by James O'Shea
215 David Geffen, who had made billions in Hollywood Author’s interview with Leo Wolinsky, Los Angeles, CA, fall 2010, and by telephone, 2008–2010.
216 Carroll’s departure, one writer happened to note “John Carroll on Winning Pulitzers while Losing Circulation, and the Future of Corporate News Outlets,” by Paul McLeary, Columbia Journalism Review, July 2005.
217 By the time ABC auditors acted on Klunder’s tip Audit Bureau of Circulations Report for the Los Angeles Times, 2005.
Chapter 14: Civil War
220 Kern began compiling the raw material for “Hurricanes Katrina and Rita, Insights about Tribune’s coverage of the big storms and implications for future national coverage,” Tribune Publishing, October 2005.
221 Times employees had had it, and in a survey conducted by an International Survey Research, LLC (ISR), Verbatim Comments of Los Angeles Times Editorial Department Respondents, March 2005. ISR was hired to do a statistical survey of the morale in the editorial department of the Los Angeles Times. Employees were also given the opportunities to supplement their answers to the survey with written comments. In all, 548 employees of the editorial department took advantage of the opportunity to comment on everything from the direction and goals of the company to the quality of their supervisors. Some of the comments were lengthy and harsh regarding the leadership of the Tribune Company since it acquired the Los Angeles Times.
222 The first dose came The proxy said Tribune management began due diligence on March 10 and that the boards of the two companies approved the deal two days later on March 12. David Hiller said the Tribune due diligence team had scrutinized publicly available records on Times Mirror before March 10 and that the Matthew Bender tax problem was deemed an acceptable risk. Tom Unterman said he had informed Tribune Company how the Times Mirror tax department intended to handle the potential Bender tax liability. Author interviews with David Hiller, Chicago, winter 2010, and Tom Unterman, Los Angeles, fall 2010.
223 However, about a year after the deal was closed Author’s interview with Thomas Unterman, Los Angeles, CA, fall 2010.
223 To diversify the family’s investment Tribune Company, Proxy Statement, April 2007; and Tribune Company Form 10-K for fiscal year ended December 31, 2006.
223 the Chandlers wanted to place valuations Deposition of Dennis J. FitzSimons, Chicago, IL, June 25, 2010; and author’s interviews with Scott C. Smith, Chicago, IL, December 2010, and David Hiller, Chicago, IL, winter 2008, and winter 2010.
223 The dispute came to a head in May 2006 United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141. Deposition of Dennis J. FitzSimons, Chicago, IL, June 25, 2010. The contemporary history of the Tribune’s financial problems were spelled out in detail in this voluminous report.
224 But the move infuriated the Chandlers United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141 and author’s telephone interview with Thomas Unterman, March 2011.
224 William Stinehart, who publicly filed a blistering eleven-page Letter from William Stinehart, Jr., former director of Tribune/trustee of the Chandler Trusts to Tribune Company Board of Directors, June 13, 2006. The 11-page letter castigated Tribune managers, harshly criticizing them for lack of vision and strategic failures in running the company. The letter, in effect, put the company up for sale.
226 Smith and FitzSimons summoned Johnson Author’s interview with Jeffrey Johnson, Los Angeles, CA, winter 2011.
227 rumors emerged of a “suicide pact” between “Baquet’s Billionaire Boys Club,” by Nikki Finke, Deadline Hollywood, LA Weekly, September 2006. Finke’s widely read column reported on a suicide pact, but the three editors involved said there was no such thing and none resigned.
227 “I didn’t need Gerry Kern to make . . .” Author’s interview with Leo Wolinsky, Los Angeles, CA, fall 2010, and by telephone, 2008–2010.
Chapter 15: Up Against a Saint and a Dead Man
231 Baquet stood before the “Los Angeles Times Editor Urges Others to Fight Cuts,” by Katherine Q. Seelye, New York Times, October 2006.
233 He seemed thrilled to see me During his 15 months as editor of the Los Angeles Times, the author kept a diary in which he recorded key events and exchanges. Many of the recollections and quotes from his time as editor came from this diary. The author usually recorded entries in the diary the same day that they occurred.
237 “When people complained, I always . . .” Author’s recollection of conversation with John Madigan.
239 In Baltimore, a wealthy hedge-fund investor Letter from Bruce S. Sherman to Board of Directors, Knight Ridder, Inc., November 1, 2005. Bruce Sherman wrote to the board of directors on behalf of Private Capital Management, LP, Knight Ridder’s largest shareholder. His letter triggered the sale of the company.
239 including the Minneapolis Star Tribune “Private Group Buys Start Tribune,” by Matt McKinney, Minneapolis Star Tribune, December 27, 2006.
251 a story about huge bonuses being Author’s memo to the staff of the Los Angeles Times, April 23, 2007.
252 he said,“and I’m not too impressed.” Author’s recollection of meeting with Dennis FitzSimons.
Chapter 16: Before the Fall
253 Not long after I had walked into United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
253 In private, the Chandlers had hinted they might United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; examiner’s interview of William Stinehart, Jr., former director of Tribune/trustee of the Chandler Trusts, Los Angeles, June 28, 2010.
254 Tribune Company posted robust 2006 United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141. The examiner’s report contains extensive financial information on the Tribune Company, compiled from company reports as well as from company analysts and banks.
254 In his letter, Stinehart outlined a Letter from William Stinehart, Jr., former director of Tribune/trustee of Chandler Family Trusts to Tribune Company Board of Directors, June 13, 2006.
254 The acrimony with the Chandlers didn’t end United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
255 The Tribune’s Special Committee hired Morgan Stanley United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
255 Overall, Tribune investment bankers United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
255 Tribune employees owned 11 percent of United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
256 to the tune of an unusually high $10 million, a large United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; and deposition of William A. Osborn, May 16, 2007.
256 Morgan Stanley would try to muscle its way United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
256 “Always said the banking intramurals . . .” United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; and e-mail from Crane H. Kenney, general counsel, Tribune Company, to Michael R. Costa, former managing director, mergers and acquisitions, Merrill Lynch, February 24, 2007.
256 At one point, the Chandlers considered selling United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; and examiner’s interview of William Stinehart, Jr., former director of Tribune/trustee of the Chandler Trusts, Los Angeles, June 28, 2010; and deposition of Dennis J. FitzSimons, Chicago, IL, June 25, 2010.
257 “We looked out and saw a ski slope,” United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; examiner’s interview of William Stinehart, Jr., former director of Tribune/trustee of the Chandler Trusts, Los Angeles, June 28, 2010.
257 The mere thought of doing a deal with United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; examiner
’s interview of Julie H. Persily, formerly with the Citigroup Leveraged Finance Department, New York, NY, July 8, 2010.
257 He had just sold his Equity Office Properties “Update—Zell Sells for $39 Billion,” by Scott Reeves, Forbes, November 20, 2006.
258 A Chicago Tribune magazine article “Here’s the Deal; How Sam Zell Beat a Tax-Fraud Rap and Rose to the Top of the Real Estate World,” by Greg Burns, Chicago Tribune, July 25, 2004.
258 To put together a bid, Zell activated an Author’s interview with confidential source from Equity Office Properties. The source spoke with author under the condition of anonymity.
259 While at law school at the University of Chicago Author’s interview with confidential source from Equity Office Properties. The source spoke with author under the condition of anonymity.
259 A few years before, Zell had invested in a waste “Invest Like a Billionaire: Sam Zell,” by Tatiana Serafin, Forbes.com, November 9, 2006. The author also learned of details of the ESOP and Covanta transaction from a confidential source at Equity Office Properties.
260 A mere five days later, Bartter United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; examiner’s interview of Brit Bartter, then vice chairman of investment banking group at JPMorgan Chase, Chicago, IL, June 16, 2010.
260 Zell’s proposal had some intriguing benefits, too. United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141. Zell and others at Equity Office Properties spelled out the details of the proposal to the examiner.
260 “What was novel was that it was an S-Corp....” United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
260 Some bankers involved in the deal were cool to the idea. United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
261 Christina Mohr, a managing director in Citigroup’s United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; e-mail from Paul Ingrassia, managing director, Citigroup, to Christina Mohr, February 20, 2007.
261 When Costa, the Tribune’s United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
262 Any plan would require approval by the Federal Communications Commission (FCC) because United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
262 But Zell had an answer United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
262 Mohr recalled how United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
262 Zell, who called Tribune General Counsel Kenney and demanded Author’s conversation with Crane Kenney in Los Angeles, 2007. The author noted the conversation in his diary.
262 “Marty called me one morning and said . . .” United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; deposition of Dennis J. FitzSimons, Chicago, IL, June 25, 2010.
263 the Zell proposal until Osborn United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; deposition of Dennis J. FitzSimons, Chicago, IL, June 25, 2010; and examiner’s interview of Samuel H. Zell, Chicago, IL, June 14, 2010.
263 But Morgan Stanley’s Whayne United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; examiner’s interview of Thomas Whayne, managing director, Morgan Stanley, New York, NY, June 11, 2010.
263 Costa pushed back saying they should be “more aggressive.” United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
263 “The banks were climbing . . .” United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; deposition of Crane H. Kenney, former General Counsel of Tribune, Chicago, IL, July 8, 2010.
264 In late March, Zell broke United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
264 “That’s how I got comfortable. At the end of the . . .” United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
264 At the last minute, Zell also cut United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
264 There was no end of whooping United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; e-mail from Sanjay Jain, vice president, JPMorgan Chase, to Peter Cohen, managing director, JPMorgan Chase, April 2, 2007.
264 “Guys—truly amazing financial . . .” United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; Merrill Lynch inter-office e-mail from Chris Cormier to John Eidinger and Michael Costa, April 6, 2007.
265 But Jieun (Jayna) Choi, an analyst at United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; JPMorgan Chase interoffice e-mail from Jieun ( Jayna) Choi to Goh Silew Tan, April 5, 2007.
265 For their work over six months United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141. The author computed the fees from data disclosed in the examiner’s report.
265 By now, FitzSimons had climbed on United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; deposition of Dennis J. FitzSimons, Chicago, IL, June 25, 2010.
265 The way he saw it, Tribune’s assets United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; examiner’s interview of Samuel H. Zell, Chicago, June 14, 2010.
267 anything that adds juice to a column “Public’s beach is a beauty, but try to find it,” by Steve Lopez, Los Angeles Times, April 6, 2007.
Chapter 17: The Penguin Parable
269 On June 4, 2007, JPMorgan Chase United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
269 have driven the company’s stock United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141. The report contained numerous estimates of what would happen if the deal had not closed, including one from Lehman Brothers that was particularly negative. That report suggested that the Tribune’s stock could have fallen to below $10 per share.
272 Both Baquet and Carroll agreed that Author’s telephone interview with John Carroll, summer 2009; and Dean Baquet, winter 2010.
272 a report that called for a vigorous renewal of time The Spring Street Project Report, Los Angeles Times, December 1, 2006. The report, which was initiated by Baquet, was an 11-page summary of the Spring Street Team’s visits to other newspapers, web operations, research, and consulting offices including: Yahoo!, America Online, Technorati, and an interview with craigslist founder, Craig Newmark.
278 The loans gave Zell the money he needed United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
278 The Chandlers didn’t help things. United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
279 Jill Greenthal, a Blackstone Group United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; e-mail from Jill Greenthal, et al., to John Madigan, June 4, 2007.
279 Zell dismissed speculation United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; transcript of lenders’ meeting, April 26, 2007.
279 “I thought the chances of getting the second . . .” United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; examiner’s interview of Samuel H. Zell, Chicago, IL, June 14, 2010.
279 A report from Lehman Brothers United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
280 knocked the company’s 2007 operating profit off 40 percent. Tribune Company Form 10-K for fiscal year ended December 31, 2007.
281 When JPMorgan Chase tried to syndicate United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141. Series of interoffice e-mails at Merrill Lynch between Todd Kaplan and Victor Nesi
that said the deal was not going well, May 10, 2007. Also, e-mail from Jeffrey A. Sell, former head of special credits group in the credit risk department of JPMorgan Chase, to Brian S. Sankey, May 12, 2007, that said the orders had fallen short.
281 One brokerage firm analysis suggested Tribune “Tribune Debt Default Risk Tops 50%, Swaps Show,” by Tim Mullaney and Shannon D. Harrington, Bloomberg Report, July 20, 2007. The pessimistic forecast was done by CMA Datavision of London, England.
281 Peter Cohen told his boss, the bank’s chairman United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; JPMorgan Chase interoffice e-mail from Peter Cohen, managing director, to Jamie Dimon, chairman and CEO.
282 To close phase one of the deal United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
282 The company’s outstanding bonds took an even bigger hit and “Tribune Debt Default Risk Tops 50%, Swaps Show,” by Tim Mullaney and Shannon D. Harrington, Bloomberg Report, July 20, 2007.
283 paying just under 8 percent interest United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
283 At JPMorgan Chase, one alarmed banker United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141.
283 Jimmy Lee, a JPMorgan Chase United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; JPMorgan Chase interoffice e-mail from James B. Lee, Jr., vice chairman, to Patricia Deans, analyst.
283 FitzSimons, who assumed he would resume United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; deposition of Dennis J. FitzSimons, Chicago, IL, June 25, 2010.
284 Darryl Jacobson asked if the bank could suggest United States Bankruptcy Court, Report of Examiner, Kenneth M. Klee, Case Number 0813141; JPMorgan Chase Syndicated and Leverage Finance Group interoffice e-mail from Darryl Jacobson to Rajesh Kapadia, September 26, 2007.
