News

New ADN sues old ADN

AKDispatch v McClatchy - 5-6-16, 12-45 PM1x1

Two years after buying the Anchorage Daily News for $34 million, Alice Rogoff —  wife of financier and philanthropist David Rubenstein — is suing the California newspaper chain that made the sale claiming she was snookered.

The complaint filed this week in an Anchorage Superior Court alleges The McClatchy Co. “failed to perform many of (its) obligations, which was a breach of the SPA (Stock Purchase Agreement) and a violation of the implied-in-law covenant of good faith and fair dealing, which is implied in all contracts.”

The suit lists seven specific instances in which McClatchy, in the view of Alaska Dispatch Publishing, failed to live up to agreements. Alaska Dispatch claims McClatchy owes it more than $780,000 for breaching those agreements.

According to published reports, the Dispatch has been facing financial problems since its purchase. Suzanne Downing, a former speechwriter and journalist who now blogs for for the Alaska Republican Party in January reported Rogoff lost $6 million on the newspaper in its first year of operation.

Rogoff herself alluded to being financially upside down in a March commentary topped by a rather odd, footnoted headline: “2016 ADN update: To quote Jeff Bezos, we’re in ‘investment mode’*”

The asterisked referenced at the end of the column quoted Bezos, the publisher of the Washington Post, advising Post staff to distinguish “between operating at a financial loss versus making a planned choice to invest in future growth.”

The 64-year-old Rogoff – married to one of the country’s richest men – has been in investment mode in Alaska since 2009 when “a handshake and an agreement inked on a napkin cemented Rogoff’s purchase of 90 percent of Alaska Dispatch in July 2009,” Julia Duin, the Snedden Chair at the University of Alaska Fairbanks, reported in The Post.

Complete copies of the lawsuit and the stock purchase agreement with McClatchy can be found here: https://craigmedred.news/2016/05/08/adn-purchase-details/

Dispatch began as a struggling internet startup run out of the home of Alaskan husband and wife team Tony Hopfinger and Amanda Coyne.  Before Rogoff, he had been pitching boxes at FedEx, then working as a stringer for a news service while Coyne chipped in with her income as a professor at Alaska Pacific University to help save the money to start and later maintain the operation.

With backing from Rogoff, the duo moved the operation into a hangar on Merrill Field, added staff, and began building Alaska Dispatch into a news operation intent on challenging the dominant Anchorage Daily News. Hopfinger, at the time, told friends that he had carte blanche to run the news operation as he saw fit as long as it didn’t lose more than $500,000 per year, which was all Rogoff, a former executive at U.S. News & World Report, said she could annually afford to finance journalism in the near Arctic.

Over the course of the next five years, Dispatch steadily grew its internet traffic and its staff, but at a price. Rogoff kept losing money, and Hopfinger, Coyne and most of the Dispatch crew worked long, hard hours. Coyne and Hopfinger eventually divorced and she left the company in 2013.

By late in that same year, Rogoff was in negotiations to buy the McClatchy-owned Daily News, the state’s largest newspaper and the still dominant, online news website in the 49th state.

Rogoff finally bought Anchorage’s newspaper and its website from McClatchy on April 8, 2014. At that time, both she and Hopfinger told friends and some former Dispatch employees that Hopfinger had sold his 5 percent interest in Dispatch Publishing to Rogoff and that Rogoff was creating a new company  – Alaska Dispatch News LLC – to run the combined operations of the two websites and the newspaper.

But state records indicate something else happened. After Rogoff acquired the stock of Anchorage Daily News Inc. in May 2014, she  installed Hopfinger as vice-president and  Margy Johnson as secretary to run the operation. Control, however, was vested in a company called AK Publishing LLC, which held 100 percent of the stock. AK Publishing, according to state records, is wholly owned by “The Moon and the Stars LLC”. The Moon and Stars is 100 percent owned by Rogoff who set it up in 2009.

Alaska Dispatch News claims on its website to be owned and published by Alaska Dispatch Publishing LLC of which Hopfinger is a 5 percent owner. But the actual controlling interest appears to be The Moon and the Stars LLC.

Why the suit against McClatchy was filed by Alaska Dispatch Publishing, an entity co-owned by Rogoff and Hopfinger, and not by AK Publishing or Moon and the Stars LLC, is unclear.

Hopfinger, reached by telephone in Chicago, said he was unaware he was involved in any litigation against McClatchy involving Dispatch Publishing. State corporate records show the plaintiff, Dispatch Publishing LLC,  remains a state corporation in good standing with Hopfinger as it registered agent. Hopfinger said he was not at liberty to talk about his present relationship with the ADN or with Rogoff, but confirmed he is no longer working at Alaska Dispatch News. Alert Dispatch readers in January noticed his named disappeared from the website where he had been listed as the company’s president.

After the Daily News purchase, Hopfinger had tried to wean the Dispatch from the Associated Press.  The  AP is a major issue in the seven-count lawsuit, which claims “McClatchy failed to disclose the existence of an onerous and costly two-year contract with the Associated Press (‘AP’).”

McClatchy offices were closed and officials could not be reached for comment late Friday. The 55-page stock purchase agreement between the Dispatch and McClatchy, an agreement that was submitted to the court, required McClatchy to notify Dispatch of all contractual obligations of $50,000 or more.

The suit concedes the California company did do that, but charges that “it did so in a manner that would suggested the value (sic) of the contract with AP was less than $50,000 when in fact the obligation was in excess of $340,000.”

Because McClatchy failed to spell out the costs of the AP contract, the suit contends, it breached the sales agreement and cost the Dispatch “an amount that is in excess of $340,000 which was ultimately paid to AP.”

AP content has filled much of the newshole in the Dispatch paper since the purchase. Whether the Dispatch plans to drop the AP, which Hopfinger had been negotiaing prior to his departure, is unknown. Dispatch editor David Hulen did not return a message left on his cell phone asking specifically about this issue.

There has been some speculation in Alaska media circles that if the Dispatch, the AP’s largest client, was to stop buying “the wire,” as it has long been called, AP might have to reduce its Alaska bureau to a skeleton crew.

The other big issue in the Dispatch lawsuit focuses on the costs of workmen’s compensation. Rogoff agreed to cover certain claims filed with the old ADN when she bought the operation from McClatchy. The workmen’s compensation accounts were turned over to a third-party administrator. The lawsuit says Dispatch has reimbursed McClatchy $165,356 but has not received adequate documentation to “substantiate the payment of the claims and administrative costs” and wants its money back.

Many other claims in the suit are relatively minor: Dispatch says McClatchy owes it $29,000  to cover unemployment taxes; $23,677 reimbursement for a deposit paid on rental space in the Anchorage Daily News building that Dispatch sold to GCI, Inc., the telecommunications company; and $20,258 it cost Dispatch to establish a line of credit to keep the new company going after the purchase.

GCI bought the old ADN building from Rogoff for $14.5 million.   Rogoff used the sale to help offset the $34 million purchase. She was supposed to move Dispatch staff and the press out of the building within 18 months. Staff were relocated to midtown, but the press remains in the old building.

Rogoff announced recently that she has found a new press and is now looking for a building to house it. The costs are unclear. The stock purchase agreement submitted to the court reveals she also committed to cleaning up the ink wells and any seepage caused by the old press, which may contain “hazardous materials,” probably from the ink.

The sale of the state’s largest newspaper has obviously not gone all that smoothly for Rogoff, and the new owner is not happy. The final count of Rogoff’s lawsuit is a demand for $100,000-plus to penalize McClatchy for violating the “implied-in-law covenant of good faith and fair dealing.”

No matter what McClatchy did or didn’t do, people familiar with the newspaper business say Rogoff’s biggest problem in the ADN purchase might rest in how she negotiated the deal. By agreeing to acquire the ADN stock instead of buying the assets of the newspaper and website, she took on a host of liabilities.

Most of them are outlined in the stock purchase agreement — retention of ADN personnel and medical plans, accrued leave, severance payments if employees are laid off and more. Compared to those costs, the AP contract seems insignificant.

(The author of this story was an employee of the McClatchy-owned Daily News for more than 25 years, left the Daily News in 2009,  went to work for the online Alaska Dispatch, and was employed for a time at the new Alaska Dispatch News, which added “News” to its name to take advantage of the old Anchorage Daily News website – adn.com. Hopfinger is a personal friend as was Rogoff, but she has not talked to the author since negotiating a separation agreement. She found him too controversial after he was involved in catching a member of the state Board of Fisheries breaking the law.)

 

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3 replies »

  1. While I feel sorry for Alice, she didn’t ask me about her investment, likely made after at least 4 drinks and a good dinner. I could have steered her better, probably to Lockheed Martin.

    Like

  2. Interesting that the ADN doesn’t consider this newsworthy enough to have yet reported on it. Thanks, Craig.

    Like

    • in their defense, Val, they’ve never been all that fast off the mark unless someone gave them a press release as a template with which to start. and i don’t expect to see anyone putting out a press release on this.

      Like

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