The most feared owner in American journalism looks set to take some of its greatest assets

Journalist George Kelly protesting Alden Global Capital outside the hedge-fund's headquarters in New York, in May 2018. Photo: Karen K. Ho

On December 3, 2016, the morning after the Ghost Ship warehouse in Oakland caught fire, killing thirty-six people, the East Bay Times’s new executive editor, Neil Chase, instructed his staff to throw their resources behind the story. 

“They had been through a long series of years where there was all kinds of nickel-and-diming in news––‘don’t take that trip’ kind of stuff,” Chase says. At the time, he told the staff, “Don’t hold back on overtime and stuff like that. This is where we invest.” 

The East Bay Times published at least twenty articles and videos in the first two days after the fire. By the end of that week, a team of more than a dozen reporters had written investigations and narrative reconstructions of the night of Oakland’s deadliest fire and the lives of its victims. Their coverage won the 2017 Pulitzer Prize for Breaking News Reporting. They won, the committee determined, “for relentless coverage” of the deadly fire, and “for reporting after the tragedy that exposed the city’s failure to take actions that might have prevented it.” 

The staff celebrated with champagne and was, momentarily, uplifted. But Chase, who knew that the company was planning to consolidate some functions of the newsroom, did not share their optimism. “A lot of folks assumed that the Pulitzer Prize means they’re going to be happy with us and they’ll take better care of us, and we won’t have more layoffs. And then a week or two later, we had to announce twenty people being fired,” Chase recalls. “Winning a Pulitzer Prize doesn’t change the economics of the company,” he says, “so why would it change the attitude of the owners?” 

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The East Bay Times had been so diminished, it barely knew its own name. It had always been called the Contra Costa Times, even through years of mergers with other local papers in the 2000s under its owner, MNG Enterprises (known variably as MediaNews Group or Digital First Media).

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In 2010, Alden Global Capital, a New York-based hedge fund, acquired enough stake of MediaNews Group to give the hedge fund a significant say in the papers’ futures. (They’ve since acquired a controlling stake.) By 2016, the Oakland Tribune, Contra Costa Times, Daily Review and others became the East Bay Times, under ownership of the Bay Area News Group––which is, in turn, owned by MediaNews Group. Under MediaNews Group’s ownership in those years, the Bay Area News Group shrank from around 380 staffers to around 250, Chase says. By the time he left at the end of 2018, he says, the company was down to 160.

The story of the East Bay Times is not unique. As of this year, through MediaNews Group, Alden has stakes in about two hundred American newspapers. They include the Denver Post, Boston Herald, St. Paul Pioneer Press, Orange County Register, Macomb Daily, The Trentonian, The Saratogian, Los Angeles Daily News, The Pottstown Mercury, Chico Enterprise-Record, Boulder Daily Camera, and many more. 

Now, as mass layoffs, furloughs, and pay cuts accelerate due to the coronavirus pandemic, and as metropolitan newspapers with depleted staffs struggle to adequately cover the most seismic protests in a generation, the role of the company and legacy of the man who created it is becoming a more urgent issue.

 

In the late 1960s, according to a D Magazine story, a young couple, Randall D. Smith, and his wife Kathryn, appeared on “Dream House,” an ABC game show which pitted two couples against each other in several rounds of rapid-fire trivia questions for a chance to win either a new house or cash. They sat next to another couple on a set decorated with shiny curtains and long beams dotted with iridescent light bulbs. The host, in a suit and tie, quizzed them. They won, and took the $20,000.

The Smiths met as students at Cornell University and married the day after Christmas in 1965 in New Jersey, according to an account published by Smith’s brother. Kathryn went on to a PhD program. Randall took a draft deferment, earned an MBA, and landed a job at Bear Stearns, where he would come to be an early pioneer in distressed asset investing––the Wall Street euphemism for pulling the last of the money from failing companies.

Life for the Smiths was one of luxury, punctuated by summer trips to Luxembourg and the French Riviera. Smith’s success also coincided with the beginning of the end for many American newspapers. 

As Smith climbed the ladder at Bear Stearns, and the couple raised a boy and a girl in Short Hills, New Jersey, he started a new investment firm, R.D. Smith & Company, in 1985. It was a bankruptcy trading firm described as “devoted exclusively to the tired and the poor of the corporate community,” by Hilary Rosenberg in her 1992 book The Vulture Investors: The Winners and Losers of the Great American Bankruptcy Feeding Frenzy. By the early nineties, though he had made partner at Bear Stearns, he left to dedicate himself fully to his own company. 

The company, the New York Times noted in 1991, had won rave reviews for its shrewd research. But it had also received complaints from some of its partners and customers. “The one central theme,” the Times reported, “seems to be that Smith and its web of affiliates are out, first and foremost, for themselves.” 

“R. D. Smith & Company, whose office near Wall Street fittingly overlooks the Trinity Church graveyard,” the Times wrote, “is profiting from other people’s misery by trading the stock and debt of troubled companies, both for itself and its customers.”

In the case of one publishing company, Community Newspapers, R.D. Smith was accused of getting in the way of more responsible deal-makers seeking a rescue, and ensuring it landed in bankruptcy court—all in a search for a few extra cents per share.  

Smith founded a successor company, Alden Global Capital, in 2007. The impetus behind the transition is not fully clear, but Smith invested in the real estate business in the years before. Alden has helped steer PayLess ShoeSource and Fred’s Pharmacy into bankruptcy. It appears sparsely staffed, with Wall Street veterans rather than media executives, and until very recently it nearly entirely shunned attention. (Neither Smith, Alden, the current president of Alden, nor MediaNews Group responded to repeated requests for comment or interview for this story.) 

But its mode of operation remains roughly the same as R.D. Smith. “Bankruptcy always attracts their attention,” says Julie Reynolds, a former reporter at the Monterey Herald and intrepid chronicler of Alden.

Denver journalists rally against ownership group Alden Global Capital on May 8, 2018, outside The Denver Post’s office and printing plant in north Denver. AP Photo/David Zalubowski

Media observers note that they make cuts almost from day one. Pens and notebooks disappear from newsrooms. One newsroom was missing hot water. Then newspaper buildings are sold, and staff is consolidated and cut. Despite earning higher profits than is typical in the industry, the NewsGuild says that between 2012 and 2019, Alden cut seventy-one percent of jobs in the hedge fund’s Guild-represented newsrooms. They “seek out distress,” Reynolds says, “and suck out what they can before whatever it is dies.” 

“They will have a calculation,” Ken Doctor, a media analyst for Nieman Lab, says. Alden ultimately thinks that the newspaper industry is guaranteed to die, Doctor believes, and that “a lot of money can be made on the way down.” 

“They don’t care one way or the other about journalism,” says Chase. “It’s all about the spreadsheets and the numbers.” Paul Huntsman, who bought a newspaper, the Salt Lake Tribune, back from Alden, says the attitude is common among hedge funds. Alden was “no different than a lot of other large financial services,” he says. “They’re driven by the bottom line.” 

Asked what Alden thinks about its role in the industry, Jim Brady, a former top editor with Digital First Media, says the hedge fund sees newspapers only as temporary money makers. If Alden executives had other thoughts, Brady adds, “I have no idea what they are.”

 

There’s a story about Smith that his eldest son, Caleb, once recounted in D Magazine: When Caleb asked his father why he worked, Smith told his son, “It’s a game and I love it.” How would he know who won the game? Caleb asked. His father replied, “Whoever dies with the most money.” 

Smith’s net worth is not publicly available, but indications are that it’s vast. Alden manages over $764 million, according to SEC records, but has controlled billions before. Three years ago, as his brother recalled, Smith celebrated his 75th birthday on the tiny Caribbean island of Canouan, which Bloomberg cites as the place “where billionaires go to escape millionaires.” He has accumulated a row of mansions in Palm Beach, Florida, Reynolds reported, and houses in the Hamptons. He’s a major Republican donor. Last August, he gave over $55,000 to Donald Trump’s presidential campaign and over $44,000 to the Republican National Committee; in 2012, he gave $72,800 to Mitt Romney’s presidential campaign.

He’s also a recluse. David Resnick, who represented MediaNews Group in their debt restructuring with Alden around 2009, says he visited the Alden office many times during the deal but never once saw Smith. There seems to only be one picture of him on the Internet, seen in the New York Post, and it appears as though the camera had to zoom in closely, like he is unaware he’s being photographed. One union official I spoke to asked me, in sincerity, if Smith is even alive.

There are years of Smith’s life that are difficult to account for, including recent ones. Alden has shielded its transactions through a convoluted network of LLCs and offshore accounts. Its real-estate transactions, in particular, are difficult to trace. Reynolds has spent years trying to find details, and has reported on Alden’s financial entanglements with debt in Greece, fraud in Mexico, pollution in Russia, and corruption in Brazil

Smith handed control of Alden to a protégé, Heath Freeman, a family friend. Freeman, who is the president of Alden, runs its daily operations. 

Amid the coronavirus pandemic, the company has laid off and furloughed many dozens of newspaper workers. “I firmly believe that Randall Smith and Heath Freeman could weather this timeframe if they wanted to,” says Patricia Doxsey, the president of the Kingston NewsGuild and a government reporter at the Alden-owned Kingston Daily Freeman. “They choose not to.” 

As the industry’s recent dire circumstances focused minds on the business of news, including those of lawmakers, Freeman broke with Smith’s strategy of avoiding the spotlight, and gave his first ever interview, to the Washington Post, in which he seemed to argue he was attempting to save newspapers by cutting them. He also wrote a letter to Senators Dick Durbin and Tammy Duckworth, in response to their concerns about Alden’s history of layoffs and lack of transparency. He insisted that inaccurate media reports about the company abound, their ownership is a cause for celebration, and Google and Facebook are to blame for the death of local news. “We share the belief that Americans need and deserve robust local journalism that operates with editorial independence,” he wrote.

The PR push coincides with Alden seeking to acquire larger, more historically significant, and more influential papers. Last year, the company failed in an attempted hostile takeover of Gannett, which owns USA Today, the Arizona Republic, the Des Moines Register, the Louisville Courier Journal, and many more papers. In January, it purchased a 5.9-percent stake in Lee Enterprises, which owns the Buffalo News, the Omaha World-Herald, the Tulsa World, and many other newspapers. But Alden has focused its attention on Tribune Publishing Company, which owns, among others, the Chicago Tribune, the New York Daily News, and the Baltimore Sun

Its efforts began last year, when Tribune’s largest shareholder, Michael Ferro, sold his 25.2-percent stake to Alden, rendering Alden its largest shareholder. Alden paid just over $117.9 million for Ferro’s shares. 

On that same day, the NewsGuild—which represents the Chicago Tribune Guild and thirteen Alden-owned newsrooms—testified before the US House Committee on Financial Services that, according to its calculations, Alden had been responsible for 23,584 American job losses, through PayLess, Fred’s, and its newspaper empire. 

Alden also got two seats on the Tribune Publishing Company board and increased its ownership stake to thirty-two percent. As part of the deal, Alden agreed to a standstill, which Tribune says is typical for large shareholders. Temporarily, it cannot increase its stake in Tribune. The deal expires on June 30. It’s eminently possible that, after that date, as the country focuses on a historic pandemic and attempts to turn social uprisings toward concrete change, the fund will acquire a majority stake in Tribune and become the owner of some of America’s proudest newsrooms.

Journalists at the Chicago Tribune have resorted to begging for new owners, the Times reported. Some editors have already left. The union launched an ultimately failed campaign to attempt to unseat Alden’s board members. Many reporters have been furloughed—a difficult outcome that was itself a hard-won concession by the union. 

Tribune––which analysts and union officials believe is already acting under Alden’s influence, though Freeman denies this in his letter––had tried to implement even heavier cuts. “What I can expect in the next few months and for the rest of the year,” Chicago Tribune Guild president and courts reporter for the paper, Megan Crepeau, says, “is a strong newsroom, a united front, because now we know exactly the kind of dirty tricks and exactly the kind of ways that they want to gut us.”

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Savannah Jacobson is a CJR Delacorte Fellow. Follow her on Twitter @srjacobson1.