren. Kurren issued a temporary restraining order against mothballing the Star-Bulletin, an edict that was upheld by U.S. Court of Appeals Judge Alan C. Kay in San Francisco.
Turning Hawaii into a one-paper state would be particularly isolating, argued its supporters. In San Francisco, where Hearst last year acquired the morning Chronicle and sold its Examiner to a propped-up, subsidized publisher, readers have alternatives. The San Jose Mercury News launched plans to move into the city with a new edition, and daily newspapers exist nearby in Contra Costa County and in Oakland. But no would-be competitors would cross 3,000 miles of open Pacific to publish in Hawaii.
Gannett officials dispute that they violated antitrust laws. "There is no agreement between Gannett Pacific and Liberty that Liberty will not publish the Star-Bulletin or sell it to anyone else," argued Gannett lawyers in their appeal brief. "If Liberty does not publish the Star-Bulletin, or no one seeks to buy it, that will be because of market realities, not any agreement with Gannett Pacific. Gannett Pacific's payment to Liberty simply reflects the fact that it was cheaper for Gannett Pacific to pay Liberty to end the JOA than to make 13 years of guaranteed payments and bear 100 percent of the Star-Bulletin's continuing losses."
Gannett vehemently protested against being forced to publish the Star-Bulletin under court order--the only such instance participants can recall. The company argued that forcing it to do so amounted to an unconstitutional "taking" of property, and violated the First Amendment that not only protects free speech, but also protects the right not to speak.
THREE HOURS AFTER PHILLIPS announced to the staff he would close the paper, union officials representing Star-Bulletin employees gathered at a hastily called meeting a few blocks away in the Statehouse conference room of Gov. Cayetano. Cayetano is a flinty second-term governor with no love for Honolulu's newspapers--both had endorsed his opponent in 1998. When asked a few weeks earlier about the possible closure of the Star-Bulletin, he had snapped, "I could care less if Hawaii has one or two daily newspapers."
But Honolulu is a union town, and jobs are important. The governor listened intently to Cahill of the Newspaper Guild and Jonathan Lono Kane, head of the International Longshoreman Workers Union. When they complained that the Star-Bulletin was going under without even being offered for sale, Cayetano promised to investigate.
That week a group of citizen activists met in Guild offices and resolved to file an antitrust suit under the name "Save Our Star-Bulletin"--SOS. Two prominent Honoluluans volunteered as plaintiffs: former Lt. Gov. Jean King and former state Democratic Party Chairman Richard Port. The National Guild and the affiliated Communication Workers of America, aided by contributions from the plaintiffs, bankrolled the lawsuit.
The fight to save the Star-Bulletin was quickly framed as a battle against mammoth Gannett. Honolulu Weekly Magazine published stories revealing Gannett's history of aggressive practices against competitors. Copies of Richard McCord's book, "Chain Gang: One Newspaper versus the Gannett Empire," were passed around as locals became well-versed in how Gannett allegedly "murdered" its competition in Green Bay, Wisconsin; Salem, Oregon; and other cities. Only twice had Gannett been beaten: in Little Rock, where its Arkansas Gazette was outgunned by the Arkansas Democrat and gave up; and in Santa Fe, where Robert McKinney, who had sold his New Mexican to Gannett in 1975, won it back after a court fight. The key question: Could Hawaii join them?
A few weeks into the fight, Star-Bulletin supporters fanned out among tailgaters in the parking lot at a University of Hawaii football game, collecting 15,000 signatures for a petition calling for actions to keep the Star-Bulletin alive. "Everyone wanted to sign," recalls Port. "In all my political life I've never seen people so willing to sign a petition."
ONE OF THE FIRST THINGS you notice inside the Star-Bulletin newsroom is that almost everybody wears a polo shirt with a Star-Bulletin logo or a Hawaiian aloha shirt with the name incorporated into the design.
It's an overt pride that is uncommon these days. At least half of the staff are kama'aina--the Hawaiian word for longtime island residents. It's a middle-aged staff, many of whom have spent their entire careers at the Star-Bulletin. Reporters proudly say salaries for senior reporters top $56,000. But in Honolulu, that doesn't go far. The day I was in the newsroom, national statistics were announced ranking Honolulu as the fifth most expensive city in the country.
Aside from a couple of business news services, neighbor island papers and a half dozen magazines, there are few other journalism jobs in Hawaii. Virtually none pay as well. For most of the 97 editorial and 50 advertising staff, the end of the Star-Bulletin presented an unbearable choice: leave the profession or leave the islands.
Advertiser managers offered job interviews to all Star-Bulletin reporters. The interviews infuriated many. Résumés and clips were required, and staffers felt interviewers seemed more interested in gathering intelligence on Star-Bulletin operations. Nineteen newsroom employees were offered jobs. Seventy were not. "It created haves and have-nots," recalls Shapiro, "and that was very dispiriting. But what I am most proud of is that somehow the staff put that all aside, they got past it, and went back to producing a good newspaper."
The Guild constructed a feisty Web site that serves as an archive for stories about the closing and antitrust allegations against Gannett. Investigative reporter Ian Lind writes a humorous and poignant daily diary for the Web, chronicling the mood in a newsroom that has bounced from despair to optimism.
The editorial staff continued to whomp the Advertiser. Former Advertiser Editor Jim Gatti contends that his morning paper is the most comprehensive source of local news, but many disagree. In a one-month comparison of the papers last August, for instance, the Star-Bulletin beat the Advertiser on stories such as a relocation of a major marine dolphin studies center; a proposal to increase Volcano National Park by 50 percent; an investigation into tainted blood tests at Honolulu police's crime lab; and a proposed settlement with ousted Bishop Estate trustees. In the last three years, the paper has written prize-winning series on secrecy in government, the power of public employee unions, and the steep prices of gasoline and groceries on the island compared with the mainland.
But "Broken Trust" and follow-up stories that dominated Hawaii's news for the last three years are most remembered by readers. When I met David Shapiro for coffee at Borders book store in Honolulu's Ward Center, he explained why the story had so much significance: "The Bishop Estate Trusteeships had become part of the state Democratic patronage system. It corrupted the judiciary and the whole political structure.... 'Broken Trust' broke up that political machine in a way nothing had ever done before."
The fact that the authors of "Broken Trust" included retired federal judge Samuel P. King, educator Gladys Brandt, appeals court judge Walter Heen and Monsignor Charles Kekumano--Kansas native Randall Roth, a Hawaii resident for 18 years, was the only outsider--showed that the pillars of the Hawaii community, not the haoles (white people) but the Hawaiians themselves, were ready to challenge the entrenched island power structure.
To put this in context, it's necessary to recount some Hawaiian history. In 1883, the year that Princess Bernice Pauahi Bishop, the last descendant of the Kamehameha the Great, wrote her will to create the Bishop Estate, the population of native Hawaiians had been decimated by measles, syphilis and other Western diseases brought by missionaries and whalers. From a peak of 300,000 estimated by Captain Cook in 1778, the native population had declined to fewer than 44,000.
Trader and sugar plantation families took control of the islands, eventually engineering a bloodless revolution that pushed aside the Hawaiian royalty when Hawaii was annexed as a U.S. Territory in 1885. Haoles kept tight control on island commerce and imposed near-feudal conditions on immigrant plantation workers from Japan, China, Korea and the Philippines.
World War II changed the entire political, economic and social landscape in Hawaii. Plantation workers' sons marched off to war, assigned to battalions that fought some of the bloodiest battles. Those who survived returned as war heroes, ran for office and took over the Democratic Party, turning Hawaii into essentially a one-party state--now 23 out of 25 state representatives are Democratic. Asians, Hawaiians and other non-Caucasians account for more than 70 percent of the state's population.
It is not surprising that an outsider like Gatti, who had landed in Honolulu 18 months before he was approached by the authors of "Broken Trust," failed to understand the story's overarching significance. After the Star-Bulletin published its series, Gatti wrote a long column for the Advertiser titled "Newspaper Values Must Prevail Over Ultimatums." Gatti explained that the authors weren't willing to wait for the paper to contact Bishop Estate trustees and Supreme Court justices for comment prior to publication. He implied that he was given only four days, not three weeks, to make a decision--a scenario denied as fantasy by Roth and King.
Roth and Shapiro concede they didn't contact the Supreme Court justices or Estate trustees prior to publication--a commentary piece, they say, did not require response on the same day, and from previous experience they feared that getting multiple responses would have led to months of delay. The Star-Bulletin ran lengthy responses a week later.
But to much of Hawaii, Gatti and the Advertiser were just plain skunked and refused to admit it. To them, Gatti's response to the idea of publishing "Broken Trust" was an arrogant display that has left a searing impression.
In contrast, Roth remembers the Friday morning that Star-Bulletin Managing Editor Shapiro and Editorial Page Editor Diane Chang wore big smiles on their faces when they said they would print the story, then huddled together to rip open the paper.
In the middle of the frenzy, Shapiro looked up from the copy he was editing. To no one in particular, he said, "God, I love this job."
NOTABLY MISSING FROM THE debate over the future viability of the Star-Bulletin as a stand-alone newspaper have been numbers--hard, accurate profit-and-loss figures. Accurate balance sheets are notoriously elusive when two newspapers share advertising, circulation and distribution. ###
Before the 1992 amendment, the JOA was reported to be earning an annual net profit of $50 million, about $20 million for the Star-Bulletin and $30 million for the Advertiser. Those figures, which have never been confirmed, are attributed to retired Hawaii Guild administrative officer Roy Kruse, who says he anonymously was sent a company balance sheet.
Today, JOA President Fisch says the Star-Bulletin costs the agency $10 million a year for its news budget, a figure that would be higher if it factored in newsprint and production costs. Offsetting advertising revenues can't be quantified, he says, because advertising is only sold as a joint buy for both papers.
Two local businessmen interested in buying the Star-Bulletin lambasted Phillips and Gannett for offering sparse information to prospective buyers, although Fisch says, "We gave them everything but walk them through it." That didn't satisfy bidder Cecil Heftel, a five-term former Hawaii congressman and broadcast executive who put together a group of investors. "It's a joke," he huffed. Oahu car dealership owner Mike McKenna, who eventually declined to bid, also criticized the paucity of financial information: "Understand: They're not selling anything. They want to close the newspaper."
A glossy, leather-bound promotional brochure was prepared to help sell the Star-Bulletin. There were no financial figures in its more than 100 pages. A one-page list of the Star-Bulletin's physical assets explained why few big-time newspaper groups stepped forward to bid. The sum total of assets are: the Star-Bulletin masthead; its Web site; its subscription list; seven Apple computers; two Saturn cars; seven vans; and the publisher's company car, a 1994 Honda Accord.
Staffers say that despite such meager assets, the Star-Bulletin, unlike so many metro afternoon dailies, has a fighting chance to survive on its own. Because Hawaii is six time zones behind the East Coast, an afternoon paper here is able to publish closing stock prices and some sports scores. Although the Advertiser's 106,590 circulation is much greater than the Star-Bulletin's 59,748, the difference is negligible for home delivery in core circulation areas on Oahu, the most populated of the six major Hawaiian islands: 60,578 for the Advertiser and 53,338 for the Star-Bulletin. Moreover, Star-Bulletin subscribers are wealthier and better educated, according to readership surveys.
David Black, whose Black Press Ltd. is based in Victoria, British Columbia, negotiated with Gannett throughout October and into November this year, racing to meet a court-imposed deadline. Black delivered his final offer on the morning of November 9 and demanded a reply by late morning so he could break the story in the Star-Bulletin. A banner headline: "SOLD!" made the late edition. The staff was jubilant, although aware that it's in for a tough battle as soon as the divorce is final when the JOA dissolves March 15.
Both papers are readying for battle and bringing new generals to the front. The Advertiser's Gatti, 57, took early retirement and moved back to the mainland. He was replaced by longtime Knight Ridder editor Saundra Keyes on December 1. Gannett is poised to hire 20 to 25 new staffers to beef up local coverage.
The week the Star-Bulletin was sold, Shapiro notified the company that he had to accept permanent disability status. Veteran Star-Bulletin editor Frank Bridgewater was appointed ME.
Black, 54, a low-key, lanky entrepreneur known for driving Jaguars and planting deep roots in his community, secured the paltry assets of the Star-Bulletin for a mere $10,000. Black, who declined to be interviewed for this article because he was too busy with his new acquisition, saved his powder for a more serious volley aimed at Gannett. On December 1, he announced the acquisition of nearby RFD Publications, publisher of a free weekly newspaper with a circulation of 280,000. The sale price was not disclosed. In one swell swoop, Black secured offices and up-to-date presses; an experienced staff of 140 circulation, printing and advertising employees; and already-in-place advertising clients. It was a move entirely in character for the publisher, who has built his empire into the largest privately owned newspaper company in Canada by clustering weeklies, shoppers, and tourist and classified publications, all using the same presses.
In addition to launching a new Sunday edition for the six-day Star-Bulletin, he expects to expand coverage of neglected neighbor islands. He has secured modest concessions from the staff in a new Guild contract, although there remains some wariness about a cost-saving measure for reporters to work out of their homes. For the most part, however, he has been greeted like Caesar entering Rome.
A frequent visitor to Hawaii who plans to live in the islands part-time, he does seem to have a love for the place. When asked by a television reporter why he would embark on such an uncertain challenge, his response was incredulous:
"Are you kidding?" he asked. "To a Canadian, Hawaii is paradise."