Sun-Times jinx: Fading to Black
Second of two parts. First installment is here.
The Chicago Sun-Times, the most jinxed newspaper in America, already had suffered through a decade of bad luck by the time Conrad Black bought it in 1994. But the worst was yet to come.
Black was the chief executive of Hollinger International, which operated a global network of newspapers including the National Post in Canada, the Jerusalem Post and the Daily Telegraph in London.
Though born in Canada, Black was so self-involved that he was determined to buy a peerage in the United Kingdom. After a bit of finagling, he got his wish. But the honor was issued on the condition that his title would incorporate the name of Tube stop outside the Telegraph’s office. Thus, he became Lord Black of Crossharbour.
Black was more than your average wealthy egomaniac. His lordship also turned out to be a crook who now resides in a federal penitentiary in Florida.
On his way to the pokey, Black did a world of damage to the Sun-Times, which the paper may be hard pressed to survive. But he didn’t do it alone. He got help from his long-time henchman, F. David Radler, whom he installed as the publisher of the Sun-Times shortly after buying the paper for $180 million.
Radler, a tight-fisted manager who was convicted with Black in 2007 for stealing millions from Hollinger, often told people that his ideal newsroom would consist of three editors, two of whom kept busy selling ads.
In merciless slashing, Radler cut the Sun-Times staff to barely half of the more than 300 journalists who worked there in the pre-Murdoch era (the number since has been thinned in the outsourcing and cost cutting that eliminated nearly 19% of all the jobs in the company 2008). Radler turned off the escalators to save money and cranked editorial policy so far to the right that the traditionally conservative Chicago Tribune emerged as “the city’s moderate voice,” according to Chicago Magazine.
Black and Radler were not just stingy with the staff. In addition to cheaping out on journalism, they also cheated the advertisers by faking circulation. When the fraud was discovered after their departure, the newspaper was censured by the Audit Bureau of Circulations and made restitution to a number of advertisers. Today’s daily circulation of 313,176 is about half of what it was when I left in 1984.
In the end, Black and Radler were exposed as not merely chiselers but also as out-and-out felons. After being bounced out of the company in 2003, they were convicted four years later in a federal court of looting the company for millions and each sentenced to a stretch behind bars.
Radler, who flipped on Black and repaid $63 million he stole from the company, was released earlier this month after a relatively short stint in jail. Black, who is in his 60s, is about one year into a 6½ term at a federal pen in Florida, where he recently told a Toronto paper that life is “safe and civilized.” Black was ordered to repay only $6 million to the Sun-Times.
Adding insult to injury, the Sun-Times was forced under terms of the employment contracts of both men to pay almost $64 million to defense attorneys for the sticky-fingered executives. The company reports that it has recovered all but $14 million of the money in the aftermath of the convictions.
Hollinger was a mess in the years after Black and Radler were fired, forcing the company to sell all of its holdings except the Sun-Times and its sister papers in the communities surrounding Chicago. In an effort to protect the innocent, the name of the company was changed to the Sun-Times Media Group in 2006.
With the sole focus of the business in Chicago, the corporate office, naturally, was placed in fancy digs in New York. And the company was put in the charge of an investment banker named Gordon Paris, who was paid a staggering $2.87 million for his services in 2005, making him by far the highest-paid chief executive in the newspaper industry in relation to the size of his company.
In a rare stroke of common sense in late 2006, the corporate HQ was moved into the same offices as those occupied by the newspaper and a seasoned turnaround executive and Chicagoan named Cyrus F. Freidheim, Jr. was named the new CEO. Freidheim took the job for quarter of the pay hauled down by Paris and subsequently accepted a pay package last year that compensates him largely in almost worthless Sun-Times stock.
Freidheim found himself presiding over the company during the Black-Radler trial, the denouement of the circulation scandal and an unprecedented disintegration of the newspaper business that has been exacerbated by the worst global economic meltdown since World War II.
Along the way, Freidheim, who is the former CEO of Chiquita Brands International, had a legal problem of his own. It turns out that the banana company had paid $1.7 million over seven years to a Colombian paramilitary group to protect its workers from harassment. When the paramilitary group was designated a terrorist group in 2001, the payments became illegal under U.S. law but Chiquita kept making them.
As Freidheim tussled with all the problems of running the Sun-Times, he also spent the better part of 2007 trying to convince federal authorities that Chiquita made the payments without realizing they were illegal. He and his colleagues, who could have been subject to criminal prosecution, eventually were cleared of wrongdoing by the U.S. Justice Department.
With the value of Sun-Times stock plunging, Freidheim acceded to the demand of dissident shareholders to offer the company for sale in early 2008. But there were no takers, as there have not been for most of the dozens of other newspapers put on the market in the last year or so.
Under new management – again
Displeased that the entire market capitalization of the Sun-Times Group today has shrunken to an less than $7.5 million, the company’s largest shareholder launched a proxy fight in early December to oust not only Freidheim but also most of the other members of the Sun-Times board.
Now that the shareholders have succeeded, they have installed a board of new turnaround experts to somehow wring more value from the group. Freidheim was among the ousted directors but he will continue serving as the CEO as long as the new board permits.
That probably won’t be long, inasmuch as the new board includes Jeremy L. Halbreich, the onetime general manager of the Dallas Morning News who went on to build and sell the five-largest chain of community newspapers in the United States.
The new turnaround team will install new managers to bring new second-guessing, new cost cutting and new uncertainty to a company that has suffered almost unremitting turmoil for 25 years.
At the same time, the Sun-Times, which relies heavily on single-copy sales, is facing the stiffest challenge yet from the rival Chicago Tribune. After eating into Sun-Times street sales for the last few years with its jazzy, free Red Eye tabloid, the Tribune this week launched a tabloid version of the main paper. Thus, two separate Tribune tabloids will squeeze the Sun-Times as it scrambles to eke out a sustainable share of the increasingly scarce readers and advertising dollars in the market.
Can the new team lift the jinx? I hope so, for the sake of the people who work there. After nearly 25 years of bad luck, you have to wonder how much more they can take.