By Julie Reynolds
Heath Freeman has come out of hibernation.
The co-founder of vulture hedge fund Alden Global Capital hasn’t spoken to the media in years. He never, ever returns journalists’ calls. When he’s been close to being deposed in lawsuits and bankruptcy cases, the cases seem to always get settled before deposition day. Public and private letters from Sen. Chuck Schumer, and another one from 20 U.S. senators have gone unanswered.
So it was surprising to learn that Freeman actually replied to a letter from Illinois Senators Dick Durbin and Tammy Duckworth asking about Alden’s intentions regarding its one-third stake in Tribune Publishing.
The letter, posted here, posed the following questions to Freeman:
- It is our understanding that Alden has agreed not to increase its stake in Tribune Publishing until after June. After this date, does Alden intend to increase its ownership stake with the goal of influencing newspaper portfolios or selling assets?
- Does Alden plan to push for additional staff layoffs at Tribune Publishing beyond the buyouts already offered? If not, will you commit to supporting current staff levels at Tribune Publishing? Can Alden provide an example of a journalism investment that has not resulted in mass layoffs and/or newspaper closures?
- What specific steps will Alden take to protect freedom of the press and ensure that communities served by Tribune Publishing continue to have access to fact-based, timely reporting?
The letter noted the senators were “troubled by reports that Alden is under investigation by the Department of Labor due to mishandling of pension funds…This raises further questions about Alden’s capacity to act in the best interests of workers and retirees.”
The letter also expressed concerns about “Alden’s lack of transparency surrounding its investors. A recent filing with the Securities and Exchange Commission indicates that 80 percent of Alden’s clients are non-U.S. persons and that more than $830 million of Alden’s assets under management are connected to non-U.S. citizens. Furthermore, Alden has domiciled significant funds in the Cayman Islands, a well-known tax haven that lends itself to corporate secrecy.”
The senators asked Freeman to respond by March 27.
Amazingly, he did.
The letter was first reported on by Dean Miller of the Seattle Times.
While the fact that Freeman responded has surprised the likes of the Harvard Nieman Lab’s Ken Doctor, I, too, have been wondering why he’s being so cordial in this case. Doctor speculates it might have something to do with the upcoming deadline (June 30) for Alden to merge with — or outright buy — Tribune Publishing.
Regardless of motive, I felt some clarity regarding Freeman’s remarks was warranted. While it was hard to find a sentence in his letter that didn’t beg for some kind of annotation, I resisted highlighting the whole thing.
Here, then, is an annotated version of Heath Freeman’s letter to the senators. Annotated text appears in red. Just click the fact check bar after each paragraph to read the annotations.
March 27, 2020
The Honorable Dick Durbin
United States Senate
711 Hart Senate Office Building
Washington, D.C. 20510
The Honorable Tammy Duckworth
United States Senate
524 Hart Senate Office Building
Washington, D.C. 20510
Re: March 12, 2020 Letter to Alden Global Capital LLC
Dear Senators Durbin and Duckworth,
We appreciate the opportunity to respond to your letter dated March 12, 2020 (the “Letter”), in which you requested information related to Alden’s relationship with Tribune Publishing Company (“Tribune”).
Alden is a significant investor in MediaNews Group, Inc.(1), (“MNG”) which is committed to ensuring communities across the country are served by robust, independently minded local journalism (2). Now more than ever, families across the country depend on their local news for timely, fact based reporting. As the on-going global COVID-19 pandemic highlights, reliable news and information is essential to ensuring the health and safety of our local communities.
MNG’s goal is to operate newspapers in a sustainable and responsible way so that they will continue to exist successfully for the benefit of their local communities and shareholders (1) over the long term. Notably, all of MNG’s newspapers have editorial independence (2) in both their newsrooms and opinion sections. MNG’s talented team of seasoned newspaper executives have worked in journalism for an average of more than 30 years and have a successful track record of turning around (3) and sustaining challenged newspaper businesses.
Given the extensive inaccurate media coverage (1) Alden and MNG have received, we appreciate the opportunity to clear up some common misconceptions. We have previously made the decision to focus on operating our business rather than arguing over errors (2) in media coverage. Perhaps we should have been more proactive (3) in setting the record straight and correcting coverage in order to have avoided the erroneous ways we are now viewed.
MNG is one of the leading newspaper operators in the U.S. with approximately 200 publications (1) including The Denver Post, The Mercury News (San Jose), The Pioneer Press (St. Paul) and The Monterey County (2) Herald. MNG has never closed a daily newspaper during our ownership (3). Given the industry trends, including in your home state of Illinois, we think this is something to celebrate. Too often, MNG is the buyer rescuing newspapers like The Reading Eagle, The Greeley Tribune, The Boston Herald or The Orange County Register(4) from bankruptcy or liquidation or perilously close to that fate. Indeed, failing to equip local newspapers so they can adapt to the economic realities of the newspaper business in the 21st century would most certainly lead to more newspapers going out of business in your state and across the country.
Alden acutely understands that local newspapers in the U.S. are struggling (1), putting the important and vital role they play in our communities at risk. The documented reality is that tech behemoths such as Google and Facebook are devouring the advertising base that has traditionally supported newspapers. Based on analysis conducted at Pew Research Center, total print advertising revenue in the U.S. newspaper industry was estimated to have declined from $46.6 Billion in 2006 to $9.3 Billion in 2018, a loss of $37.3 Billion or an 80% decline. In that same period, total digital advertising revenue in the U.S. newspaper industry was estimated to have increased only $2.3 Billion growing from $2.7 Billion to $5.0 Billion. That equates to a total estimated loss of $35 Billion in total advertising revenue in the U.S. newspaper industry from 2006 through 2018. Unfortunately, digital advertising dollars are not near replacing the dramatic declines in print advertising dollars the newspaper industry is experiencing (2). The digital transformation of the U.S. newspaper industry is in its early stages. And if local newspapers do not reset to these economic challenges (3) they may cease to exist. As you may be aware, a 2018 study from the University of North Carolina found that the U.S. has lost nearly 1,800 local newspapers since 2004, or approximately one in five (4). Clearly, if local newspapers fail to adapt to the economic realities they will continue to close.
As you know, Illinois has already been deeply impacted by the loss of local journalism, with numerous publications closing or significantly reducing staff over the last decade. Just last November The News-Gazette in Champaign-Urbana laid off over 30 employees after Community Media Group bought them out of bankruptcy in August 2019, while The St. Joseph Leader and The County Star in southern Champaign County closed their doors permanently in August of 2018. Moreover, in 2015 Gannett (formerly New Media) shut down The Murphysboro American, Galattia’s Money-Stretcher, and The Daily American of West Frankfort, IL ending nearly a century of providing local and national news to its residents. Attached for your convenience is a list of articles and publications detailing the significant issues facing the industry.
Alden is an active investor in the newspaper industry (1), and believes in helping local papers operate successfully over the long term (2). With our minority investment in Tribune, we seek to further our goals of supporting local newspapers, with a focus on ensuring that publications can operate profitably and sustainably. Alden is committed to local news coverage and to enabling local papers to serve their communities well into the future. As Alden is a minority equity holder of Tribune (holding 32%), it is critical to underscore that Tribune operates independently. As a result, Alden does not, and cannot, make decisions (3) regarding operations, selling assets, influencing newspaper portfolios, staffing, or facilities for Tribune. These decisions are made solely by Tribune. At this time, Alden has not made any decision regarding additional investments in Tribune (4).
In your Letter you stated that Alden is under investigation by the Department of Labor regarding Alden’s management of employee pension savings. The inquiry was closed by the Department of Labor and completed to its satisfaction. We appreciate the opportunity to reiterate MNG’s commitment to supporting the participants and beneficiaries of its employee pension plans.
With respect to Alden’s structure and its investors, Alden is located in the United States and is fully compliant with all relevant legal requirements as a registered investment advisor. As is typical in our industry, (1) there may be (2) certain legal entities and organizational structures formed outside of the United States. While Alden has customary contractual confidentiality arrangements with its investors limiting its ability to disclose their identities or background information, we can share that Alden is controlled by U.S. citizens. We can also disclose that all of the ultimate beneficiaries of the interests in the Alden investment funds are U.S. or EU persons (3).
All of this is to say we understand, given the depth and breadth of inaccurate media coverage, why you may be skeptical. We are heartened by the fact that, in reality, we share the belief that Americans need and deserve robust local journalism that operates with editorial independence.