This OpEd by Julie Reynolds was published by Newsweek on July 18.
July 18, 2019 – When I first became a reporter at the Monterey Herald in 2004, it was a feisty and robust local newspaper covering a midsize California county. We did what local news is supposed to do: We investigated sky-high water rates, exposed investment scams and held public officials to account.
Then the New York “vulture” hedge fund Alden Global Capital took over our chain, Digital First Media, in 2012. Since then, scores of papers across the country have been stripped for parts under Alden’s chop-shop approach to the businesses it touches.
It’s true that before Alden, we had layoffs and downsizing. But we also knew who our owners were. We knew they were in the news business and that they understood the ethics and responsibilities that go with running a newspaper.
Under Alden’s tenure, though, layoffs and attrition accelerated at breakneck speed. Instead of a story a day, reporters scrambled to crank out two or three because there were fewer and fewer of us. The office supplies vanished, and we had to buy our own pens, calendars and manila folders. Then the hot water in the bathrooms was turned off. The gutters were never repaired, and staff creatively arranged house plants to try to soak up the leaks. Then, as with most newspapers in the Digital First chain, the presses were dismantled and our buildings sold.
But far worse than the effect on workers was Alden’s effect on the communities we served. Entire towns in our coverage area became “news deserts.”
Our bureau closed in Salinas, the county seat and the largest city in the region. A towing scandal in the town of King City went unreported for a year—until half the police department was arrested—because we could no longer cover most of our county. Other papers in the chain also lost entire beats and sections, and the venerable Oakland Tribune shut down after 142 years in print.
Since I left the Herald in 2015, things have gotten even worse. Friends there tell me deadlines are now 2 p.m. because the paper is copyedited, designed and printed in a “hub” more than five hours away. This means City Council votes and even high school sports scores rarely make it into the print edition.
We’re just starting to see the effects of this deliberate downsizing. Some research shows that residents living in U.S. news deserts pay higher interest on municipal bonds, pay more taxes and may even experience more corruption in local government.
Like some other private equity firms, Alden has no interest in turning a struggling business around and appears to care little for the communities that are hurt when their watchdogs go away. Instead, it employs a strategy of stripping news organizations’ real estate and other assets, laying off staff at twice the national rate and profiting handsomely.
According to NewsGuild President Bernie Lunzer, “Alden has played a particularly destructive role in local journalism. Motivated only by greed, it has depleted newsrooms, eliminated beats, and made it virtually impossible for local papers to fully tell the stories of their communities.”
Whether we get our news on paper or a smartphone, Americans need and expect it to be gathered by journalist dedicated to informing the public. As more communities become news deserts, we’re seeing more and more opinion passing as news.
We are speeding toward an abyss of disinformation and ignorance, but it’s not too late to stop.
Hedge funds must be held accountable, and even more so when they control the news. When private equity buys a company to add to its portfolio, workers and communities are left in the dark. They don’t know who owns the company, don’t know how much debt was used to make the purchase or who is obligated to repay it. They don’t know who has responsibility for their successes or failures or who controls their pensions.
The Stop Wall Street Looting Act unveiled Thursday by Senator Elizabeth Warren of Massachusetts addresses these unknowns.
The legislation places limits on compensation to executives in companies owned by private equity and prevents big payouts when workers receive nothing during the bankruptcy process. It also gives priority to severance pay during bankruptcy. It eliminates the so-called “carried interest loophole” whereby the money extracted from both the companies they own and their limited partners is taxed at a low rate.
Most importantly, the Stop Wall Street Looting Act makes private equity ownership much more transparent. It directs the Securities and Exchange Commission to collect information. The names of general and limited partners will be known, as will the ownership percentages. The amount of debt used to finance the purchase will be known. The private equity firm’s other portfolio companies will be known.
Photo: Speaking at a press conference announcing introduction of the Stop Wall Street Looting Act, Julie Reynolds says hedge funds must be held accountable.