At a time when warnings abound that the concentration of wealth in America is dangerously threatening the underpinnings of our democracy, it's unsettling to see a cast of billionaire moguls and dubious characters circling their wagons around the Nation's largest newspapers.
The Tribune Company, owner of the Los Angeles Times, Chicago Tribune, Baltimore Sun, Newsday (Long Island), Hartford Courant (Connecticut) and 25 television stations, is under heavy pursuit by at least six teams of bulge bracket players. One of those players is Maurice (Hank) Greenberg, ousted Chairman of AIG, who is facing a civil fraud lawsuit filed by New York State Attorney General and Governor-elect, Eliot Spitzer over sham transactions and accounting at AIG.
According to the Wall Street Journal, another player is Providence Equity Partners, which is also part of a group trying to take over Clear Channels' 1,150 radio stations and was part of a consortium that purchased Univision Communications' radio stations and Spanish-language TV network earlier this year. Providence already owns a stake in Freedom Communications, publisher of the Orange County Register in California, as well as two dozen dailies, 37 weeklies and eight television stations. Providence is also the controlling shareholder of Kabel Deutschland, Europe's largest cable operator; a 47% owner of Digiturk, Turkey's largest provider of pay television services; the sole owner of Hallmark International, the international version of the Hallmark Channel which is distributed outside the United States to approximately 60 million subscribers in 152 countries; a part owner of Com hem, the leading cable television operator in Sweden; Casema, the third-largest cable operator in the Netherlands, along with holdings in a host of telecommunication or media-related companies.
It's easy to find out what Providence Equity owns. It's on their website or in public filings. But who actually owns Providence Equity? There's nothing about that on their website or in their SEC filings when they take over a publicly traded company. (Shouldn't the public know who's behind this massive media buying binge?)
If Providence runs into trouble with the FCC over media concentration issues, it can call on Michael Powell for advice. Powell's the former FCC Chairman who embraced media concentration as well as the former Chief of Staff of the Antitrust Division in the Department of Justice. Providence hired him as a Senior Advisor last year.
The battle over at The New York Times has only one player showing their hand at present. Morgan Stanley's investment arm, Morgan Stanley Investment Management, has initiated a full blown campaign to strip the Ochs-Sulzberger family of its control of The Times, starting with a nasty report, then letters and now a shareholder resolution. According to the Morgan Stanley unit, there is bad corporate governance at The Times and the buck should stop with those in leadership.
Morgan Stanley is well qualified to opine on lapses in corporate governance. In December 9, 2004, the New York Stock Exchange fined Morgan Stanley $6 Million for oversight lapses and failure to follow up on suspicious activity. For example, Morgan Stanley was not curious enough to dig deeper when millions of dollars in checks, over a seven year period, were deposited at the firm with no remitter's name on the checks; helping to perpetuate a massive fraud. (Memo to Morgan Stanley: you need some curiosity on suspicious activity before you get to run a newsroom.)
Then there was that long-running battle with the EEOC, the Federal agency that charged Morgan Stanley with failing to promote and equitably compensate women (watch out Maureen Dowd). The suit was settled on July 12, 2004 with Morgan Stanley paying $54 Million in shareholders' dollars.
In 1999, there was that tangled maze of corporate intrigue when Morgan Stanley set up a sting operation against a black plaintiff in a Federal civil rights case against the firm, Christian Curry, and paid an informant $10,000 to discredit him. That brought in the Manhattan District Attorney, Robert Morganthau, and lots of scandalous publicity and speculation. The D.A.'s office eventually dropped the case and the chief legal officer of the firm, Christine Edwards, resigned. And that was that. The who, what, when, where and how of this story was a carefully guarded secret inside Morgan Stanley.
Even more timely and to the point, Reuters reported on November 8, 2006: "The New York Stock Exchange (NYSE) on Wednesday said it fined Morgan Stanley $500,000 and censured the firm for failing to report short interest positions in hundreds of securities for as long as 20 years."
A short interest is when one sells a stock that one does not own, hoping it will decline in price. Significant shorting can lead to a price decline in a stock and thus it's important to know if someone with an agenda is doing it. The NYSE disciplinary report does not mention any of the names of the stocks that Morgan Stanley was shorting without disclosure so it is impossible to know if one of those might have been The New York Times. However, a soggy stock price is one of the things that Morgan Stanley is raising against the current leadership at The Times.
The NYSE disciplinary report goes on to mention that under Rule 421 of the NYSE, the exchange relies on the accuracy of the short interest reports to compile its own calculations of short interest, which is then disseminated to the public. In other words, The Times, and every other market data gatherer in the U.S., received, and potentially published, inaccurate short interest data because of Morgan Stanley's lapses.
It's also raising eyebrows that a Morgan Stanley unit is trying to break up control of The Times through the filing of a shareholder resolution within weeks of that paper's editorial and investigative report involving Morgan Stanley's Chairman and CEO, John Mack. The issue involves Mr. Mack's possible role in providing insider information to a hedge fund, Pequot Capital Management. According to the editorial, a Securities and Exchange Commission investigator, Gary Aguirre, "sought permission from higher-ups to question John Mack, who had briefly worked at Pequot, about his dealings with Pequot's founder, Arthur Samberg. As Walt Bogdanich and Gretchen Morgenson reported in The Times on Sunday, the tone of the inquiry shifted drastically once it came to light that Mr. Mack was being considered for the job of chief executive at Morgan Stanley. A supervisor then wrote about Mr. Mack's ''juice'' and ''political clout'' in internal e-mail messages. Mr. Aguirre was not permitted to interview Mr. Mack and ultimately was fired — immediately after receiving a merit-based pay raise. The Senate Finance and Judiciary Committees are pursuing the question of how the Pequot investigation proceeded and why Mr. Aguirre was fired...."
The question arises: should Morgan Stanley Investment Management succeed in turning a 7.6% stake in The Times into board seats, will we ever get to read the who, what, when, where and how of yet another opaque corruption story.
Pam Martens is an independent writer based in New Hampshire. After working two decades on Wall Street, she retired in April of this year.