Hollinger Woes Casting a Pall Over Future of Neocon Papers
By
NATHANIEL POPPER
FORWARD STAFF
A convergence of unrelated financial scandals is threatening to sink the
tiny but influential boat of Jewish-flavored conservative journalism.
At the center of the controversy is Hollinger International, a media
company that owns dozens of conservative newspapers, including the hawkish
Jerusalem Post. An internal investigation into improper payments allegedly
made to Hollinger's majority owner and CEO, Conrad Black, and its president,
F. David Radler, has triggered a major reorganization of the company.
Radler, who oversaw the Jerusalem Post, has resigned. Black has stepped
down as CEO, but will continue to play a role in planning what is expected to
be a mass sell-off of the company's media holdings.
Many media insiders are predicting the shakeup will lead to the sale of
most Hollinger-controlled newspapers, including The Jerusalem Post, The Daily
Telegraph of London and the Chicago Sun-Times. Hollinger also owns a piece of
The New York Sun, which was launched in 2002 by former Forward editor Seth
Lipsky. Though ostensibly a general interest newspaper, the Sun is best known
for its pugnacious coverage of Jewish-related issues, as well as its
neo-conservative policy positions.
Hollinger's stake in the Sun is relatively small, but financial problems
have also threatened Roger Hertog, the newspaper's main financial backer and
also a part-owner of The New Republic, a highly influential Washington-based
opinion journal with a heavy interest in Jewish issues. Hertog's potential
troubles relate to his post as vice chairman of Alliance Capital. The company
is being investigated by New York Attorney General Eliot Spitzer for improper
trading moves and has put aside $190 million to cover restitution and legal
costs relating to the case.
Alliance Capital is also being investigated by the Securities and Exchange
Commission for payments to Morgan Stanley to obtain preferred status with
investors.
Some of the allegations at Alliance Capital surround suspicious trading
activity at mutual funds it purchased from the company of the late Jewish
philanthropist Zalman Bernstein, where Hertog was formerly president and
CEO.
A financially induced collapse at the Sun or political shift to the left at
The Jerusalem Post would represent a severe blow to conservative Jewish
activists who have come to depend these publications as dependable allies in
various policy fights. Since it is not yet clear how, and whether, the
troubles at Alliance Capital will affect Hertog, for now the more furious
speculation is focused on Hollinger and the fate of The Jerusalem Post.
"This is one of the most famous brand names in Israel alongside Jaffa
oranges," said one former employee. "And there is a major change coming to the
Post; a fundamental change in the way the paper operates."
The Post was historically known as a left-wing newspaper, until its
acquisition by Hollinger in 1989. Since then it has become a leading
conservative outlet for opponents of the peace process throughout the world,
thanks to its highly popular Web site.
While the political future of the newspaper remains unclear, most observers
are predicting the newspaper will be sold.
Rumors about an impending sale were rippling through a gathering in Israel
this week of 4,000 North American Jewish communal leaders. "The air at the
General Assembly [of the United Jewish Communities] is thick with rumors of
potential buyers," said David Landau, editor of the English edition of the
Israeli daily Ha'aretz.
"I think that obviously you are looking at wealthy Jews who are interested
in extending their influence," one Israeli media insider said. "I don't know
that any Israelis would buy it."
Speculation has focused in part on Michael Steinhardt, the New York-based
Jewish philanthropist with stakes in the Sun and The New Republic. Formerly a
part-owner of the Forward, Steinhardt has previously displayed interest in
buying the Post. Another name being mentioned is that of Ronald Lauder, the
cosmetics heir who already has holdings in Israeli media. Russian investors
Vladimir Gusinsky and Roman Abramovich also have been rumored to be
interested.
Given Hollinger's $730 million of debt, observers see no way for the
company to survive without selling at least some of its assets. Numerous
parties have expressed interest in The Daily Telegraph, and The Washington
Post Group has been repeatedly mentioned for its interest in the Chicago
Sun-Times. An Israeli media insider said the assumption is that the Post will
be sold separately from the rest of the Hollinger papers.
In the past, Black, who gave up his Canadian citizenship to become a
British lord, has defended his company's dealings with a brashness for which
he is famous. When minority investors called for an investigation at Hollinger
earlier this year, he called them "zealots" who were caught in the "fad" of
corporate governance. But on Monday he released a statement recognizing that
"the present structure of the group clearly must be renovated."
Many former employees of the Post say the departure of Radler as chairman
of the newspaper's board does not come soon enough. When Hollinger first
bought the Post, an ensuing editorial clash led to the resignation of 30
members of the Post's editorial staff, including the top two editors.
Landau, who resigned as managing editor at the time, said that after this
exodus of employees, "the rump paper lurched 180 degrees to the right, and
plummeted from journalistic excellence to journalistic non-credibility." The
free-market-oriented and hawkish editorial policies that Radler brought to the
Post were staples of other Hollinger newspapers.
The early resignations brought on by the heavy-handed editorial policy were
followed by a number of firings and a vigorous effort to break the newspaper's
labor union.
On hearing of Radler's resignation, Landau said, "I remembered the biblical
injunction against rejoicing at the downfall of people who deserve to fall
down."
Radler has not shied away from admitting the "ruthless" cost-cutting
measures he used to turn a profit. In one interview in Maclean's, he said: "I
visit the office of each prospective property at night and count the desks.
That tells me how many people work there. If the place has, say, forty-two
desks, I know I can put that paper out with thirty people, and that means a
dozen people will be leaving payroll even though I haven't seen their faces
yet."
An internal investigation at Hollinger, the results of which were released
Monday, found that Black and Radler had each been paid $7.2 million in 2000
and 2001 from a $73.7 million "non-competition" agreement with a chain of
Canadian papers. The payments to Black and Radler were not authorized by the
Hollinger board, and were inaccurately reported to the Security and Exchange
Commission, according to the company's internal report.
A company statement said Black will continue in a non-executive capacity
while helping to formulate a plan for the future that could include "a
possible sale of the company" or "a sale of one or more of its major
properties."
It would appear that the problems at Hollinger will have less of an impact
on The New York Sun: The company reportedly owns just a 12% stake in the
paper. "Conrad Black, who represents Hollinger International Inc. on the board
of The New York Sun, is an active and trusted director, and we value his
leadership enormously," Lipsky, the newspaper's president and editor, said in
a statement.
Sun publicist Charlotte Ibarra said of Hollinger, "We wish them luck, but
as far as we're concerned they have a small stake in the Sun."
One media observer in New York downplayed the potential impact on the Sun,
saying, "I don't see it as having a big impact except as a matter of
perception."
If Hertog becomes entangled in the problems at Alliance Capital, however,
the consequences for the Sun could be greater. Hertog is the chairman of the
Sun, and it has been reported that he owns close to half of the conservative
newspaper.
The Sun declined to comment on the problems at Alliance. Hertog did not
return phone calls.
