Media

Bad news for the News

anchorage

The former Anchorage Daily News headquarters, now the GCI Building/McClatchy Company

This story has been updated

 

Almost $1.4 million behind on the rent and electric in a building due to have been vacated long ago, Alaska’s largest newspaper now faces eviction from the Anchorage structure that houses its only working print-press.

Building owner GCI, an Alaska telecommunications company, went into state court today to ask a judge to evict its troublesome tenant. The action came after years of GCI negotiations to rid itself of ADN, months of payments skipped or ignored, and a week after GCI sent the Alaska Dispatch News a demand that it pay its bills.

GCI is not the only company facing problems collecting from ADN. The unpaid bills from a growing list of creditors who have not been paid for months appear to total in the millions of dollars. Some of the creditors told craigmedred.news they expect ADN could soon be forced to file for Chapter 11 bankruptcy protection.

Such a move could at least temporarily stall GCI eviction efforts and allow the newspaper to keep printing for a little longer, and it could free the company from long-term leases for offices in a building in Anchorage’s Midtown and a never-completed, new print plant in the city’s industrial area, according to attorneys familiar with bankruptcy filings.

The newspaper and companion news website ADN.com have been in financial trouble since their purchase by Alice Rogoff three years ago. Rogoff is the estranged wife of American billionaire, David Rubenstein, one of the founders of the Carlyle Group. 

Carlyle successfully oversees $162 billion in assets. Rogoff – aided mainly by Bill Bittner, an Anchorage attorney and brother-in-law to the late Sen. Ted Stevens, and Margy Johnson, a former mayor of Cordova fascinated by mermaids – has struggled to manage an Alaska news operation she bought from the California-based McClatchy Company for $34 million in April 2014. 

As part of a three-way deal to swing the purchase of the newspaper, GCI paid Rogoff somewhere in the neighborhood of $15 million to acquire the Daily News’ former headquarters,  a massive, 125,000-square-foot structure on Northway Drive not far from the city’s downtown.

Old friends

GCI founder Ron Duncan and Rogoff were reportedly classmates at the Harvard Business School, though Duncan has said he didn’t remember her from those days. She reminded him when she moved to Alaska and reconnected. Duncan’s cooperation was required to make Rogoff’s purchase of  the Daily News work, and many thought the two business tycoons were friends.

But the GCI court filings are harsh in their criticism of Rogoff and two key companies involved in the Daily News purchase – Alaska Dispatch Publishing LLC and the Anchorage Daily News LLC.

LLC stands for limited liability company, a type of corporation exempt from the state’s corporate income tax.

“ADN and AK Publishing are mere instruments of  Alice Rogoff, the corporate forms of which continue to be used by Rogoff to defeat public convenience and justify wrong,” the suit says. “Under Alaska law, Rogoff’s conduct pierces the corporate veils of ADN and AK Publishing, making Rogoff personally liable for both companies’ debts, obligations and judgments to GCI.”

GCI’s $15 million investment in the ADN building and a $13 million loan from Northrim Bank were key to Rogoff being able to make the deal for the newspaper work at a time when some estimates of the Daily News’ value put it as low as $7.5 million.

The Northrim loan was secured by some of Rogoff’s personal assets and what are described as “marital agreement payment streams” in public records. It is unclear where the other $6 million came from but there are indications Rubenstein might have contributed some or all of that.

The details of the “payments streams” are not public. Rogoff’s attorneys have fought to keep information about Rogoff’s personal finances and the ADN deal out of court. But friends of Rogoff believe she agreed to some sort of multi-million-dollar,  postnupital agreement with Rubenstein before moving from their Bethesda, Md., home to a house she purchased in Anchorage in 2006. 

Suddenly hands-on owner

At first the majority owner of Alaska Dispatch.com, a feisty online start up that attracted national attention and helped bring McClatchy to the bargaining table to discuss a sale, Rogoff was a sometimes visitor to company offices in a hanger at Merrill Field where she kept an airplane she would later and spectacularly crash. 

After she bought the Daily News and transformed it into the Alaska Dispatch News on paper, a change which enabled the business to continue plugging along as the same old ADN.com online, she took on a much bigger role in the day-to-day operation of the company.

Among the first orders of business were finding office space for a big, new crowd of employees, and a new home for a new press, given that the ADN was supposed to be out of the new GCI building in a matter of months. And it wasn’t long before the news, advertising, business and circulation departments were moved to a new building Rogoff leased on C Street in Midtown.

Moving the presses proved far more problematic. Large pieces of machinery that must operate within tight tolerances, printing presses require secure foundations. There was a lot of discussion about finding a building in Anchorage with a 6-foot-thick concrete floor.

No such building could be found other than the one designed and built to house the Daily News press on Northway. Strapped for money, Rogoff pursued the idea of putting the press in a hangar at the abandoned Kulis Air Force Bay next to Anchorage’s Ted Stevens International Aiport or building a new building.

Both of those ideas were eventually abandoned in favor of an old, abandoned, oilfield services warehouse in an Anchorage industrial area on the south edge of Midtown. A new press – a press Rogoff announced to her staff as a “Christmas miracle” – was eventually moved into that building.

The concrete beneath it settled and rendered it in operable. Meanwhile, the ADN’s smallish heatset press was moved out of the GCI building into the new ADN shop on Arctic Boulevard, but there were problems.

The building had no certificate of occupancy from the Municipality of Anchorage, because construction at the site was still underway, and the natural gasline supplying the building was apparently too small to provide gas for the press.

Because of these issues, Rogoff’s working press never left Northway. It remains in the GCI building to this day, and ADN has no other working presses.

Problems, problems, problems

At the time of the Daily News purchase, the ADN was publicly reported to be generating $59 million in annual revenue, but the reality was that the revenue stream was less than half that, according to sources familiar with company finances.

As with most American newspapers, the old ADN had been struggling to adapt to a market where more and more people were daily getting their news online instead of from a newspaper. The newspaper radically shrank its staff, vacated the upstairs floors of the Northway building, and took in tenants to maintain profitability.

Pat Doyle, the last of a string of publishers, announced an 8 percent cut in Daily News staff in the fall of 2008. Less than a year later, almost 20 percent of the staff was laid off.

“In addition, we are implementing wage reductions for all employees whose compensation exceeds $25,000 annually,” Doyle said in a memo to employees in 2009. Unpaid furloughs were ordered, and the paid work week was cut to 37.5 hours, though many Daily News employees continued to work 40 hours or more.

Executive editor Pat Dougherty in 2011 told a class at Texas’s Baylor University, his alma mater, he’d overseen the reduction of the ADN newsroom from 104 to 34. At the time, the old ADN remained Alaska’s dominate news source, and it would stay so up until the time of the sale although Disaptch.com was making inroads.

Dougherty was skeptical about the future of the new ADN.

“I heard Alice say, it’s going to be up to advertisers to rally around this new and revised newspaper,” he told Alaska Public Media shortly after the sale. “That suggests to me that Alice doesn’t understand advertisers. The advertisers are not in the paper because they want to rally around the news product. They’re there because they have goods and services they want to sell and they’re looking for the most effective and most economical way to do that. You need to understand the business.

“So I don’t think you can count on advertisers to just jump into the newspaper because they think Alice has high journalistic ambitions. It’s a cutthroat world for that business and it’s not going to get easier.”

The words turned out to be prophetic. The big upswing in advertising Rogoff anticipated after the sale never occurred. “Sponsored content,” basically public-relations written news slipped in among the journalism, never paid off the way she thought it would. She set unrealistic revenue goals and then got mad when they couldn’t be met.

The biggest problem, though, was Rogoff’s unwillingness to match operating costs to revenue. At a time when she needed to reduce staff, she added staff and spent more. The newsroom nearly doubled in size when she combined Dispatch.com with ADN.

Costs ratcheted up again when Rogoff gave old-ADN employees pay raises to bring their salaries in line with Dispatch employees. To make them happy, she also dumped the mandatory, old-ADN furloughs and restored the 40-hour work week.

Old ADNers were excited about the higher pay. Dispatch President and Executive Editor Tony Hopfinger worried the costs would sink the company and privately hoped Rubenstein would come riding to the rescue. (Editor’s note: The author and Hopfinger were colleagues who worked  closely together at Dispatch.com and at the new ADN for a time. The author has personal knowledge of discussions that took place at the new ADN and before that Dispatch.com)

When Hopfinger suggested budgetary constraint, Rogoff chastised him with the pronouncement that “we can’t cut our way to profitability.”

Hopfinger, who cofounded Dispatch.com in his living room with then-wife Amanda Coyne, was left baffled as to how the company was to break even – let alone become profitable – without cutting costs. Hopfinger and Rogoff parted ways in November 2015.

They are now locked in a bitter lawsuit. Rogoff is refusing to pay Hopfinger $900,000 of $1 million she promised him when she bought out his shares in Disaptch.com after the purchase of the Daily News. At a July hearing on the lawsuit, Rogoff’s lawyer said the Alaska Dispatch News had slipped $4 million into the red in its first year of operation. 

Rogoff contends that was Hopfinger’s fault. The losses, however, continued after he left.

IMG_20170811_112932793.jpg

A GCI laundry list of ADN bills dating back nine months

High hopes

In March 2016, Rogoff proclaimed in an odd op-ed with an asterisk that ADN was in “investment mode.”  She bragged about a new printing press the company was having shipped to Anchorage and plans for a new headquarters.

“Some of you may have noticed we ran an advertisement to find a suitable building for our printing operation,” she wrote. “(In fact, we heard from so many of you about that ad that we joke we can now write our own testimonial to the power of print advertising). Thanks to the many leads received, we’re narrowing down choices to a site we hope to occupy by fall. Stay tuned for us to tell you where it is, and even to schedule tours for the public.”

The new building turned out to be an old, oilfield services warehouse along the railroad tracks in an Anchorage industrial area. The new press was installed on an inadequate concrete pad and settled. Problems began escalating from there as Suzanne Downing has noted at MustReadAalska.com.

The building is now tied up in litigation. M&M Wiring Services, the contractor who was wiring the building for the new press, says the new-ADN owes it almost $500,000 for work already completed.

Company owner Mark Miller said Thursday that the Dispatch News has never told him why it won’t pay. He added that he’d be happy to offer his services free to GCI if it needs someone to turn off the power to the ADN press in the GCI building.

M&M was involved in helping to dismantle the old press there until 80-year-old Ed McCoy told the company to stop. A friendly, white-bearded man known to many around the Dispatch office as “Santa Claus Ed,” McCoy was the contractor once in charge of remodeling Rogoff’s $2 million home on Campbell Lake.

After Rogoff’s messy breakup with Hopfinger, she put McCoy in charge of the dismantling of the old press in the GCI building and the installation of the new press in the Arctic Building. Contractors associated with both projects said McCoy’s efforts to cut costs resulted in all sort of problems.

McCoy, reached by telephone this week, said that “I was just following orders.”

Asked whose, he said, “Alice’s.”

Rogoff, he said, gave him strict orders to keep her print shop manager “from spending too much money.”

The print shop and Rogoff had a difficult relationship. The printers were unhappy when the newsroom somehow found $10,000 to buy a drone earlier this year when the pressman were begging Rogoff to wire money south – she’d already lost credit because of unpaid bills – because they were close to running out of black ink to print the paper, according to sources who did not want to be identified for fear it could cost them their jobs.

Rogoff’s print problems have only grown since then. The GCI action threatens access to her only working printing press. The Tennessee company that installed her new press put a lien on it Thursday. Rogoff owes them money too.

Worst yet, as part of her deal with McClatchy, Rogoff is contractually bound to remove the old press from the GCI building and clean up the space it once occupied. Some estimates of the cost of that have exceeded $1 million.

Various toxic chemicals have been used in newspaper inks over the years. Because of what residues might be left in the pipes at the old ADN, there has been speculation that it might be necessary to treat the pipe as hazardous waste and ship it south to Washington state for disposal in a Superfund site.

On Friday afternoon, Rogoff issued a statement suggesting she is trying to sell the troubled operation. There was reportedly a deal two weeks ago that fell through at the last minute because Rogoff wanted more money. The business is now so saddled with debt current and former publishers and others familiar with the newspaper industry say it is worth little, if anything.

Here is Rogoff’s entire statement:

“It is extremely unfortunate that GCI has taken this legal action to evict us from our press facility. The events that led us to this point have been extremely complex. At no point has there been any bad faith on the part of the newspaper. Our goal has always been to keep Alaska’s largest newspaper alive and robust for the sake of our readers and the community. Our goal remains unchanged and we are in active discussions toward that end. Until the discussions are concluded, we are unable to provide any details. Please know that business disputes arise from many causes and are never one-sided. We hope that this matter will be resolved shortly to the benefit of all parties.”

CORRECTION: This story was edited at 2 p.m. on Aug. 11, 2017 to provide a more accurate price on what GCI paid for the old ADN building.

 

 

 

Advertisements

11 replies »

  1. Thanks for this story, Craig. Great reporting, as usual. Why, one wonders, did Rogoff overpay so much for the ADN? Did she have even a clue what she was doing?

    Like

  2. Medred might know this: Haven’t seen an article on ADN by their political reporter Nathaniel Hertz for several weeks. Is he on vacation? Or did he see that he was on a sinking ship and jump off?

    Like

  3. “The biggest problem, though, was Rogoff’s unwillingness to match operating costs to revenue.”
    This sums it up. Her spending ways, consistent with her political views, finally cahjr up with her. Now, the government will bail her out .

    Like

  4. ADN is vigorously censoring comments to its watered down article about the eviction lawsuit. If anyone provides details about Alice’s financial situation or is a bit to negative, the gulag censors delete the comment. Stifling comment is poor journalism and a strong sign that all is not well with ADN. Time for us and others to cancel our subscription. And see if we will get a refund of our six month advance payment. We have advertised in the classified section on many occasions. No more.

    Like

  5. just connecting the dots that aren’t there yet… I bet the new out of state GCI owners, were the new “buyers” of the deal that fell through 2 weeks ago mentioned in one of these stories by Alice….

    Like

    • Alaskans first: You are correct about ADN censoring comments on the article about the eviction lawsuit. A poster asked “Who will take the place of ADN when they are gone?” I responded: “Non-print news outlets like KTVA.com and KTUU.com”. Tell me that comment was not civil, or truthful. Yet it was censored because it was “beneath the civility threshold.” Huh? I guess the truth is not civil in the minds of ADN employees.

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s