San Diego In 2003 and 2004, as Helen Copley lay gravely ill, Copley Press hired the Washington, D.C., firm of Capitol Tax Partners to lobby for lower estate taxes. According to U.S. Senate disclosure records, the newspaper chain paid a total of $280,000 for the services of Jonathan Talisman, a well-connected Washington tax hand. Talisman had worked for Democratic senator Daniel Patrick Moynihan of New York as chief counsel for the Senate Finance Committee minority staff before becoming assistant secretary for tax policy at the Department of the Treasury under President Bill Clinton. Since joining the ranks of Capitol Hill lobbyists, his clients have included General Electric and big life insurance companies.
But whatever tax breaks Talisman arranged for Copley, they apparently weren't enough to save the newspaper chain after its owner's demise. Last week Copley Press said that because of newspaper-industry weakness and debt incurred for estate taxes from Helen Copley's death in August 2004, the company was exploring the sale of all its newspapers except the Union-Tribune. "That's corporate speak for 'You're for sale,' " the publisher of the Peoria Journal Star told his shocked employees. The Illinois papers in Springfield, Lincoln, Galesburg, and Peoria and the Ohio papers in Canton, Massillon, and Dover/New Philadelphia expect to be jettisoned by spring. Copley is already negotiating to sell its Torrance-based papers.
Ironically, the financially conservative Helen Copley was averse to debt. She was influenced by two bedrock Iowans on the company board: her brother Joe Kinney and lawyer David MacDuff Elderkin. But as Helen Copley became ill in the mid-1990s, management took on debt to pay $175 million for the Peoria and Galesburg papers. After dumping some Chicago-area money losers, the company then snapped up the Ohio properties beginning in 2000.
On the cocktail circuit, some say that cash flow from the acquisitions has paid off most of that debt. The privately held company isn't talking. A more skeptical view is that Helen Copley's debt aversion was right on the mark: even if these papers threw off cash, their long-term prospects were never so hot. Canton, for example, had a population of 116,000 in 1950. It's now below 80,000 and falling. Peoria's population was 124,160 in 1980; now it's down to 112,936. The surrounding metro areas have done better, but these are not growth markets.
So will Copley get a decent price for these properties? Daily newspaper valuations are plunging. Ailing newspaper chains aren't buying now. Private equity groups are showing interest in papers. "They [Copley] should come out ahead, but when you take account of inflation, the cost of money, what they may have invested, it may be a wash," says Larry Grimes, newspaper broker in the Washington, D.C., area. Chicago's Tribune Company is considering liquidation and looking for buyers, "but I am hearing that the deals offered the Tribune are not attractive. And the private equity guys are only interested in a particular [low] price."
U-T employees are nervous. The Copley Press staff in La Jolla won't be needed, and its building is choice real estate. Copley News Service will die, shrink, or be folded into the U-T. The company offered buyouts to employees with more than 30 years of service. On October 30, the Audit Bureau of Circulations reported that U-T circulation continues to drop: for the year ended September 30, Sunday circulation dropped from 416,682 to 390,310 and Monday-Friday from 314,279 to 304,334. The company continues to inflate its numbers with "other paid" circulation (mainly those papers that get dumped in your driveway even though you are not a subscriber). They were 30,352 Sunday and 20,787 Monday-Friday. Readers, however, stay misinformed. On September 12, the U-T reported that it had "a circulation of about 340,000 daily and 440,000 Sunday." At that time its own house organ was saying that daily circulation was 305,000 and Sunday 380,000.
Chief executive David Copley, Helen's heir, has had a heart transplant. On June 22, 2006, Harold W. Fuson Jr., the company chief counsel, appeared at the United States Embassy in Beirut as part of its "Conference in Support of an Independent Media," which Ambassador Jeffrey Feltman described as "a useful and productive exchange between media leaders about successful business models for print, internet, radio and television outlets in Lebanon."
Fuson's snazzy PowerPoint presentation, featuring photos of his granddaughter, asked the questions, "Will journalists become a charitable institution? Will employees take control?" There has been talk that when David dies, the newspaper will be run by a charitable nonprofit institution, rather than be sold. Contacted last week, Fuson declined comment.
There is a precedent for that in Florida's St. Petersburg Times, bequeathed in 1978 by Nelson Poynter to the nonprofit media institute bearing his name. "But that's in cases in which the owners want to have a great paper and care for the staff," scoffs a veteran U-T employee. "But Copley has never wanted a great paper and doesn't care that much for the staff."
There are at least two good reasons to expect a sale: top brass have been given generous golden parachutes, according to a reliable source, and chief operating officer Charles (Chuck) Patrick has a home in Santa Barbara that he is now refurbishing.