Ownership of Union Leader a tale of tangled trusts.
It's a long story.
On July 6 1979, William Loeb, the publisher of The Union-Leader and New Hampshire Sunday News, repeated a pledge to his workers that he had been making for more than 20 years. Not wanting to turn the operation over to some heir who may or may not know anything about the news business, he said, he would give it to the employees.
According to the plan, after Loeb and his wife died, the paper would go into a trust. When the next-to-last trustee died, the paper would go to the employees.
"Obviously if the paper is well run and everyone does their job well after Mrs. Loeb and I are gone, you will be the most prosperous people working in any newspaper in the United States," he said in a signed letter to his employees. "The reason why Mrs. Loeb and I have done this is we do not believe in inherited wealth on grand scale. We believe that the people who worked on this paper and built it up -- the executives, the workers, in all the departments -- deserve the fruits of their works....It's a bit novel and different than you generally see in ownership, but it is for real."
In one sense, Loeb's pledge has been kept. A trust was set up that will go to the workers. But in another sense, those words ring hollow. After Loeb's death, the trust became worth a little more than a quarter of the newspapers' worth. And it's questionable whether any of the current employees will ever even get a piece of that.
After William Loeb's death in 1981, Nackey Scripps Loeb wound up with half the paper. Inheritance taxes and various loans almost reduced the trusts' amount in half. In 1987, after a five-year legal battle, The Union Leader Corp. agreed to give some $20 million to workers who were around at the time. Now the trust consists of 28 percent of the paper.
At the time, Mrs. Loeb didn't say what she would do with her share, but fearing that inheritance taxes would force her to sell off the paper to a chain, she willed that it be donated to a small school created by The Union Leader and controlled by her daughters and Union Leader management.
She felt very strongly that the employees would be best served by remaining independent," said Nackey Scagllotti, Nackey Loeb's daughter from a previous marriage. The idea of distributing any of her shares to the employees did not even come up, she said.
"He (William Loeb) didn't envision the paper being sold to pay estate taxes," said Joe McQuaid, president of the corporation. "Had the paper gone to the employees, it would have had to be sold to a national chain that is only interested in the bottom line. That's not good for the state of New Hampshire. I don't think that's any way to run a paper."
So who owns The Union Leader? The Nackey S. Loeb School of Communications does. But The Union Leader management controls the school. So in a sense, you could say The Union Leader owns itself.
Not so, said McQuaid. A board of trustees is not the same as an owner.
"The school has to abide by the rules as a non-profit corporation. It just owns -- knock on wood -- a profit-making company."
The school, while serving as a vehicle to preserve the independence of The Union Leader, is more than that, McQuaid said. Though what it will become is not quite known yet.
"It's just in its infancy," said McQuaid. "How it grows and expands? It is too early to tell."
The Poynter model
Loeb founded the Nackey S. Loeb School of Communications before she died, with $1.1 million in start-up funds. It took a year for the school to get off the ground. Since last April, the school -- located at 749. East Industrial Park Drive, not too far from The Union Leader building -- has taught about 200 students taking its six-week classes.
The ownership arrangement is modeled after The Poynter Institute, which owns the St. Petersburg Times in Florida. (The Poynter Institute is controlled by the paper's editor.) The institute has become a mecca of continuing education for Working journalists throughout the nation. Many of the Loeb school's classes have been aimed at local high school students in order to get them interested in journalism.
"We want to get people le more interested in journalism," said Holly Babin, the school's executive director. "Whether they want to follow it up as a career is up to them."
Eventually, she said, she would like the school to become a northern version of Poynter, though "it might take a few years to get there."
The courses -- ranging from First Amendment law to photo journalism -- are mostly free of charge. The adjunct teachers, who are paid a stipend, are reporters with some teaching experience. The school recently offered its first paid course, a one-day workshop on media relations for police personnel. The $85 price included lunch.
Nackey Loeb's donation of the majority interest in the newspapers to the school was no afterthought, said Scagliotti. "She planned it. The whole plan is in the estate documents."
Actually, Nackey Loeb's will only alludes to the plan. Her shares of The Union Leader were held in her own trust, which was not subject to probate court. The rest of her estate -- valued at nearly $6 million in July -- went to her two daughters; Scagliotti and Edith Tomasko. Tomasko inherited Loeb's Goffstown home, Scagliotti got Neighborhood Publications, a chain of weeklies around Manchester that Loeb started in the early 1990s.
Both daughters will he on the board of trustees of the school, along with McQuaid and two other executive at the Union Leader, John E. MacKenzie and Dirk Ruemenapp. Presumably, the daughters could exert some influence on the paper, but neither plans to. Both said they were satisfied with the general direction it's taking.
"I'm not sure we would be good at running it," said Tomasko. "I can make a good logical business decision, but I have not taken part in the newspaper business."
Scagliotti said she plans to "he involved as much as I can in the paper without stepping on the toes of the management."
Don't look for any fiery front-page editorials from her, like the ones that used to come from William Loeb and then Nackey Loeb, she said.
"I expect to be far more involved in Neighborhood Publications than at The Union Leader," she said.
Scagliotti also is on the board of directors of the E.W Scripps Company national newspaper chain.
Actually, the Loeb school trustees won't have direct control of the paper, since the paper's board of directors make major decisions. But since shareholders elect that board and the school holds the majority of the shares, presumably the school will have a say in who is on the board and the decisions it makes. McQuaid, both president and publisher of the paper and president of the school, would seem to be in control.
McQuaid won't reveal who else is on the paper's board of directors -- the prerogative of a corporation that is still privately owned.
However, The Union Leader will have to become a little less private next spring, when the school, as a non-profit, must file publicly available tax forms for the first time since it inherited the paper. The forms will disclose value of the shares, revealing the paper's worth. McQuaid declined say what that figure would be.
A matter of trust
So how did Nackey Loeb's death affect the William Loeb Union Leader Trust, which owns the rest of the paper? That trust's history is long and litigious.
Loeb started the profit sharing trust in the 1950s. In 1957, he wrote employees that "Mrs Loch and I have set up a legal arrangement by which after our death, the entire company will be owned by the Union Leader Retirement Profit-Sharing Trust and all the profits will go to that fund for your benefit. So you see you have a real stake in the future of this company."
In May 1978, he said, "I am not giving my entire ownership of Union Leader stock, not to family or charity, but to loyal employees."
He was even more vehement in correspondence and interviews. In one interview, in which he castigated the liberal press during the 1972 presidential primary, he said, "I'm far more liberal than any of you are, because when I die my papers are going to go to the people there."
And in answer to another letter, he said, "Furthermore, on Mrs. Loeb and my deaths, the newspaper will be given to the employees."
However, in an editorial written at about the same time, he spelled out the arrangement in more detail. After the death of the Loebs, he wrote, the paper would not go to the employees but to the trust, and would only be distributed after the last (actually the trust papers say next-to-last) of the trustees die.
"At that point, the trust will be dissolved and the stock of the newspaper distributed to the then-employees of the paper -- again in proportion to their own salaries multiplied by the period they have been with the paper," wrote Loeb. "Considering the fact that some of the trustees are in their early thirties, this event should not occur, barring a universal disaster, for another 40 years or more."
What does "then-employees" mean? That was the focus of Richard Bergeron v. William Loch Union Leader Trust, a lawsuit filed in 1982. Bergeron, a Union Leader employee in a class action suit, claimed that Loch had promised the current employees the paper and they wanted their share.
"Loch's body wasn't cold in his grave," said McQuaid, "and the employees were knocking on the door, saying, 'Where is that paper?"'
The employees claimed that Loeb betrayed them, persuading them to forego salary increases and profit-sharing in the hope that some day they would get their hands on the more valuable paper. Instead, they watched as a Nevada probate court (where Loch resided) gave half of the paper to Nackey Loch as community property. They saw that some of it was put up as collateral for a loan to the Security Bank of Nevada A U.S. Court of Appeals protected Nackey Loeb's share, but kept alive the rest of the case. The paper appealed the case to the U.S. Supreme Court in vain in 1985.
Locb contended that it was unrealistic to distribute the paper to anybody who had worked for the Union Leader at any time.
"It would have been an impossibility for me to go back and check the headstones in the graveyard or what have you to find out who was going to be the beneficiary at that time (of distribution of the stock)."
Both parties eventually settled the case in 1987.
Employees were given something similar to a cash payoff -- preferred non-voting stock that they could only sell hack to the newspaper at a set value. The totals range from about $10,000 to over $100,000 for those employees around in 1981. Some of them kept their stock, and receive occasional dividends.
"But for those that started the day after (Loch's death) and dies the day before the next-to-last trustee does, they will not get anything," said Mike Harvell, the attorney representing the employees.
Not exactly McQuaid. Current employees are entitled to some dividends. There haven't been too many such distributions over the years, he said, and when there have been, it has been off of preferred stocks. Last year, however, the trust gave out a total of $36,000 in dividends, though it was unclear how much of that went to employees who worked in the paper before 1981 and those who worked afterward.
There have been no common stock distributions, however. That will change, McQuaid said, because the school will need them in order to function: That is another Way current employees will benefit by the school's ownership.
McQuaid, however, did agree that current employees probably won't get a piece of the pie when the stock is distributed. At 51, McQuaid is the youngest trustee of six. The next oldest trustee is also in his early 50s.
"How many will he here when someone runs me over with a truck?" he asked.
It doesn't seem that most workers at the paper are counting the days. In fact, current employees aren't really aware of the trust arrangements, said Scott McQuillen, past president of the Graphic Communications International Union local. "We are pretty much in the dark about it," he said.
|Printer friendly Cite/link Email Feedback|
|Publication:||New Hampshire Business Review|
|Date:||Dec 29, 2000|
|Previous Article:||Record-setting N.H. economy stronger than ever.|
|Next Article:||DOT'S IT.|