How the Cincinnati Enquirer's hard-hitting investigation of Chiquita Brands International unraveled.
By Alicia C. Shepard
Alicia C. Shepard is a former AJR senior writer and NPR ombudsman.
T O FULLY GRASP WHAT THE ENQUIRER was taking on when it began its in-depth look at Chiquita, it's necessary to understand Carl Linder Jr., head of the company since 1984. He arrives in a Rolls Royce and wears cufflinks proclaiming --Only in America." Lindner, 79, never graduated from high school but went on to become the 282nd richest man in America, according to Forbes magazine.
Not only is Lindner a billionaire, he's also incredibly generous. The Cincinnati Post and the Enquirer have run scores of stories reflecting Lindner's benevolence. Last fall, for example, he gave $1.5 million to buy computers for Cincinnati's inner-city Catholic schools and $5 million to the University of Cincinnati's business school.
Lindner's largess is legendary, especially his contributions to national Republican and Democratic coffers. In March 1997, Time magazine said Lindner's political donations make him one of the nation's top power brokers. He is unquestionably No. 1 locally. By September, one of every $10 donated to Cincinnati City Council candidates of last fall's election came from Lindner or one of his family members or employees, according to an Enquirer story.
And Lindner has a history with both the Enquirer and parent Gannett. He owned and was publisher of the newspaper from 1971 to 1975, when he sold it to Combined Communications, remaining a major shareholder in the company. In 1979, Gannett acquired Combined Communications in a stock swap. As a result Lindner held a 4 percent stake in Gannett and a de facto interest in the Enquirer.
Little by little, says Allen H. Neuharth, Gannett chairman at the time, Lindner began buying up Gannett stock until he owned 5 percent of the company--making him the second-largest stockholder behind the Gannett Foundation (now the Freedom Forum), which owned 11 percent. Lindner began trying to buy the foundation's stock too, says Neuharth. Things turned ugly between Neuharth and Lindner in 1985, so unpleasant that Neuharth dubbed the soft-spoken Baptist --a shark in sheep's clothing." --In my opinion, his goal was to try to take over Gannett," says Neuharth, who now lives in Florida in retirement.
At one point, Lindner offered to sell his 4 million shares back to Gannett, according to Neuharth's book, --Confessions of an S.O.B." Neuharth offered to pay $57 a share, the market price. Lindner wanted $70 a share, or more than $50 million above market value, wrote Neuharth.
`` `Carl,' I said, `isn't that something I keep reading about that's called greenmail?' " Neuharth wrote in his book. ``Lindner bristled. `I'm sorry to hear you use that word. We don't do greenmail.' `Whatever you call it, I call it greenmail, and the answer is no,' I countered. `Well, then, you leave us no alternative but to fight you,' Lindner said as he and his henchman departed."
After Lindner unsuccessfully tried to bolster his position, according to newspaper accounts, he unloaded his Gannett stock at market price. But a business relationship continues; Gannett owns one share of the Cincinnati Reds and Lindner owns 1.5 shares, out of a total of 15.
Today Lindner, who couldn't be reached for comment, heads a $2 billion holding company called American Financial Group with interests in insurance, banking, convenience stores, media and Chiquita. His money and power, some say, can make covering him difficult.
In May 1993, Jay Shatz, a reporter for WCPO, at the time CBS' Cincinnati television affiliate, put together a profile of Lindner. It focused on the two faces of Lindner: Cincinnati's most generous benefactor, and an astute investor who had a reputation as a ``bottom feeder" for buying financially troubled companies at a bargain price.
Promos for the Lindner profile aired the weekend before it was to be broadcast. Soon afterward, executives with the station's owner--Scripps Howard Broadcasting--wanted an advance look at the story.
``Some of the folks in the corporate office saw the promotion and were concerned about the tone of the promotion, so they looked at the story," recalls Pat Burns, then assistant news director at WCPO, who is now at KTRK in Houston. ``Ordinarily there is not corporate involvement in any stories. Frankly that had more to do with the fact that the corporation [Scripps Howard] is based in Cincinnati. Carl Lindner is very well-known. He's a very important guy. I'm sure they probably had some alarm bells go off. Given the Cincinnati Enquirer's experience, the folks at corporate were pretty smart to check it out. They didn't change the story substantially, but the story was changed. It was Carl Lindner, and they just wanted to be careful."
In 1993, after Beaupre arrived, Enquirer reporters Braykovich and Patricia Gallagher conducted a three-month investigation of Lindner. In a four-day series, they disclosed that he was married from 1942 to 1949 to a woman who filed for divorce on the grounds of neglect. This was news to readers, who knew Lindner only as a devout Christian married to the same woman since 1951 and a devoted father of three sons.
``Carl Lindner is the most prominent Christian conservative in this country," says WLW radio's Cunningham, a Lindner loyalist. ``The fact that his first marriage ended in the 1940s is nothing that the public needs to know. Carl had worked hard to keep it quiet, and the Enquirer put it on the front page. It indicated to me that the Enquirer had taken on a new role and was out to get Carl Lindner." After the item about Lindner's divorce appeared, Lindner refused for a time to sell the Enquirer in any of his 200 United Dairy Farmers convenience stores.
It was against that backdrop that Beaupre and his reporters launched their investigation of Chiquita. In reporting on the affairs of a figure of Lindner's clout and aggressiveness, it was particularly crucial to have everything air-tight. The Enquirer thought that was the case when it published the Chiquita stories on May 3. But it was wrong, very wrong. C HIQUITA, NOT SURPRISINGLY, WAS uncomfortable about the Enquirer's investigation. After it found out about it in June 1997, it retained the Washington, D.C.-based law firm of Kirkland & Ellis to coordinate the firm's responses to the paper's numerous questions. It did so, officials say, because the inquiries were so far-reaching. ``We thought we were doing them a service by giving them well-researched and organized answers," says Olson, Chiquita's general counsel. ``Most of the work product we gave them was ignored."
Over October 6 and 7, Chiquita officials, their Washington lawyers, Beaupre, local news editor David Wells, Gallagher and McWhirter met at Chiquita headquarters for a total of about seven hours. Both sides taped the meetings. During the sessions, Gallagher asserted that the paper was not --out to get Chiquita," according to the suit the company filed against the reporter on July 2.
The same month, according to a high-level source at the Enquirer, Beaupre learned Gallagher had gotten access to Chiquita's voice mail system. It had gone beyond receiving tapes. Beaupre warned him not to do it again. The editor also let the paper's lawyers know what had happened. ``Yes, we knew Mike had the access codes," says Braykovich. ``But he said he got them from a source. He said the source provided the access codes and the tapes. After Mike admitted to Larry that he'd accessed the voice mails, he was told not to do it. But by then, he'd already done it."
Meanwhile, Chiquita officials were concerned that the questions Gallagher and McWhirter were asking were extremely specific. Letters from attorneys flew back and forth between the two camps up until the articles ran. ``A pattern became apparent as Enquirer reporters put questions to the company through our lawyer," says Chiquita president Warshaw. ``Our lawyers would accumulate internal documents and documents from third parties to answer their questions. Then the reporters would subsequently listen to the document-gathering process, listen to us saying things like: `Should we answer this? Should we give them this document?' They knew what specific documents existed and what we were willing to give and what we chose not to."
Chiquita officials began to suspect that someone inside the company was leaking information to the reporters. But then an episode in late April 1998 led Chiquita to believe something more nefarious was going on.
While driving home, Olson decided to check his voice mail at work. He couldn't get through. He didn't make much of it, he says, because Chiquita's voice messaging system would say a mail box was busy if the employee had failed to sign off properly. It happened a second time, and again he wasn't too worried. But when he tried to listen to his voice mail over a weekend and couldn't, he got concerned. He knew that even if he'd failed to log off properly on Friday, the system would eventually correct the situation within minutes. ``Whoever it was thought I wasn't using my mailbox," says Olson. ``After all, how long are you even in voice mail?"
Olson mentioned the incident to his boss, Warshaw, and they brought in Chiquita's voice mail administrator, who oversees the system but doesn't have access to employee passwords. She agreed it was odd. But soon she figured out how they could produce electronic footprints: She could find out the telephone number of the culprit, although some calls came from pay telephones.
On May 1, a caller from outside the company entered Olson's voice mailbox when he was at his desk, then moved on to four more boxes. Now Chiquita officials knew their voice mail system had been penetrated. ``We knew something was going on, but we couldn't point to anyone specifically," Olson says.
Two days later, Chiquita had an answer when the Enquirer published its stories on the banana giant and reported it had listened to more than 2,000 password-protected taped voice mail messages provided by someone at Chiquita with authority over the voice mail system. One problem: As Chiquita officials quickly told the Enquirer and Gannett's attorneys, there is no one person who would have access to all of the voice mail.
Chiquita, according to its lawsuit against Gallagher, says its computer-controlled voice mail system was able to preserve detailed electronic records of illegal invasions. Chiquita considers voice mail messages proprietary information, not unlike trade secrets. In one 10-day period near publication time, Chiquita's records show that the system was invaded on more than 50 occasions, sometimes as frequently as 13 times a day.
``Each time Gallagher engaged in an unauthorized invasion of a legitimate user's voice mail box, he caused a record of his unauthorized voice mail session to be placed on Chiquita's storage box," the suit alleges. Chiquita's voice mail equipment includes an internal tracking device that operates like caller ID and indicates where calls are coming from. Some of those calls, say Chiquita officials, are linked to Gallagher.
Within two weeks of publication, Chiquita contacted the Hamilton County Sheriff's Department, which began an investigation of theft of proprietary information, says Stephen S. Barnett, a sheriff's spokesperson. Since then, the FBI and the U.S. Attorney's office have joined the inquiry. County Prosecutor Joseph T. Deters, a longtime friend of Lindner, recused himself from the investigation and on June 1 the court appointed a special prosecutor, Perry L. Ancona.
``I spoke to [Gallagher] right after the stories were published and then about three weeks before" Gallagher was fired, says Westchester reporter Ed Tagliaferri. ``He said to me, and I'm not quoting him exactly: `I can't go into detail, but I didn't do anything wrong.' "
Both Gallagher and his attorney, Patrick J. Hanley, aren't talking. When AJR asked Hanley why Gallagher wouldn't say publicly that he didn't break into Chiquita's voice mail if that were the case, Hanley replied: ``It's much more complicated than that. I really don't want to go into it now."
Once Chiquita told Gannett lawyers the company planned to file a suit against the paper in mid-June, negotiations began to move quickly. At 10:20 p.m. on Saturday, June 27, Beaupre was ordering his shocked weekend desk to remake page one.
A staff meeting was held the following Monday near the sports department of the 19th floor newsroom. Before the meeting, management distributed three-page fliers that anticipated and answered questions. ``QUESTION: Where were the editors? How could this happen? ANSWER: We took normal and even extraordinary measures to scrutinize these stories. Plain and simple the reporter lied to us. He lied to us repeatedly over a period of nearly a year. His deception was massive."
The flier explained there was no evidence McWhirter, who is known as a superb database reporter, was involved in the deceit. Editors had trusted Gallagher based on his record, because ``his facts had always withstood scrutiny."
The atmosphere at the 90-minute meeting was tense, almost funereal. Beaupre said he had had a name for Gallagher's source who supposedly had authority over Chiquita's voice mail system, but left it at that. ``It was depressing and all the reporters were frustrated because no one was answering any questions," says one reporter. ``Every time a question was asked, they'd say: `Read the apology.' That's fine for the public, but they owe us an explanation."
Top managers say they can't discuss what happened until the criminal investigation is over, if then. New information surfaced on July 17, when the Wall Street Journal and the New York Times had front-page stories reporting what led to the settlement and, in the case of the Times, looking at whether there is any truth to the discredited stories. Times reporter Frantz ``found that some of the allegations cannot be dismissed so easily, despite the questions raised about the reporting method."
Chiquita was not happy with the Times' story because it trumpeted on the front page the fact that the SEC was continuing its investigation prompted by the series' allegations that Chiquita covered up a bribery scheme in Colombia.
For the most part, however, Chiquita has been quite successful at blunting the impact of the Enquirer series by focusing attention on the paper's reporting techniques. Chiquita executives remain furious, however, because they say the stories were unbalanced and that much of the information they provided to undercut the articles' allegations wasn't used. ``What we did has to do with inaccurate reporting and false and misleading information, and only secondarily the manner in which the information was gotten," Warshaw says. ``We were shocked at the extent they ignored our information and that of third-party information that backed our claims."
Chiquita sued Gallagher for libel, trespass and violations of wiretapping laws; its larger goal is to force him to return the tapes and prevent him from profiting from the information. Chiquita lawyers have already deposed one of two people who say Gallagher shared the tapes with them--Larry Birns, director of the Council on Hemispheric Affairs, a longtime critic of Chiquita.
There are no winners in this story. The public is left confused about what, if anything, Chiquita did wrong, and doubts about the ethics of journalism have been reinforced. Chiquita says it will use the money from the Enquirer to cover its legal costs and to try to repair the extensive damage to its reputation. As a result of the series, a handful of stockholders filed suit against Chiquita for, according to one suit, damages --caused by pervasive and on-going course of illegal conduct designed to artificially inflate the earnings of Chiquita" reported in the series. The --in excess of $10 million" Chiquita received three days after the public apology will come out of the Enquirer's budget, not Gannett's--money nearly everyone agrees could be better spent in the newsroom.
There's also the issue of trust between reporter and editor, which has been seriously compromised. Editors such as Leach at the Akron Beacon Journal are profoundly concerned. ``Larry [Beaupre] trusted a reporter he's worked with for 12 years," says Leach. ``It's a wake-up call. I know Larry had to ask all the right questions.... I don't know what else he could have done. I'd like to think I'd ask the right questions. What else is there to do? I'd love to have the answer to that."
And reporters at the Enquirer have to live with the damage to their newspaper's reputation. ``Mike Gallagher hurt some of the people who cared most about him," says Braykovich. ``He stabbed all of us right in the heart. But then I look at him and he may go to prison. I cared about the guy. I like him a lot. He was a really good guy. I waver between wanting to comfort him and wanting to punch him in the mouth." ###