War at the Wall Street Journal

by Sarah Ellison

  That Thursday evening of May 18, Jimmy Lee was the first to arrive in the Oak Room at the Links Club on East 62nd Street, where the banker often entertained JPMorgan's most favored CEOs. Tonight he believed his guests could accomplish something quite advantageous for all involved. The dark paneling and the hushed greetings at the club were the perfect atmosphere for Jimmy, though both his guests would find the surroundings staid and stuffy. This was unfortunate, as Jimmy had hoped for a casual effect that signaled ease and a not-too-aggressive approach. He didn't even plan to raise the topic—"the thing," as he often said—that was behind the occasion. To him, bringing up the deal at this point was like going on a first date and talking about when to have children—it was a turnoff.

  Rupert Murdoch arrived later than Zannino, as planned. Jimmy didn't want them to be seen entering the building at the same time. The perfect host, Jimmy ushered each man, upon arrival, to the small Oak Room, where they opened a bottle of expensive Australian wine. Jimmy had been busy making the match for months, telling both men they'd really like the other. He saw them both as "guys' guys"—the same way he saw himself.

  Murdoch arrived at the dinner facing myriad threats to his kingdom, but he was, as ever, moving forward. John Malone, the cable magnate, had bought up his stake in News Corp. The stake was threatening because it wasn't much smaller than the Murdoch family's own 30 percent share, and Malone was just wily enough and opportunistic enough to never be trusted. The previous summer, Murdoch's elder son, Lachlan, who had been groomed his whole life to take over from his father, had left his post as deputy chief operating officer of News Corporation. Lachlan had suffered from what some called a "corporate conspiracy to undermine him" at the hands of Roger Ailes, the programming genius behind Fox News, and Peter Chernin, the company's chief operating officer. But it was more than just a corporate defeat. The move was a "tragedy" for the family, in the words of one of the kids. The problem was that Lachlan's father had allowed it to happen. Murdoch had prepared Lachlan to be the heir apparent, but when Lachlan started to falter, Murdoch allowed him to fall. "It wasn't the most emotionally intelligent way for Dad to handle it," said Elisabeth, Lachlan's older sister. "He doesn't really have the tools to express that he's sorry."

  Lachlan's defection in 2005, unthinkable until it happened, had been hastened by another threat to the old Murdoch family: Murdoch's third wife. Murdoch had long been separated from his second wife, Anna, with whom he had Lachlan, his older sister, Elisabeth, and his younger brother, James. Anna, an elegant woman, knew her husband well. She could almost have anticipated his affair with Wendi, whom Murdoch met on a trip to China in 1997. During the divorce in 1999, Anna's children watched bemusedly as she focused single-mindedly on cementing her children's control over the family trust that gave the Murdochs control of News Corporation. "I told her to stop being so paranoid," one of the children said, as Anna warned them that their father would start a new family and have more children and supplant the existing kids' total control over the trust. "He's not going to have more kids at his age," they said, shrugging off their mother's concerns, the way children often do.

  Anna could have walked away with half of Murdoch's empire. The Murdochs were residents of California, and after a thirty-one-year marriage, Anna was likely due half the estate, worth nearly $8 billion at the time. But to blow apart the family, after all the work she had put into it, seemed foolish. She had gotten her children up in the morning early to see their father before he went to work. She had nurtured a feeling of Murdoch loyalty. "Growing up, we moved around a lot, and it always seemed that if everything else went wrong, we still had each other," says Elisabeth of her family. Even if Rupert Murdoch was going to throw that away, Anna wasn't going to let the divorce threaten the dynasty. She took a relatively modest $200 million in exchange for a guarantee of her children's future control of the company.

  When the news came that Wendi was pregnant, Anna's wounds were salved just a bit by the knowledge that she saw this coming. When Wendi's second daughter, Chloe, was born less than two years after the first, Anna braced for the next step. It came as she predicted.

  When the little girls were just babies, Murdoch strove to assure Wendi that she was truly part of the family and that all his children were equal in his eyes. Murdoch told his older children he needed to split the trust. "We'll split the family if you don't get in line," he said. For months, they haggled over the outline of the trust with their father. It fell to Elisabeth to tell her mother the children's decision to give in to their father's wish to split the trust. The four older children retained voting power but agreed that all the children—Grace and Chloe included—would receive a $150 million distribution from the trust. It was a grueling ordeal, and it seemed, for a time, that the dynasty might falter. (Lachlan left for Australia in the midst of the dispute.) But the grown children stood by their father in the end and made peace, however uneasy, with his new life, and their new siblings. By then, Anna was remarried to a man who finally would take her to the opera and spend afternoons at home. She described her recovery from the divorce as "coming out of a deep mental illness."

  Zannino had pretended to agree to this dinner reluctantly. He knew Murdoch was interested in Dow Jones and how their meeting might appear if discovered. The early awkward moments of the meeting past, Zannino breathed a sigh of relief. Someone brought up the show American Idol, which aired on Murdoch's Fox network. (Murdoch's daughter Elisabeth had urged him to buy the program years earlier.) Then the talk segued into the price of newsprint. Murdoch knew how to play this part of the game and maneuvered adeptly, seeming neither too eager nor too distant. For his part, Zannino was equally adept. Just over three months into his first CEO job and there he was, already in the shark tank with one of the most determined and skilled dealmakers in media, trying to avoid the subject that brought them together while, at the same time, making an impression. They all knew the purpose of the gathering but it was never mentioned. "To get a big deal done, that's how it works," Jimmy says, recalling the evening. "You don't just invite everybody into a room and say, 'Hey, wanna sell Dow Jones for $60 a share? Yeah, sure!' You need to get to know people, to introduce them." Murdoch left the meeting feeling comfortable that Zannino was different from Kann, in a way that would certainly be advantageous.

  Meanwhile, Zannino and Crovitz were trying to contain the disaster brewing in the newsroom. The "news strategy" position they had created for Ingrassia clearly wasn't working. It was an inflated title with very little real responsibility that bought them time before Ingrassia would take a permanent position. Crovitz had presented the interim job to him as a mere delay in the appointment, but the delay threatened to become indefinite. Marcus Brauchli's star was rising, and Ingrassia, with Steiger against him, seemed to retreat. Suddenly rumors coursed through the newsroom that Ingrassia would cut 20 percent of the Journal staff (a claim Ingrassia denied he ever made). Brauchli's allies were vicious about Ingrassia, who believed, despite the barbs, that the job was safely his.

  5. Billy

  IN THE TEN YEARS of family fireworks that followed Billy Cox's coming together with Elisabeth Goth for the express purpose of saving, and perhaps advancing, their fortunes, the disaster of Dow Jones remained a regular topic of conversation for Cox. Now fifty-one years old in the fall of 2006, his light brown hair thinning, his skin showing age spots, he had moved on to a second marriage and a career as an independent investor, far from the frustrations of his family and Dow Jones.

  A few days prior to the publication of the Fortune article, Billy had left his job as managing director of Dow Jones Global Indexes. A few days later, he was on a plane to see Buffett again, who was interested in exploring a possible combination of Dow Jones and the Washington Post Company, in which Buffett owned a significant stake and where he served on the board. Billy continued to monitor Dow Jones's situation closely, sending off pointed missives to his family members, disputing Peter Kann's claims that all was well at the company. He continue
d to criticize the company in the press, much to the annoyance of his father, William Cox Jr. Billy talked to any reporter who managed to get him on the phone. He defended his indiscretion by saying he had no other choice: "There is no mechanism within the family to discuss openly the business issues surrounding Dow Jones," he told Fortune in 1998, in a follow-up story on his and Elisabeth's campaign. "I didn't see any other alternative." His Christmas card in 1997 lamented his "divorce" from "my ... mistress: Dow Jones."

  If they were included in family meetings, he and Elisabeth were sternly warned not to talk to the press. Elisabeth eventually obliged; Cox never did. Because of his public critiques, bankers and private equity executives frequently contacted him, hoping for a sliver of insight into his family and Dow Jones and who might be willing to sell the company. He readily shared what he knew of his family dynamics. He had divorced his first wife, with whom he had four children, and remarried in 1998. With his new wife, Beatrice, who was French American, and his young son, Clarence, who was six years old, he moved to Barcelona to give Clarence a European education. Still, he returned often to Princeton, where his four children from his first marriage resided, and never missed an opportunity to launch into a litany of Dow Jones errors.

  The New England sisters, he told them, were "clueless." His own siblings seemed woefully uninterested in Dow Jones. His father had stood with Dow Jones management against him, something he hadn't forgotten but tried to gloss over. "We agreed to disagree," he told his cousins. Still, he had felt abandoned ever since and took every opportunity to try to return the slight, rolling his eyes at his father's comments in meetings and mentioning how his dad didn't measure up to Jessie Bancroft Cox as a leader the family desperately needed. While Billy moved around Europe, his father had retired to Palm Beach and split his time between his airy home there and his summer place on Nantucket, playing golf and enjoying a quiet life.

  At the time of the family forum in mid-October, five months after Zannino and Murdoch's first meeting, Billy had moved to Rome and had recovered from his second hip surgery. (He had sustained a nasty ice hockey injury a few years earlier.) As he approached the offices of Hemenway & Barnes, which occupied two floors of a red-brick building in downtown Boston, he felt the familiar bile rise in the back of his throat, but he wasn't going to let this opportunity pass. Today was the day he would deliver another message to his family.

  Elisabeth wasn't attending the meeting that day. Frustrated by her failure years before, she had sold her personal holdings of Dow Jones stock (she remained a beneficiary of the largest trust, Article III) and backed away from the fight. She was preoccupied at the time with her new marriage to Robert Chelberg, an American software entrepreneur who lived in Prague. Just the week before the meeting Elisabeth had flown from Prague to the East Coast for Robert's grandfather's eightieth birthday party. Just before the party, she had met with the Hemenway & Barnes trustees. Elefante told her he was concerned about the company's ability to increase its stock price, given all the negative factors facing the newspaper industry. Rather than feel alarmed, Elisabeth was relieved. Finally, she thought, they are being honest with me. Maybe it was that Hammer was gone; maybe it was because the news had gotten so bad that it could no longer be ignored. Regardless, Elisabeth welcomed the candor. After the meeting at Hemenway, she checked in with Mike Hill, and the two commiserated about their frustrations with the company.

  Since he left Dow Jones's employ, Billy had nurtured his disrespect for the factions of the family loyal to Peter Kann—namely, the New England branch of the Bancrofts who had descended from Jane Cook, the meek sister to Billy's boisterous grandmother Jessie Cox. Jane's daughters—Lisa Steele and her two sisters—were among those who saw selling their stock as heresy.

  Lisa Steele, a member of Dow Jones's board, typically took Mike Elefante's advice, as she had Roy Hammer's before him. She was often busy with her real estate company, which promoted responsible development in the remote town of Shelburne, Vermont, and didn't have the time or inclination, unlike her cousin Leslie, to do a lot of her own research outside the official channels. It seemed like a waste of time to her. Moreover, the family's advisers had always seemed honest and forthright. Robes, when she wasn't on her boat, spent time at her house in Maine and was probably the family member closest to Peter Kann. Stevenson and her husband occasionally hosted family meetings, hoping to lessen the tension.

  Billy's contempt for his family was returned. Some of his relatives said his ill temper had to be the result of a chemical imbalance. It wasn't. He was just almost perpetually annoyed at his relatives. Discreet where Billy was outspoken, understated where Billy showed off, Lisa and her New England sisters saw Billy as possibly dangerous to the family and someone who couldn't be trusted. Even the cousins in his own branch—the Hills—thought Billy too reckless. His problem in a secretive family may have simply been that he talked too much.

  The occasion where Billy was headed on that October day was a Bancroft family forum, one of the family's regular meetings to discuss the state of Dow Jones. The New England sisters arrived and, after politely greeting Billy, sat far away from him in the large conference room upstairs from the law firm. Billy sat with Mike Hill and his wife. (Hemenway & Barnes didn't have a large enough conference room to comfortably seat the two dozen family members who showed up.) Also in attendance were the Hill siblings, who were increasingly dissatisfied with Hemenway & Barnes. Mike had gotten nowhere with all his letter writing, and the entire family was contemplating pulling their funds out of the firm, believing as they did that Hemenway had squandered the family's money.

  Mike Elefante stood before the even more restive Bancroft clan that day. He took note of Billy's distracted expression across the conference table but didn't pay much attention. Billy was a regular at such meetings and always a bit of a troublemaker.

  The meeting had an anxious but ultimately hopeful feel. From the perspective of Elefante and some of the Bancrofts assembled, Dow Jones's prospects seemed to be improving slightly. Rich Zannino had been in the CEO chair for roughly nine months and had begun a reorganization of Dow Jones. Many were relieved that Kann was finally gone from the CEO spot.

  Elefante had broached the topic of forming a more ironclad trust—something like what the Sulzberger family had at the New York Times Company—that would allow the family to vote as a bloc instead of through the dozens of overlapping trusts that currently governed the family's money. But the conversation stalled, mired in the logistical hurdles of refiguring the trusts, not to mention the aimless dissatisfaction in the family that made any progress nearly impossible.

  After a time, Billy forced himself to the front of the room to deliver his message: "Rupert Murdoch is going to make a bid for the company," he told his relatives gathered in the conference room above Hemenway & Barnes's office that crisp fall day. "I've been talking to some guys about it," he continued. "I think it could be $50 a share." No one took him seriously. Billy's history—always name-dropping, not entirely reliable—obscured his message. He had talked in the past about how bids were going to come in for Dow Jones. They never did. But this time, he had been talking to someone about a deal. An old acquaintance of his, Andrew Steginsky, a money manager who had served on the board of the Princeton Symphony Orchestra with him years before, had been telling him Murdoch wanted to buy Dow Jones.

  The family had grown weary of his refrain. "It's coming," he said, pausing. He heard—he could barely believe it—laughter. "We've got to figure this out," he continued, his face flushing.

  "Oh, he's got helicopters, eh?" Buzzy Stevenson, Jean's husband, replied, joking about how Murdoch would swoop in to take over the company.

  "You guys aren't even gonna know what hit you," Billy sputtered, too exasperated to care anymore about what he saw as the family's complacency. He left the meeting, went back to Rome, and called his friend Andrew Steginsky.

  Rupert Murdoch would talk to anybody who had a good piece of information for him. He was demo
cratic in that way. And he could certainly keep more than one game going at once and spent most days on the phone, like the thousands of reporters he employed, gossiping. He talked to Jimmy Lee about Rich Zannino and Dow Jones's board, and he talked to Andrew Steginsky about the Bancroft family.

  Steginsky, currently running his own investment firm, Steginsky Capital LLC, in Princeton, New Jersey, had started investing in News Corp. in the mid-1980s, when News Corp. already owned the New York Post and 20th Century Fox and later launched the Fox Broadcasting network. Still, the company was based in Australia and didn't have many American investors. Steginsky, then a fund manager at Schroders bank in New York, had good access to Murdoch, who always returned Steginsky's calls and occasionally invited him to News Corp.'s offices when both men were in Manhattan. Balding and slightly overweight, Steginsky didn't cut an inspiring figure. Perhaps this was the reason he was drawn to forceful entrepreneurs. He counted Rupert Murdoch as one such man.

  Steginsky's opportunity to be truly helpful to Murdoch came in early 2005, when he was sitting with the mogul in Murdoch's midtown Manhattan headquarters. To make conversation, he asked Murdoch what he thought of the Wall Street Journal, a copy of which was sitting on Murdoch's desk. "I'd love to own it someday but the Bancrofts will never sell," Murdoch replied. Steginsky, reflexively ingratiating himself, responded that he knew one of the Bancrofts. He had once served on a board with Billy Cox III.

  Steginsky's relationship with Rupert had deepened when Lachlan Murdoch arrived from Andover to attend Princeton University in the 1990s. Wary and perhaps too aware of the world and the way wealthy young men could be used and often hurt, Murdoch sometimes mentioned his son to Steginsky, who lived just minutes away from campus. Steginsky, who had a casual and obsequious manner, told Rupert he could at least have Lachlan over for dinner to make sure he was eating right. And so Lachlan came over, Steginsky cooked him meals, and the two got along. Steginsky was a fan of opera and would invite Lachlan to hear the arias using tickets from Schroders, which were happily doled out to Steginsky whenever he told his superiors he was entertaining Lachlan Murdoch.