Former Alaska Dispatch News owner Alice Rogoff – a financial adviser to Alaska Gov. Bill Walker, the hostess for dinner with President Barack Obama on his historic 49th state visit, and the estranged wife of one of the country’s richest men – is now in federal Bankruptcy Court pleading for consideration as the sad victim of the collapse of her journalistic empire.
Unfortunately for Rogoff, a federal bankruptcy trustee isn’t buying the sob story, and a messy legal fight looks to be brewing with the old Anchorage Daily News/ADN headquarters at its core.
Rogoff closed a deal to sell that 125,000-square-foot building for $14.5 million to GCI, the Anchorage-based cable and telecom company, shortly after buying the Daily News from The McClatchy Company in 2014.
An attorney for the bankruptcy trustee is now suggesting that the money from that sale, which should have gone from GCI to the Alaska Dispatch News, the company selling the building, went to Rogoff and then disappeared into her finacial maze.
GCI is a company started by Ron Duncan, who Rogoff claims as an old classmate in the Masters of Business Administration program at Harvard. He doesn’t remember her there, but they connected and became friends after she moved to Anchorage from the nation’s capital a decade ago.
Both were small-plane pilots. Their planes for a time shared a hangar at Merrill Field just north of downtown. An internet news startup backed by Rogoff – AlaskaDispatch.com – came to flourish in the same hangar.
When Rogoff decided to make a bid for the Daily News, she turned to Duncan for help. In order to come up with the staggering $34 million needed to buy the state’s largest news organization, Rogoff agreed to a $14.5 million sale to GCI of the massive, block-long News headquarters on Northway Drive in the Airport Heights neighborhood of Alaska’s largest city.
The building contained the News’ printing press. Selling the newspaper’s press marked the first of a string of bad business decisions that led to bankruptcy only three years later for the company Rogoff had rebranded the Alaska Dispatch News/ADN.
A bankruptcy court trustee now wants a special counsel to investigate how what started as a fairytale story about an internet-news startup buying the state’s largest newspaper turned into a train wreck.
“Salmon swallows whale: Website buys Anchorage Daily News, Alaska’s largest newspaper,” the Seattle PI headlined at the time of the sale.
“And chokes to death” could have been the epitaph just a few years later.
But this story is way more complicated than that.
The massive losses the ADN accrued in the three years Rogoff owned it, the tangled web of Rogoff-controlled limited liability companies (LLCs) mixed up in the business, the news websites (potential company assets) Rogoff walked away with after the bulk of the ADN was sold to the Binkley Company, and more have raised a lot of lot of questions, and a Chapter 7 bankruptcy trustee wants a special counsel to investigate.
Rogoff has sought to block the investigation. Her bankruptcy attorney and old friend Cabot Christianson last week filed on her behalf a court motion opposing the appointment of a special counsel.
Such a probe is pointless, he argued, because it will only impose further financial hardships on his client, who appears to have lost about $26 million on her misadventure in Alaska publishing.
Bankruptcy trustee Nacole Jipping doesn’t seem to care. In a response to Christianson’s filing, her attorney, Anchorage’s William Artus, called Rogoff’s objection “diametrically at odds with the trustee’s duty to maximize recovery to the creditor body as a whole….
“…The estate may hold significant claims against Ms. Rogoff and/or Northrim Bank,” he wrote. “…It appears that Ms. Rogoff caused the debtor (Alaska Daily News LLC) to liquidate $14.5 million of the debtor’s own real estate to fund her purchase of 100 percent of the stock in the debtor. In other words, the value of the real estate was removed from the debtor (Alaska Daily News LLC) and used for the benefit of Ms. Rogoff without any apparent corresponding benefit to the debtor.”
The real estate in question would be that old Daily News building on Northway. Artus’s contention is essentially that Rogoff used a $14.5 million company asset to buy stock for herself.
The Alaska Daily News LLC was the predecessor to the Alaska Dispatch News LLC. The stock of the Dispatch News LLC was acquired by AK Publishing LLC, a limited liability company wholly owned by Rogoff, who has more LLCs than many people do shoes.
The bankruptcy of AK Publishing/Dispatch News/ADN is particularly tangled in that Rogoff, whose mismanagement of the company flew it into bankruptcy, claims to be the biggest creditor owed money by the estate of the company she destroyed.
Debtor meet creditor
Rogoff says she loaned ADN more than $16.6 million to keep it afloat until she couldn’t keep it afloat anymore. She now hopes to get a teeny tiny amount of that money back in ongoing Chapter 7 bankruptcy proceedings.
Enter Christianson who shares ownership with Rogoff in a vacation retreat in the sunny San Juan Islands of Washington state.
He contends the costs of a special counsel would unfairly gobble up in attorney fees whatever little Rogoff might hope to recover from what’s left of the Dispatch News. Most of the assets of the ADN passed to the Binkley Company in a $1 million Chapter 11 sale in September.
The Binkleys have since rebranded the newspaper as the Anchorage Daily News, the name before Rogoff purchased the business from California-based McClatchy.
Chapter 7 deals with company assets the Binkleys chose not to take. Christianson has argued there isn’t much: a couple of printing presses no one seems to want, a couple of websites Rogoff argues are worth nothing, and maybe a couple used vehicles.
And most of what might be obtained from those assets, his motion said, is due Rogoff who holds “more than 7/8ths of the total unsecured debt….(thus) at least 7/8ths of that benefit or detriment inures to Alice Rogoff.”
Other creditors aren’t so sure about this. They want the court to probe where that more than $16 million went that Rogoff claims to have lost in her three years of running ADN, and what exactly the arrangements on a $13 million loan from Northrim Bank that along with the ADN-building sale helped Rogoff close the deal to purchase the ADN.
At a hearing before a bankruptcy trustee earlier this month, Artus tried to probe the financial connections between AK Publishing LLC, Alaska Dispatch Publishing LLC and Rogoff personally only to be shut down by an attorney for Northrim.
Northrim attorney Michael Parise appeared nervous Jipping might somehow jump to the conclusion that AK Publishing, Dispatch Publishing and Rogoff were all really just part of one big company that might simply be considered Rogoff Inc.
“There’s a lot at stake in half an hour,” he said.
The “lot” would now ppear to be in the neighborhood of $13- to $14.5-million.
In Artus’s motion to retain counsel, he writes, Rogoff “personally borrowed $13 million from Northrim Bank,” but then used ADN to “guarantee her personal obligation to Northrim Bank without any apparent corresponding benefit” to the company.
On top of that, Artus noted that the ADN appears to have later made hundreds of thousands of dollars in payments to Northrim to cover interest due on Rogoff’s supposedly personal note to the bank.
Nothing at stake
Where Parise and Artus see potentially a lot at stake, Christianson sees almost nothing.
“One (bankruptcy) action that has been discussed is against Northrim Bank,” he wrote. “Rogoff has personally guaranteed the Northrim debt. If, hypothetically, the Bush Kornfeld firm were to recover $100 from Northrim, here is an accounting showing conceptually how the funds might be distributed:
Everyone comes out a loser in this deal, Christians argues, and especially Rogoff.
“From Rogoff’s standpoint,” Christianson wrote, “if the trustee recovers $100.00 from Northrim, and Northrim recovers that amount from Rogoff on her guaranty, then Rogoff receives back $55.03 on account of her claim. This is obviously very disadvantageous to her, because every $100 of ‘benefit’ to the unsecured creditors actually makes her $44.97 worse off than before.”
The other creditors do stand to make $7.64 for every $100 collected, he conceded, “but
the creditor body, as a whole, is $38.33 worse off.”
The $38.33 is what Christianson calculates will be lost to “administrative expenses.”
Rogoff’s attorney paints this as one, big ripoff, arguing that “from the non-Rogoff creditors’ standpoint, for every $7.64 received by an unsecured creditor, the attorneys receive $33.33. This works out to an 81 percent effective contingency fee. A contingency fee of this magnitude is far outside the realm of customary fees.
“Thus, despite the fact that the trustee is supposed to administer a bankruptcy
estate for the benefit of the unsecured creditor body generally, the proposed employment
of the Bush Kornfeld firm would effectively amount to a net harm to 7/8ths of the
unsecured creditors, with the harm directly proportional to the benefit to the trustee and
her attorneys, and also effectively charge an 80-plus percent contingency fee to the remaining 1/8ths of the unsecured creditors. The only parties that unambiguously benefit are the trustee and the trustee’s attorneys.”
Artus sees a wholly different picture.
Christianson’s “logic fails for multiple reasons,” he wrote. “It is not the debtor’s (Rogoff’s) right or responsibility to decide the minimum recovery that would be meaningful to non-insider creditors. It is not the debtor’s responsibility to argue in favor of one insider creditor’s interests to the detriment of the remaining unsecured creditors.
“Ms. Rogoff appears to have redirected at least $14.5 million of the debtor’s real estate asset proceeds for her own use, only to then provide funds back to the severely undercapitalized debtor and assert a claim in favor of herself. And Ms. Rogoff caused the debtor to incur substantial unsecured indebtedness while it was operating a business that did not earn enough revenue to pay its debts.”
If, of course, Rogoff was actually running a business.
One expensive hobby
Whatever Rogoff was doing, Christianson says she devoted a whopping big sum of money to it – $16,619,095.90 to be exact.
That, he contends, is what Rogoff “loaned” ADN to keep it afloat. Testimony from Rogoff and ADN chief financial officer Erin Austin under oath in the bankruptcy court, however, raises questions about these loans.
What both Rogoff and Austin described to the court sounded more like a hobby than a business. As the publisher, Rogoff was supposed to be in charge of the ADN, but she admitted she had no business plan, and she paid little attention to the day-to-day operations of the company.
Her main interest appears to have been in being seen around the state as the owner and publisher of the Dispatch News.
When former Alaska Dispatch president Tony Hopfinger, one of the founders of AlaskaDisaptch.com and a man now suing Rogoff over a $1 million contract on which she reneged, suggested reducing the size of ADN staff to bring costs in line with revenues – a standard business practice – Rogoff rebuffed him.
Other employees appear to have concluded the business aspect of the newspaper operation was unimportant to Rogoff.
“I knew from the beginning these (financial) mistakes were having an effect,” Richard Mauer, an investigative reporter at the Daily News turned editor at the Dispatch News before being laid off by the Binkleys told the Columbia Journalism Review, “but I assumed her deep pockets would cover our problems.”
Asked how Dispatch News finances operated, Austin said, the company just went along until the money ran short, and then “we would let her know.”
At that time, Rogoff would transfer whatever funds necessary to the Dispatch News account. Asked about the specifics of some of those transfers, Rogoff – the woman in charge of the company – seemed unsure of how or where the money was being spent or what entity was responsible for the funding.
At point in the hearing, she also volunteered, “well, I’m the debtor.”
If that statement is true, and Rogoff herself saw AK Publishing, Dispatch Publishing, the Alaska Daily News and the The Moon and the Stars, another of her many LLCs, as nothing but extensions of her personal business, she could be personally liable to Dispatch News creditors.
Christianson tried to protect her in this way in his latest motion:
“Debtor’s business practice was to settle up, at the end of each year, the due-to’s
and due-from’s as between Rogoff and the company, and for the company to execute a
promissory note to Rogoff in the net amount.”
There are promissory notes to her for 2015 and 2016, he said, but “the 2017 amount is not reflected by a note because the (Bankruptcy) Chapter petition intervened, but that amount was calculated in the same manner as in previous years. The proof of claim has backup for each year, and debtor’s records (now maintained by the Binkley Company) have backup for the backup.
“All of the due-to-Rogoff amounts (the $16.6 million) are cash loaned by her to the company for operating expenses,” Christianson contends.
Nowhere in any of the filings is it explained how Rogoff bought a company that was making money for McClatchy and proceeded to lose $4.6 million in her first year of operation only to come close to doubling the loss in 2016 when it reached $8.2 million.
“Under the circumstances,” Artus wrote, “the court may ultimately determine that Ms. Rogoff’s claims should be subordinated….” Such an act would put give creditors owed more than $2.3 million, according to Christianson’s calculations, a place in line in front of Rogoff if there are funds to be collected at the completion of the bankruptcy proceeding.
“Until the trustee has fully investigated the debtor’s financial affairs, the ultimate allowance or priority of any particular claim cannot be determined,” Artus added. “Proposed special counsel will conduct the necessary investigation on a contingent fee basis without any risk to the estate and creditors if it is not successful in recovering money for the estate.”
There is no legal merit to Christianson’s claims, Artus added, noting the Rogoff and her attorney have “not cited any authority for (the) argument opposing the employment of special counsel and it is highly unlikely that any supporting authority could be found.”