How Alaska’s largest newspaper went bankrupt

Anchorage, Alaska, via Wikimedia Commons.

When Alice Rogoff bought Alaska’s largest newspaper from media publishing chain McClatchy in 2014, she was making a bullish bet on the state and what she saw as its expanding role in the nascent economy of the far north. Oil prices were cruising above $100 per barrel. The shrinking Arctic ice pack seemed to indicate surefire growth in shipping, oil and gas development, and fishing. Russia loomed as a vague but steady threat, ensuring the continuation of—and a possible increase in—military spending.

Rogoff brought her family wealth to bear in a deal to purchase the Anchorage Daily News at a premium and turn it into her own media brand, Alaska Dispatch News. (Rogoff is married to David Rubenstein, a billionaire three times over who, until recently, was chief executive of the Carlyle Group, one of the world’s largest private equity firms.) She is among a handful of uber-rich individuals who have in recent years bought into print media markets across America. There’s Amazon founder and Washington Post owner Jeff Bezos; Boston Red Sox and Boston Globe owner John Henry; and famed investor Warren Buffett, whose Berkshire Hathaway owns 31 small dailies and 47 weeklies.

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Moneyed owner-benefactors can be a boon to struggling print news outlets, often showering much-needed resources on newsrooms and having greater tolerances for loss than corporate owners. That’s all fine until the money runs out, which is what has happened over the past three years at the Dispatch. The newspaper went from being a lean but profitable McClatchy property to near-fatal insolvency under Rogoff, who served as owner and publisher until September.

Oil prices plunged not long after she bought the paper. The resulting recession, which is ongoing, and the general flight from print newspapers did ample damage to subscriptions and advertising. But an unavoidable fact is that Rogoff ran the Dispatch like a philanthropic project, one in which loads of cash could, for a time, paper over a series of business decisions that would ultimately lead to bankruptcy.

***

Rogoff’s willingness to pour her personal wealth into Alaska journalism was apparent from July 2009, when she bought a 90-percent share of a struggling online news startup, Alaska Dispatch, founded by Tony Hopfinger and his now ex-wife, Amanda Coyne. Soon the newsroom, in offices attached to an airplane hangar, was stocked with beer, wine and enough food to provide the staff with three square meals a day. Rogoff’s private plane was available for reporting and photography trips. She published a coffee-table book called Alaska Dispatch: The Places We’ve Gone and hosted company parties at her rambling, shingled mansion on Campbell Lake.

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But even with Rogoff’s support, Alaska Dispatch could not come close to matching the print and online reach of the hometown paper of record, the Anchorage Daily News. And although the online-only news model was the future, print was still a major Daily News revenue source. In 2013 the Dispatch, whose motto had been, “We don’t do dead trees,” began angling to do dead trees in hopes of picking up more advertisers and readers.

Hopfinger says he had reservations about purchasing the competition given long-term declines in print subscriptions. “Not only myself, but others tried to tell her not to buy the paper,” Hopfinger says of Rogoff. “A lot of people told her not to do it.” Rogoff bought out Hopfinger’s share of Dispatch and proceeded with the deal, valued at $34 million, in 2014. (By comparison, Henry purchased the Globe and several other media properties for $70 million in 2013. The Globe’s weekday circulation of 246,000 was six times greater than that of the Daily News.)

To meet the steep sales price, Rogoff took out a $13 million personal loan from Northrim Bank and put in another $6 million herself. She also sold the Daily News building to Alaska telecom company GCI for $14.5 million in a related deal.

The loss of the newspaper’s former headquarters presented an immediate problem. The immense, three-story printing press that had spit out thousands of Anchorage Daily News editions, and was still vital to the paper in its newest incarnation, was cemented to the floors of a building that the company no longer owned. A second, smaller press that brought in millions in revenue through commercial printing operations was also there.

Ron Duncan, chief executive of GCI, wanted to turn the space occupied by the presses into a warehouse. But Duncan was friendly with Rogoff—the two once co-owned an airplane hangar at Anchorage’s Merrill Field—and agreed to lease the space to the paper under the assumption the presses would soon be removed. The latest in a series of lease agreements had the Daily News committing to vacate the building by December 2016 or else incur financial penalties.

In addition to meeting the paper’s steep sales price, Rogoff began her time as owner with a growing mass of fixed expenses. Aside from leasing the newspaper building rather than own it (as McClatchy had done), she entered a second lease at a Midtown Anchorage office building to house the news and business operations. She took on new operating costs—accounting, advertising, page design and more—that McClatchy’s corporate offices had previously handled. And she balked at reducing the payroll of the newly merged newsrooms. She in fact hired more staffers, myself included, even after it became clear the paper was losing money.

Her idea was to build an Alaska-based media powerhouse that would dominate coverage of not just the state, but the entire Arctic, a region Rogoff ardently believes is on the verge of a full-fledged economic bonanza. To that end, Rogoff’s ADN sent a veteran Daily News reporter to live and work in the remote Western Alaska community of Bethel. For a time, the paper discussed opening other rural bureaus in Nome and Utqiagvik. ADN hired a former Politico reporter to cover Alaska news coming out of Washington, DC, and a seasoned videographer from Seattle. “Arctic Fellows” from the Columbia Journalism School worked in the newsroom during the summers, receiving stipends, free lodging and vehicles. (Rogoff is on the Board of Overseers of CJR.)

In March 2016, Rogoff published a piece on the opinion page that said “To quote Jeff Bezos, we’re in ‘investment mode,'” echoing assurances the Post owner had given to his own staff a month earlier. She announced the purchase of a higher-quality printing press and reassured readers of the paper’s plans to “be printing for years, and perhaps decades to come.”

But before the newly acquired press, purchased for $500,000 and transported from Indiana to Alaska, could replace the old press in the GCI building, Rogoff had to find it a home. After placing ads in the paper and asking staff to pass along any leads, she finally found a warehouse in an out-of-the-way industrial area on Arctic Boulevard and began the complex and costly job of refurbishing it. Rogoff had decided to convert what court documents later called the “Arctic Road property” to house not just the newly purchased and commercial presses, but ADN‘s entire operation. The decision added a third building lease and a big remodeling project to the balance sheet.

I knew from the beginning these mistakes were having an effect, but I assumed her deep pockets would cover our problems.

“The main mistake was having to sell the building in order to buy the paper because that meant we lost control of the press,” says Rich Mauer, who worked as an investigative reporter at the Daily News and as an editor at the Dispatch. “I knew from the beginning these mistakes were having an effect, but I assumed her deep pockets would cover our problems.”

***

Rogoff’s came to ADN with a strong media pedigree. Fresh out of Harvard Business School, Rogoff, who says she was a news junkie even then, became an assistant for Donald Graham at The Washington Post. She later served as chief financial officer at US News & World Report.

Her first Alaska-related endeavors were unrelated to media. She initially visited the state in 2001 during a family vacation. A trip to St. Lawrence Island the following year inspired her to found the Alaska Native Arts Foundation, a nonprofit dedicated to promoting the cultural contributions of the state’s indigenous peoples, and Alaska House, a Soho boutique selling Alaska Native art.

While Rogoff’s enthusiasm for journalism in Alaska could be measured in dollars, her vision for the paper was often difficult to interpret, according to multiple managers who reported directly to Rogoff.

“She would come in and give one direction and then a contrasting direction a week later and wonder why we hadn’t done the first thing when she had said the second thing,” says one senior manager who asked not to be named out of concern for their professional reputation.

The lack of clear instruction led to constant tension, but no resolution, over how to manage finances and whether or not to commence layoffs. According to Hopfinger, Rogoff said the paper had to make more money because all the funds were coming from her “piggy bank.”

And yet for nearly three years she continued to cover the losses, sometimes abruptly coming up with the money just as bills were coming due, Hopfinger says.

Rogoff disagrees with the characterization of her wishes for the paper and her managerial decisions as being difficult to interpret.

“I did not want to force managers to do things they didn’t want to do,” she says. “If I seemed to back off from something it’s because they seemed to resist and that becomes kind of a standoff. I was always a consensus-style manager, not a dictatorial one.”

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The single-owner model introduced a new element of instability that hadn’t existed under McClatchy. Even in the years when Rogoff willingly poured millions into the ADN, there remained the inescapable fact that the newspaper was linked to the fortune and fate of one individual. In July 2016, on her way to a friend’s 91st birthday celebration, Rogoff crashed her small plane into the waters of Halibut Cove—an incident that underscored ADN’s vulnerability. (Rogoff was uninjured and later attended the party.)

Adding to the uncertainty was a public falling-out that summer with Hopfinger, who had left the paper the previous year to care for ailing family members. In April 2014, Rogoff had written a note on a cocktail napkin promising to pay him $100,000 annually for 10 years. She later changed her mind.

Hopfinger, who in addition to being a business partner was once a close friend of Rogoff’s, filed a lawsuit alleging breach of contract, among other counts, in a case that is ongoing.

“As far as me and her, I absolutely hate that I’m in litigation with her,” Hopfinger says. “But we had a deal and she didn’t honor it.” Rogoff would not comment on the lawsuit.

The truth of the matter is, Alice staffed up the newsroom so readers probably enjoyed more content in print than without her taking it. One would have thought circulation would have increased more when she was subsidizing it, but that didn’t happen.

Paid print circulation numbers did not significantly change in the three years Rogoff owned the paper. Under McClatchy, circulation declined annually by eight to 10 percent for at least two years before the sale and they continued to do so under Rogoff, according to audited figures provided by Roger Weinfurter, ADN’s vice president of circulation.

“The truth of the matter is, Alice staffed up the newsroom so readers probably enjoyed more content in print than without her taking it,” Weinfurter says. “One would have thought circulation would have increased more when she was subsidizing it, but that didn’t happen.”

***

By the beginning of 2017, the paper no longer spent so freely. Rogoff, who did away with the Daily News online paywall erected by McClatchy, put up one of her own. The paper stopped printing a Saturday edition. Open newsroom positions went unfilled.

Then came the news that work on the Arctic Road property had encountered delays and exceeded its budget. The project was managed on Rogoff’s behalf by Ed McCoy, the contractor who transformed Rogoff’s large home into a bona fide mansion, but had no experience supervising the complex job of dismantling, moving, and reassembling a newspaper printing press.

Rogoff says McCoy clashed with the contractor who represented the property owner, Arctic Partners, LLC.

“Ed and that contractor had different points of view,” Rogoff says. “But I don’t want to place blame on anyone. I managed that project in a way that disappointed me, and let’s just let it go at that.”

On June 1, a local electrical contractor, M&M Wiring, filed a lawsuit claiming that $454,000 in invoices for work done on the Arctic building at ADN’s behest had not been paid. Catalyst Paper Company did the same about three weeks later, claiming ADN owed it about $50,000.

On August 11, GCI filed an eviction notice against ADN. Multiple deadlines for moving the printing press out of the building had come and gone, and the paper owed GCI $1.4 million in rent and utilities, according to the filing. The company also claimed that removing the press would cost the paper $1.5 million.

The next day, ADN filed for bankruptcy.

“I simply ran out of my ability to subsidize this great news product. Financial realities can’t be wished away,” Rogoff told ADN business reporter Annie Zak in an article on the bankruptcy.

The subsequent public airing of company finances showed the paper never made money under Rogoff. After the sale to McClatchy, net operating losses rose to several million dollars annually in 2015 and 2016. Losses stood at $4 million for the first half of 2017.

Rogoff told the court she had poured nearly $17 million of her own money into shoring up the paper, which she wholly owned through her limited liability company, The Moon and the Stars. She also owed Northrim Bank $10 million on the personal loan she had taken out to purchase ADN.

In court filings, Rogoff reiterated the loss of her ability to personally finance the paper’s future operations. The total debt her newspaper owed to dozens of unsecured creditors was $2.5 million.

The limited liability structure Rogoff used as the paper’s owner has so far shielded her personal assets from the claims of creditors. Though Rubenstein sent money to Rogoff under a marital settlement agreement, he was not involved in the newspaper. Neither is obligated under the law to repay the unsecured creditors in the case, including ADN reporters who are owed reimbursement expenses.

Embed from Getty Images

David Rubenstein and Alice Rogoff pose on the red carpet during the The 36th Kennedy Center Honors gala at the Kennedy Center on December 8, 2013.

Rogoff would not comment on the record about the unpaid bills, or the role her husband might have in helping to settle her ADN debts. “I make it a rule not to comment on private, family matters,” she wrote in an email.

Duncan, of GCI, has some regrets about engaging in a business relationship with Rogoff. They had attended Harvard Business School at the same time, and he had trusted her resume. Plus, she had, he says, “talked a good game.” On a personal level they’d had what he describes as “a good relationship.”

“We probably should have done better due diligence,” Duncan says. “In my mind, the failure of the newspaper was the result of gross incompetence.”

***

Rogoff began a national search for buyers in early 2017. The strongest expression of interest came from the Binkleys, a well-to-do family of riverboat tour operators from Fairbanks, whose experience in the news business amounted to an unsuccessful attempt to buy their hometown paper, the Fairbanks Daily News-Miner, in 2015.

Ryan Binkley, president of the family business, took over the role of publishing the paper throughout the bankruptcy process, while Rogoff remained the owner. The Binkleys brought in Jerry Grilly, a longtime publisher of the Anchorage Daily News who is also widely credited with turning around the Denver Post, as a consultant. Jason Evans, owner of three rural Alaska newspapers, served as co-publisher.

When asked why she believed the newspaper went bankrupt, Rogoff says the Binkleys and Duncan, of GCI, “worked in concert” to force her to sell the ADN, with GCI starting the process through its filing of the eviction notice.

“I believe the Binkleys and GCI together decided to force me to sell and the only recourse I had was to go into bankruptcy,” she says. “I think at the end of the day it was probably political. The management of GCI wanted to see the paper in the hands of people with conservative state politics. There is a sizable group of business people in Anchorage who believe the role of a newspaper is boosterism. Ron Duncan is one of that group. Time will tell whether the Binkleys are as well.”

“I could be wrong,” she adds. “Maybe they didn’t like the color of my hair.”

Binkley calls Rogoff’s allegation “not factual.”

“I don’t understand. Why did she think this?” he says. “Nobody forced her to do anything.”

Binkley describes the state of the paper on the day Rogoff filed for bankruptcy: ADN was occupying the GCI building, where the press was, without a lease; almost $3 million in bills had gone unpaid, including two months of employee insurance premiums and rent at the Arctic Boulevard and GCI buildings; Rogoff owed $10 million to Northrim Bank; half a payroll period was in danger of going unpaid for lack of cash; and losses were averaging $25,000 a day. There were also the lawsuits brought by contractors, the paper supplier, Hopfinger and GCI.

Binkley’s father, John, a former Republican state legislator, is pondering a run for governor. Ryan Binkley insists the newspaper purchase is unrelated to his father’s political aspirations.

“We didn’t buy the paper for political reasons,” Binkley says. “We already tried to buy our hometown paper because we think it’s a viable industry. There’s no political motivation for us.”

Duncan says GCI’s filing of the eviction notice was purely a business decision, based on ADN’s failure to pay rent and utilities for three straight months. The telecom company occupies several warehouses throughout the city. Since purchasing the former Anchorage Daily News building in 2014, it has been planning to consolidate storage there, following removal of the press, for a projected monthly savings of about $200,000, Duncan says.

“We were essentially subsidizing the newspaper,” Duncan says. “My concern was never for the politics of the paper, my concern was over our economic interests.”

Whatever the reasons, the newspaper is, once again, in the hands of wealthy owners. But Ryan Binkley emphasized in several meetings with staff that he and his three siblings, who would all be owners along with Evans and Evans’s wife, did not have the resources Rogoff had.

The Binkleys loaned the newspaper $1 million during the bankruptcy proceedings to keep the paper from shutting down. The sale price was $1 million. And the parties agreed that the entirety of the loan would go toward the purchase, leaving the rest of the outstanding debts with the newspaper’s old owners.

The price, then, of the newspaper that Rogoff had paid millions for three years earlier, minus the cash the Binkleys put into it?

$0.

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Jeannette Lee Falsey is a former business reporter for Alaska Dispatch News and was one of 17 editorial staffers who were laid off after the sale to the Binkleys. Previously she worked at the Associated Press and Atlantic Media Company.