United States Project

Meet the journalist tracking Digital First Media’s hedge fund owner

March 29, 2018

FOR TWO YEARS, JULIE REYNOLDS has cranked out stories about Alden Global Capital, the secretive New York hedge fund that controls Digital First Media, the nation’s second-largest newspaper chain. She has profiled the firm’s elusive leaders and closely chronicles DFM’s layoffs, which recently include two-dozen employees from the Bay Area News Group and roughly a third of The Denver Post’s newsroom. A freelance reporter in the Monterey Bay area and a Center for Investigative Reporting alum, Reynolds publishes her coverage of Alden and DFM at #NewsMatters, a project of the NewsGuild-Communications Workers of America labor union.

Reynolds has a viewpoint; she amplifies the voices of irate DFM journalists and their organizing efforts. She also has been a lone source of steady coverage of Alden and the impact of its business decisions on the newsrooms it owns.

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A recent lawsuit claims Alden sucked money out of the newspapers it owns in order to make risky investments in Greek sovereign debt and a troubled pharmaceutical chain, among other areas. News industry analyst Ken Doctor wrote that the suit “provides unusual visibility into the nest of secretive vultures.” Newsrooms in a few cities with DFM-owned newspapers took note. “Alden Global Capital has for years treated one of the biggest media companies in the country like a big ATM,” wrote a columnist for The Minneapolis Star-Tribune. “Someday, it will run out of money.”

Penelope Muse Abernathy, a journalism professor at the University of North Carolina who authored a seminal report about the rise of hedge-fund newspaper owners in 2016, credits Reynolds with stimulating more commentary and understanding about the impact of hedge funds like Alden on communities with increasingly gutted newspapers. Abernathy cites a much-trafficked takedown of Alden Global CEO Randall Smith in The Nation, for which Reynolds chronicled the destruction of DFM-owned newspapers as Smith snapped up mansions in Palm Beach.

“That tipped the conversation,” Abernathy says. “She’s been like a dog with a bone on Digital First.”

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CJR spoke with Reynolds about her work on the hedge fund-owned newspaper beat. What follows are excerpts from our conversation, which have been edited for clarity.


We’re not talking about a place that sells plastic swimming pools. We’re talking about a company that provides information in communities. Without that company, the flow of information is going to be cut off and gone.


You once worked at a DFM paper. What was that experience like for you?

I worked for 10 years at The Monterey Herald, and it went from being a Knight Ridder paper to being a DFM paper during that time. Newspapers were downsizing. There is a factual element to the business struggling after the advent of the Internet. But the acceleration was really dramatic after 2012 when DFM became DFM. It got to the point where literally you couldn’t get a manilla folder, you had to buy your own pens. There was no hot water to wash your hands in the building. I’ve worked in small funky nonprofits where maybe you expect some of this stuff, but this was a for-profit major corporation. They tried taking our reporter pads away, but we had a rebellion and they couldn’t do that.

After I left—they couldn’t call it a “quota” because the guild contract wouldn’t allow it—but there started being quotas, expectations of three stories a day with your name on [them], even if you re-wrote a press release. That’s the only daily newspaper I’ve ever worked at. I was at the Center for Investigative Reporting before that, and I’ve been a freelancer for most of my career.

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How did you get involved writing for the #NewsMatters project under the NewsGuild labor union?

That was just a happy coincidence. After I left the Herald I started freelancing again. The guild decided they were going to organize the Digital First Media papers and asked me if I would edit and write for them. I can’t remember whose idea it was, but I said, “Why don’t we just make Alden a beat?” I’m an investigative reporter and I love investigating this kind of stuff. And what they’ve done, you know, it broke my heart. I thought, “I can dig into this.” That was two years ago.

It was a little strange for me because I was writing for a labor union. There’s no bones about it, I’m a happy union member, I always was. And I thought, “It’s time we journalists look at this.” I think a lot of us were hesitant to write about our owners because we feel like, “Oh, that’s just inside baseball for us, and nobody else cares,” or maybe there’s an appearance of a conflict of interest. But nobody else is going to tell this story, so I just jumped in with both feet. I was really happy to do it and still am.

I think people need to understand there’s been a change in who owns American newspapers now. There’s a few academics doing some work on this, which I’ve been really happy to see. Because it’s really been a sea change that people don’t know about. I ended up doing a story for The Nation about it only because I was at a conference telling an editor there what was going on, and he was like, “Oh my god, I had no idea.” It was literally in the food line at a conference.


Does it seem like there’s been more to cover on this beat lately?

In that last couple months things have accelerated quite a bit. When I found out about the shareholder lawsuit it piqued peoples’ interest, other reporters’ interest. I think it finally got taken a little more seriously. When Margaret Sullivan of The Washington Post wrote about it, it really ratcheted things up.

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What do you hope this lawsuit might disclose that you haven’t been able to uncover through your reporting?

It’s important for a couple reasons. For one, confirming things that I had just suspected all along because of the timing of certain expenditures, which is when Alden came into the picture. But also showing us the mechanism for it—literally, what was used to take money out of the newspapers and put it into other investments.

I knew that Alden had invested $158 million into the Fred’s pharmacy chain and I knew that the investment was made through an LLC, but I didn’t understand that that LLC was a subsidiary of MediaNews Group, which is the business name for Digital First Media. That’s directly taking MediaNews Group’s money.

If you think about it, everybody in all these communities has been complaining about the deterioration of their hometown paper. You know it personally when you’re a reporter because every time you call somebody up they complain about the paper—“It costs twice as much,” and “It’s a shadow of its former self.” And it’s true there are things that we just couldn’t cover anymore. There’s just places where you’re not seeing any news anymore. And [the hedge fund] is directly taking that money from the newsrooms. So that’s taking that money out of those communities, and out of their right to information, and putting it somewhere else.


Do you expect more disclosures from this lawsuit?

Hoping and expecting are two different things.

Since this is a hedge fund suing another hedge fund to get access to their books, I wouldn’t be surprised if there would be some sort of settlement that would be replete with lots of non-disclosures. The exhibits in the original complaint are under seal because they contain financial information. So I wouldn’t expect a whole lot more to happen. I would certainly hope that it would give us a further window into some of these secretive financial dealings that the suit itself finally gave us a clue about.

This hedge fund did have access to some of Alden’s financial records, and the suit even describes the point where Alden abruptly cut them off. They use the term “MediaNews Group” and they mention Alden in great detail in the lawsuit, but I should point out they don’t name Alden as a defendant. But they are asking MediaNews Group to open up its books. I imagine that it will be settled out of court and not in any open arena. But I’d certainly love to see a closer glimpse of where this money has been going, because this has all been secret up until now.


It may be fortunate that the union that represents journalists came along and said, ‘Why don’t you do this,’ because I don’t think a newspaper would have taken me up on it.


Alden Global’s leaders, Randall Smith and Heath Freeman, are pretty elusive guys. You’ve profiled both of them. How did you approach that work?

There had been reporting about them before. Poynter did some really good reporting when Alden first appeared on the scene about who Randall Smith is and why he was suddenly buying up newspapers.

I knew they were pretty secretive going into it, I was pretty sure they weren’t going to return my phone calls. They never have. No big shock there. For me, it was looking at the timing of things. Looking at how Randall Smith is buying up all these mansions in Florida. Well, when did that happen? What was the sequence of events? Was this before or after he got involved in the newspapers? Heath Freeman as well. At what point after he left Duke and then was a co-founder of Alden Global Capital did this lifestyle start to flourish? He came from money, so it wasn’t like he suddenly got rich from all this, but what was the timing of these actions, and how did that coincide with the cuts and the losses in the newsrooms at newspapers all across the country?

The other thing was to look at real estate as a window into all this. Alden had set up another entity called Twenty Lake Holdings to dispose of the assets of all of these newspapers. It was one of those things that nobody was talking about and we didn’t realize, but all of us were suddenly selling our buildings and moving into rental offices all across the country. What occurred to me was that that was really newspapers’ insurance policies in the past. If you had a building and you had land, it meant during hard times you could get a line of credit and survive a recession. And that was no longer ever going to be an option. That was the security blanket that was ripped out from under these papers…and nobody ever talked about it at the time. I realized it later: “That just means these people are not planning on us having a future.”


This story is largely being told by you through the News Guild. Am I just missing it in the papers?

I did a story for The Seattle Times after The Nation story came out. Here and there it’s starting to get some coverage. Even The Denver Post did a story about the Alden lawsuit. There has been some coverage, but it’s very, very little. If you think about it, if this was any other industry that’s having such an impact on communities, then we’d be all over it. I think it’s just sort of a little problem we have in journalism. It may be fortunate that the union that represents journalists came along and said, “Why don’t you do this,” because I don’t think a newspaper would have taken me up on it.


I would tell people to definitely pay for that subscription because journalists need to be paid. But—but—I think the public needs to raise some hell.


Do you think readers are starting to understand more about newspaper ownership and what it means for them?

I think in 2018 the narrative is changing. People are no longer buying the story that the Internet killed newspapers and that’s the only reason all this is happening. I think they finally realize there’s something else at work and that something is hedge funds. The writing about it has certainly changed. I know people are upset about something happening to their local news.

I go into some real rural forums—literally, speaking in a grange, you know—and people are mad that something has happened to their local newspapers. And some of them have a sense now of why: it’s because of these owners. A year ago, I didn’t hear that, they were just like, “Something terrible is happening to our local newspapers and we don’t know why.” Now they’re like, “We heard there’s this big New York company that is destroying our newspaper.” Especially here in northern California, where almost all the major papers are owned by DFM, you’re hearing that a lot now. At least in our area there’s finally starting to be some awareness of why this is happening.


Both a Denver Post editor and a DFM corporate employee recently apportioned more responsibility for layoffs to market forces at work.  What do you make of that argument?

I think they do sincerely believe what they’re saying. I think they may be fooling themselves.

Certainly under Dean Singleton [a founder of MediaNews Group] we had cuts, cuts, cuts. Gannett is known for this, GateHouse is known for this. OK, yes, there is a trend in newspapers, there’s no doubt about it. I don’t believe it’s entirely market forces, but certainly revenue is down, subscriptions are down.

But that doesn’t mean there aren’t other ways to do this. Look at The Star-Tribune in Minneapolis. Their newsroom is still [at the level it was] years ago. And you can talk to people there who will tell you that. Yes, their subscriptions have gone down, and yes, their ad revenue has gone down, and yes, they have found a way because they have an owner who has some sense of civic obligation to decide to keep the newsroom robust despite that drop. Those editors who say this is nothing else but market forces are only fooling themselves if they don’t understand that the hedge fund, especially the vulture hedge fund, has no interest in newspapers having a future.


Say you lived in Denver. Would you pay for a new digital subscription to The Denver Post, knowing what you know about where the money might go?

I would tell people to definitely pay for that subscription because journalists need to be paid. But—but—I think the public needs to raise some hell.

I think they need to let publishers, not editors, know that they’re upset with the state of their newspaper. They need to be very vocal about that, and let local officials and politicians know that this is a civic issue in their community. So, yes, pay the money, but raise some hell with the people who can get word up to Alden.

We’re not talking about a place that sells plastic swimming pools. We’re talking about a company that provides information in communities. Without that company, the flow of information is going to be cut off and gone. It’s the only industry that has a constitutional amendment protecting it, so this is an important part of our society. Publishers are going to have to get so many calls they’re sick of hearing from people. It has to get to the point of discomfort. I’m not an organizer; this is me as a consumer and as someone who participates in society.

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Corey Hutchins is CJR’s correspondent based in Colorado, where he teaches journalism at Colorado College. A former alt-weekly reporter in South Carolina, he was twice named journalist of the year in the weekly division by the SC Press Association. Hutchins writes about politics and media for the Colorado Independent and worked on the State Integrity Investigation at the Center for Public Integrity; he has contributed to Slate, The Nation, the Washington Post, and others. Follow him on Twitter @coreyhutchins or email him at coreyhutchins@gmail.com.