Scripps says Post violates JOA
Letter alleges improper payment of newsroom costs
By David Milstead, Rocky Mountain News (Contact)
Published January 28, 2009 at 12:05 a.m.
Photo by Duncan Taylor, The Rocky
A worker arrives at the Denver Newspaper Agency building on west Colfax in downtown Denver on Tuesday.
SPECIAL SECTION » The Rocky Mountain News is for sale. On December 4, 2008, E.W. Scripps, the owner of Colorado’s oldest newspaper, said if a buyer does not step forward it will pursue other options – including closure.
Click to read stories about the sale, and see what other news outlets have been saying about the paper since the announcement.
The Denver Post violated its agreement with Rocky owner E.W. Scripps when it borrowed $13 million from their jointly owned operating agency to cover The Post's newsroom payroll, Scripps wrote in a letter to Post executives last month.
"We request that this practice cease and that the Post find a way to fund its editorial payroll without resorting to this . . .," Scripps executives Rich Boehne and Mark Contreras wrote.
The letter was dated Dec. 9, five days after Scripps announced it would sell the Rocky and would pursue other options, including closure, if it couldn't find a buyer.
"We continue to reserve our rights to pursue remedies for the several breaches caused by these practices or to assert them in connection with any future legal proceedings," they added in the letter sent to top Post executives Dean Singleton and Joseph "Jody" Lodovic.
The letter also reveals that the agency's credit has dried up and the banks will not lend it any more money. And it says that Scripps does not believe that The Post is able to repay the borrowed money "promptly."
Questions to Post executives were referred to Lodovic. He called the allegations "factually inaccurate," said there have been no breaches of the agreement and said it is Scripps that will be in breach if it closes the Rocky.
"The agency owes us money, too, I assure you," he said. "We ordered all the newsprint in December - the agency owes us millions of dollars. Who cares who owes what? Money goes back and forth all the time. All the balances will get wiped out altogether in the end."
The Rocky received the letter anonymously, via e-mail, Monday afternoon. It confirms information provided to the Rocky earlier this month by a source with personal knowledge of recent financial statements from the agency. In addition, the signatures on the letter from Boehne, Scripps' CEO, and Contreras, a senior vice president, match signatures on other Scripps documents.
Scripps spokesman Tim King said, "We don't discuss private correspondence with our business partners, so I don't have any comment."
Lodovic refused to confirm the letter's authenticity. "If your own company won't confirm they sent it, I'm certainly not going to. I can't believe Rich or Mark would sign such a letter like this."
But other sources confirmed the existence of the letter.
In the letter, Scripps says the Denver Newspaper Agency borrowed money from its banks then loaned it to The Post to make its payroll. By the end of November, The Post owed the agency $13 million, according to the letter.
Scripps said the loans were "instituted without our knowledge and consent and constitute a material breach" of the 2001 Joint Operating Agreement that governs operations of the two papers.
"We request that The Post repay forthwith all loans that (the agency) was caused to make to it and that (the agency) use those funds to reduce the principal outstanding under the credit facility with the banks."
The payroll issue, previously undisclosed, sheds new light on Scripps' decision to seek an exit from the Denver market and its partnership with the highly leveraged MediaNews, which owns The Post.
The companies are each losing roughly $4 million per quarter as the newspaper industry nationally continues a rapid deterioration, based on the most recent public financial filings by Scripps. The agency, which handles business functions for the two newspapers, has a $130 million bank loan that it's attempting to renegotiate.
To help do so, Singleton told unions representing workers at the agency and The Post that he needed $20 million in contract concessions by Jan. 16. That deadline has passed with talks continuing. Scripps said bids for the Rocky were due Jan. 16, but it has not provided an update on the sale process.
A source told the Rocky in mid-January that money owed to the agency by The Post had swollen to more than $10 million by the fall of 2008. This was due to The Post's failure to reimburse the agency for its newsroom expenses, the source said.
The joint operating agreement allows for the agency to pay expenses for either partner and makes specific provision for the agency to pay newsroom costs. But it also requires the partners to reimburse the agency.
The agency's 2007 financial statements, filed by MediaNews with the Securities and Exchange Commission last year, notes the practice and says that at year-end 2007, MediaNews owed the agency $2.3 million for Post newsroom expenses.
In the past, when the Denver newspapers were generating enough cash to support both newsrooms, the agency could advance editorial costs without tapping its line of credit. Scripps' letter asserts that beginning last year, however, the agency began to borrow from its bank to cover The Post's newsroom expenses.
Both companies were asked by the Rocky, via e-mail Jan. 15, whether they were current on their obligations to the agency. Scripps responded Jan. 21, saying it had just settled a $48,000 obligation for December.
"Scripps has been funding the full cost of the Rocky Mountain News newsroom and other editorial expenses without the benefit of cash distributions from (the agency) since July. From July to year-end, that totaled $10.6 million, and we continue to fund those expenses in the early weeks of 2009."
MediaNews did not answer that e-mail or a follow-up Jan. 21.
"The issue is too complicated," Lodovic said Tuesday when asked why he hadn't responded. "It's irrelevant. Who cares?"
Lodovic insisted MediaNews has not breached the agreement with Scripps.
"The JOA has been operated the same way since Day One - years and years and years," he said. "If they are in the middle of a process that may result in the closing of the Rocky, they are going to be in breach of the agreement," he added. "They are getting ready to leave the market, and to the extent they do not provide content, they are in breach."
In the letter, the Scripps executives said the agency's banks "will no longer advance funds under (its loan)," so MediaNews began borrowing against future distributions from the agency in order to fund payroll.
The practice is allowed under the JOA, the Scripps executives wrote, but "was not intended to benefit one partner (i.e. The Post) at the expense of the other or to the potential detriment of the creditors of (the agency), if, as we believe the case to be, the partner is unable to repay these amounts promptly out of its current distribution."
Agency spokesman Jim Nolan said, "If such a letter indeed exists, agency management hasn't seen it, much less been made aware of its contents."
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January 28, 2009
1:43 a.m.
Suggest removal
jacka writes:
Reality__Check sounds like a hack from the Denver Post.
"The agency owes us money, too, I assure you," he said. "We ordered all the newsprint in December - the agency owes us millions of dollars. Who cares who owes what? Money goes back and forth all the time. All the balances will get wiped out altogether in the end." -- Joseph "Jody" Lodovic
If this comment doesn't scream the DoJ needs to investigate this arrangement I don't know what does.
January 28, 2009
5:43 a.m.
Suggest removal
LOUIE writes:
Civil, constructive, critical thinking eludes some in their comments; but I firmly support the ignorant, destructive, and those of pedestrian thought to the freedom of speech. Reality-Check, I always appreciate your writtings, they make me recognize the virtues of tolerance. God Bless you as His humble servant to humanity my friend...
January 28, 2009
6:03 a.m.
Suggest removal
LOUIE writes:
JACKA, it does smack of a loose cash register excuse. When it comes to money and both papers, a lawsuit is one dead dog trying to beat another dead dog to survive. Lawyers will get paid as it goes down in the mud of legal battles. But will either entity return to profitabilty is the larger question. It's like both papers here are on their last breath financially, as many newspapers across the nation are also in dire straights. It's like watching evolution progress in print mrdia, leaving a quality staple of our daily lives behind. I still pay to hear the "thud" at the door, pick up the Wall St. and New York Times downtown each morning. I love reading, but everything is now transitioning to being online. I read the printed press as I work several computers in various markets everyday. I like them both at hand, but I am a dinosaur in today's world with old business practices still firmly in place. Computers may crash were I sit, but business still goes on. Thus the old ways still have value in my profession, as many companies shut down in a computer failure. Online is the newest, cheapest, and fastest way to get news, classifieds, service, knowledge, almost everything except sex!
January 28, 2009
6:08 a.m.
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LOUIE writes:
Some say sex too, I guess it is the most profitable subject online. Wow, no need to worry anymore, the computer is all powerful! LOL!~
January 28, 2009
7:18 a.m.
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Barbarosa writes:
While everyone here is busy bemoaning the fact that the Rocky will probably shutter its doors and we will become a one-newspaper town, this story and others like it raise the very real possibility that Denver could well become a NO-newspaper town in the near future. (Shudder)
January 28, 2009
7:45 a.m.
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GunnyBob writes:
Borrowed $13 million without permission...
Borrowed without permission...
You mean, like, the Post stole $13 million?
January 28, 2009
7:48 a.m.
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timeandagain writes:
Too bad the unions drove the newspapers AND the auto industry into the ground...
January 28, 2009
7:53 a.m.
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medina88 writes:
come on!!! Scripts has kicked butt with the Rocky Mtn News for years. Denver's majority perfers the RMN over Post. Post Execs are scum...always have been.
January 28, 2009
7:55 a.m.
Suggest removal
DougH writes:
Sounds like Scripps is just inventing an issue to give them an excuse to back out of the JOA, otherwise it would cost them dearly to get out when they dump the Rocky. As they say "It's just business".
Memo to timewhatever,, Maybe the News should have brought in a bunch of illegals to print the paper and outsourced the writing to some guys in India. Do you think that would have saved the paper ?
January 28, 2009
7:58 a.m.
Suggest removal
AC writes:
Sounds like the Post is in worse shape than the Rocky. Could it close first and give us a no-newspaper town?
What I wonder about is how come the Post hasn't covered any of this?
January 28, 2009
8:09 a.m.
Suggest removal
liveforpowder writes:
Sounds like the Post has come issues in their closet too. Hope the Rocky can outlast the Post; I canceled my subscription to the Post in favor of the Rocky mid-summer last year due to their poor coverage and all ads in place of real news, and constant stories only from the AP, and ever since, the Post has been pestering me to renew with them. But anyways, I think this is enough for someone to be investigating the JOA independently, like what Jacka said, from the DoJ maybe? Does anyone think the Post may have tried to secretly take down the Rocky all this time?
January 28, 2009
8:16 a.m.
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Backstabber writes:
What a shock, the Post going down the drain. Enjoy the ride, Dean.
January 28, 2009
8:24 a.m.
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Romanesco writes:
"Who cares who owes what? Money goes back and forth all the time. All the balances will get wiped out altogether in the end."
Your employees care, Mr. Lodovic. %$&*(.
January 28, 2009
8:31 a.m.
Suggest removal
benn writes:
Seriously, as an auditor, this: "Who cares who owes what? Money goes back and forth all the time. All the balances will get wiped out altogether in the end." - is highly disturbing.
Cmon RMN! Stay afloat!
January 28, 2009
8:47 a.m.
Suggest removal
Scott writes:
Lodovic said, "... Who cares who owes what? Money goes back and forth all the time."
Sounds like the type of garbage that came out of the mouths of the Enron, etc., crooks.
Scott
January 28, 2009
8:53 a.m.
Suggest removal
GunnyBob writes:
Here's a copy of an email I sent this morning to Harry Whipple (Pres & CEO of the DNA), Dave Murphy (CRO of the DNA) and Dave Licko (CFO of the DNA). I'll let you know if they reply:
Good Morning:
The "Gunny Bob Show" is considering producing an investigative report on the $13 million the Rocky Mountain News is reporting the Post wrongfully "borrowed" from a joint operating account to make payroll and are hoping you will respond to some questions.
Does Dean Singleton's MediaNews Group own any business aircraft?
If so, what type?
Does it still own a Dassault Falcon 2000?
How many business aircraft have MediaNews Group and the Denver Post owned, respectively?
If the Group or Post do own any business aircraft, how much money is spent on average per month to operate and maintain the aircraft?
Was any of the $13 million used to operate or maintain any aircraft owned by the Group or Post? If so, how much?
Thank you.
January 28, 2009
8:55 a.m.
Suggest removal
scodtt writes:
Finally, an explanation of why the Rocky is still here! They found that the Post was dipping into the till, and now understandably Scripps wants some equitable treatment from what's supposed to be the even-steven JOA.
The plot thickens!
January 28, 2009
9:12 a.m.
Suggest removal
Backstabber writes:
Could be the Post will go away and not the Rocky.
January 28, 2009
9:27 a.m.
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SLCreader writes:
Yes, they own a plane. Info, with tail number, here: http://www.aircraftone.com/aircraft.a...
There are sites where you can track the flights it has made. It flew yesterday.
January 28, 2009
11:34 a.m.
Suggest removal
DUScooter writes:
The Post owes The Rocky then, and as a result if The Post must close to pay off the $13 million so be it. I grew up with The Post, but LOVE The Rocky online. I'll continue to support The Rocky to do whatever I can. Yes, I have signed the E-mail from the employees at The Rocky too. Shame on The Post executives for being sneaky and deceitful with shared revenues with The Rocky.
.
January 28, 2009
11:38 a.m.
Suggest removal
DenverBob303 writes:
Sure. This is certainly crappy business practices. (It's amazing Lodovic would say something like that. I don't know the guy, but he sounds like a supreme a-hole. Good for Milstead for making him look like a whiner.) Nevertheless, even if the Post is wrong in doing this, it's akin to the winning football team committing a 15-yard unsportsmanlike penalty with 1:43 left in the fourth quarter when they're up by two touchdowns. It might get everyone's panties in a twist, but it's not going to change the outcome.
January 28, 2009
11:54 a.m.
Suggest removal
benn writes:
Don't be so sure about that DenverBob
January 28, 2009
12:26 p.m.
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argyllskier writes:
Keep us posted GunnyBob on any response from the DNA.
One thing forgotten in this whole deal, even before the JOA, is that Scripps has always been a spineless jellyfish. Here and now is an opportunity to finally crush Singleton out of Denver and they will still probably walk away. MediaNews is so leveraged with big debt that they will be lucky to survive past Independence Day this summer.
There is a high possibility of this town losing both papers and a community service, despite the senseless notions of political biases on these commenting boards. Journalism is expensive but a very necessary element of our democracy.
January 28, 2009
12:34 p.m.
Suggest removal
argyllskier writes:
Just for additional info to support how leveraged MediaNews is:
http://sjguild.org/index.php?ID=5931
15 percent pay cuts in San Jose as well as other concessions.
January 28, 2009
12:54 p.m.
Suggest removal
jeffdragon writes:
Milstead and Scripps aren't addressing their own issue: namely, they're losing millions every quarter on the Rocky.
How about a little digging on that, too, David, instead of nothing but dirt throwing at the Post?
January 28, 2009
1:11 p.m.
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GunnyBob writes:
Arg:
Nothing yet from them, but to be fair they might all be out gasing up the jet or going for a ride to Malibu or Tahiti.
January 28, 2009
2:30 p.m.
Suggest removal
Redrik writes:
Don't count the Rocky out yet. I wouldn't be surprised if the Post goes under now and the Rocky becomes the only paper in Denver.
GunnyBob don't expect an answer they won't even talk to their own employee's about what is going on.
January 28, 2009
2:48 p.m.
Suggest removal
DenverBob303 writes:
benn -- This letter (and Milstead's article) clears one thing up, but that's not necessarily good for the Rocky. The reason why there is this seeming delay in closing the Rocky is because, we learn now, Scripps doesn't want MNG to get away with not paying that money back to the DNA. But that doesn't mean much for closing or keeping the Rocky open.
January 28, 2009
2:53 p.m.
Suggest removal
AC writes:
jeffdragon: I've seen more reporting in the RMN on their situation than I have seen in the Post on theirs. Seems to me the RMN is covering both sides. Good luck seeing today's story in the Post.
January 28, 2009
2:57 p.m.
Suggest removal
scoop7 writes:
I was an intern at the Rocky and then worked for Scripps at another newspaper for five years. In my experience both the Rocky and Scripps were fantastic places to be. Here's all you need to know about Singleton: He borrows $13 million from the DNA to pay his employees at the Post, then turns around and asks the DNA to cut $18 million in wages and benefits from its employees.
January 28, 2009
3:03 p.m.
Suggest removal
Redrik writes:
DenverBob303
If I read this right Scripps found out about the 13 million theft after putting the Rocky up for sale. Scripps has very very deep pockets and MNG has nothing now not even the DNA piggy bank now that Scripps got wind of the theft. I think Scripps is now waiting to see if the banks come calling to the 11 floor of the DNA and close down MNG and hand everything over to Scripps on a silver platter.
January 28, 2009
3:07 p.m.
Suggest removal
benn writes:
Yep Redrik, besides that I have also heard rumors of a buyer....
January 28, 2009
3:13 p.m.
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Redrik writes:
benn,
I wouldn't be surprised if MNG added the Post to the RMN sale
January 28, 2009
3:50 p.m.
Suggest removal
The_Punnisher writes:
Just fighting over the position of the deck chairs on the Titanic...
" Tweedledum and Tweedledee
Agreed to have a battle;
For Tweedledum said Tweedledee
Had spoiled his nice new rattle.
Just then flew down a monstrous crow,
As black as a tar-barrel;
Which frightened both the heroes so,
They quite forgot their quarrel. "
-Lewis Carroll
January 28, 2009
3:51 p.m.
Suggest removal
jeffdragon writes:
Well, well, well: it's starting to look like that Scripps letter might have been an elaborate hoax. Keep digging, Milstead!
January 28, 2009
4 p.m.
Suggest removal
Redrik writes:
jeffdragon what did you find out? The letter looks real to me?
January 28, 2009
4:38 p.m.
Suggest removal
pauly1620 writes:
jeffdragon writes: Milstead and Scripps aren't addressing their own issue: namely, they're losing millions every quarter on the Rocky.
How about a little digging on that, too, David, instead of nothing but dirt throwing at the Post?
Curious Jeff, just what "dirt" are you talking about? Sounds to me like the Post got its hands caught in the cookie jar and your posts smack of, well, The Denver Post. How much of the $13 million the Post allegedly borrowed in December went to cover your paycheck?
January 28, 2009
6:45 p.m.
Suggest removal
jeffdragon writes:
Hey Pauly1620: Anybody bought your rag yet? Because, your owner said it don't want you no more.
January 28, 2009
7:37 p.m.
Suggest removal
sportshooter writes:
timeandagain blames unions for the down fall of companies they don't mismanage steal money out of the company, now do they. Auto workers can only assemble what they are given, they don't design, price, market the product do they? Unions have gotten the benefits enjoyed by people top to bottom in any company, retirement, health insurance, vacations and etc. They have gotten laws to protect, child labor law, forty hour work week, OSHA, Workman Comp. Things a company wouldn't offer of their own free will. Do you think that you would have a $401K without the presence of Unions. Within the last year a Vice President of the Denver Post retired suddenly and took a extended vacation to South America after gaining concessions from the Unions at the DNA, which are only been in place for fourteen months and now he is asking for more again. This Vice President's last published salary was $20K an month. A majority of the Union Workers monthly salary is $3-4K a month. Who negoiated his salary and he was only one of many top excutives with a similar salary, which Singleton refuses to ask for the same concession percentage as the workers. If you were having trouble in your own home would you not cut everyplace you could to keep it. They laid off around 300 workers salaries around 60K a year and that was done this last year and that didn't help. Singleton has heavily leveraged Media News in order to purchase other Newspapers and Newspaper Chains, if this industry is such a looser why keep buying more, would you buy a known looser, has labor told him to do that? If there were only more workers with the same pay as a few years ago the income tax base, pension plans, Social Security would be better funded as would be the subsequent industries that are failing because, how many gallons of milk, pairs of jeans, electronics can 100 top managers buy compared to 1000 workers and their families. Try thinking outside the box that the republicans have told us for years saying the trickle down effect will benefit all. That's why there are so many jobs outsourced, greed is the trickle down your seeing in today's economic struggles.
January 28, 2009
8:39 p.m.
Suggest removal
Barkingdog48 writes:
I knew when the JOA was first formed there would be nothing but trouble in the future. Money is always the issue.
January 28, 2009
8:51 p.m.
Suggest removal
ColoradoBound writes:
I'm aware of this topic but this 'new' news is astounding! I've been loyal to RMN since 1995 so that is my bias. I do hope it emerges as Colorado's sole statewide newspaper. Anyway...
Isn't this like me borrowing millions from a bank, reneging on paying the bank back, the bank goes into a fire-sale state because of what I am (illegally) doing to it, and I then am able to use my ill-gotten millions to buy the stupid bank and/or kill it off?!
Correct me if I'm wrong here.
January 28, 2009
8:54 p.m.
Suggest removal
MorticiaA writes:
jeffdragon writes:
Hey Pauly1620: Anybody bought your rag yet? Because, your owner said it don't want you no more.
I say - what are you a 16 year old delivery boy for the Post? God I haven't seen such childish rambings since Sanjaya was on American Idol
January 29, 2009
11:41 a.m.
Suggest removal
pauly1620 writes:
jeffdragon writes: Hey Pauly1620: Anybody bought your rag yet? Because, your owner said it don't want you no more.
So I take it that would be a 'yes' to my question. Thanks 'jeff' for illustrating why most of us here in this forum prefer the RMN to the Post.
January 31, 2009
7:21 a.m.
Suggest removal
Snickers52507 writes:
Hey Gunny, I don't think the Post has any aircraft but MNG still owns the 2000. I understand it has been for sale for a while. I wouldn't think the Post contributes to any funds to maintain and operate the Falcon.
Somebody said earlier that they would support the RMN in any way they could. How many here have a daily subscription to one or both of the daily publications?
I don't live in the area and I don't take a daily paper ... anymore anyway. However, that is the BEST way to support your newspaper(s). Helps with circulation numbers and Ad revenue. If most people on this forum are just reading your news online ... YOU are a big part of the problem. You cannot have your cake and eat it too.
Free ain't Free. Somebody has to pay for the content in the paper and on the internet. A writer writes an article from the staff of the Post or the News and you read it on line, without a subscription to the newspaper, in a way, you are stealing. Who pays? The community, The Post and The News.