Oakland Tribune Rescue Raises Questions About Neuharth's Charitable Foundation

TIMES STAFF WRITER

When a charitable foundation called the Freedom Forum swept in dramatically this week to save the Oakland Tribune from extinction, some people saw signs of a fascinating subplot amid the cheering.

Was the Forum's chairman, retired newspaper publisher Allen H. Neuharth, motivated entirely by virtue? Or was this also partly revenge, another grand move in a strange public feud between Neuharth and the Tribune's chief creditor, media giant Gannett Co.? Was giving money to a struggling newspaper even an appropriate investment for a nonprofit foundation?

Whatever the answers, it is clear that the salvaging of the Tribune is the biggest move yet in Neuharth's new career. Formerly one of the nation's most flamboyant media executive, he has now turned into its most unusual philanthropist.

"I don't believe in doing anything hidden in a closet or under a bushelbasket," Neuharth said in an interview. "I certainly wasn't going to anonymously or quietly send $5 million to (Tribune Publisher) Bob Maynard and say, 'Here, save your newspaper.' "

Neuharth built Gannett into the largest newspaper company in America--mostly by buying small newspapers that won little journalistic praise. Eventually, he made a more enduring editorial mark, though one much criticized, by inventing a new kind of newspaper, USA Today--at a staggering loss before taxes of nearly $1 billion.

After retiring from Gannett in April, 1989, Neuharth published his autobiography, "Confessions of an SOB," in which he allowed his children and ex-wife to write anything they wanted about him in their own chapters.

Then he turned his attention to his new job as chairman of the Gannett Foundation, a tax-exempt charity controlled by Gannett managers with a substantial endowment of Gannett stock.

It was there that Neuharth found his new vocation.

In April, 1990, the foundation announced that it wanted to sell its 15.9 million shares in Gannett, on the grounds that the company was not making an adequate return on investment.

The move shocked Wall Street analysts. Putting 10% of Gannett's stock up for sale--the single largest stake--might put the company into play for a hostile takeover, they suspected. Gannett, to be safe, quickly entered negotiations to buy the stock back.

Neuharth does not deny that John Curley, his successor at Gannett, was unhappy about the course of events.

"I am not saying he was thrilled by it," Neuharth said, "but he is a big boy." Nor was there real friction. "I don't have any feud with anybody," he explained, "and I don't think that anybody at Gannett feels they have a feud with us."

Finally last April, after a year of haggling, Gannett paid the foundation $670 million for the shares. And suddenly Neuharth, renaming the foundation the Freedom Forum, was sitting atop the 20th-richest charitable fund in the nation.

The move was simple arithmetic, Neuharth said. At a modest return of 7% to 10%, he said, the foundation should now make about $50 million to $67 million a year, compared to the $18 million to $20 million it earned in Gannett dividends.

Gannett officials declined to be interviewed for this story; company spokesmen say the talk of a feud--at least on Gannett's part--is overblown.

But some have speculated that there was something personal on Neuharth's part. During the recession, for instance, he began criticizing his successors for failing to sustain Gannett's record of uninterrupted earnings growth.

"I have said that I would rather have seen the earnings record remain intact rather than see the record broken, but I have never specifically criticized John Curley or anyone else at Gannett," Neuharth said. "But I did say I was disappointed, and I am disappointed."

Neuharth has also written critically in his weekly column in USA Today of his former proteges at Gannett, some of whom had remarked on his taste for luxurious offices, limousines and private jets: "In recent years, some people I favored or fostered over a quarter-century have turned and bitten my hand. . . . Father forgive them, for they know not what they do."

The Forum's eleventh-hour rescue of the Oakland Tribune--coming the day that the paper was expected to close--reinforced Neuharth's reputation as someone who, seemingly, never fails to mix business with self promotion.

Immediately, speculation began that it was designed, in part, to vex Gannett. Why otherwise did Neuharth wait till the last minute to intervene?

Neuharth said he wasn't aware of how serious things were until Tribune Publisher Maynard announced Aug. 9 that the paper might close within a few days. The following day John Quinn, a Maynard friend and one of Neuharth's closest associates, called the Tribune.

"Over last weekend, he came to me and said, 'Is there something specific that we could do?' " Maynard recalled. "I said, 'For Christ's sake, put some dough into this company!' There are those who have speculated he was waiting till the end."

Others have wondered whether investing in the Oakland Tribune, a commercial enterprise, is appropriate for a nonprofit charity.

David Anderson, a tax attorney with Tuttle & Taylor in Los Angeles, said the transaction raises some questions but "doesn't sound wildly out of whack."

But these aren't the first questions about the actions of Neuharth's charity.

The Forum was been criticized for building a multimillion-dollar headquarters across the street from Gannett headquarters in Roslyn, Va.

The building has a sweeping double staircase of carved stone, suede wallpaper and hammered brass sinks. Construction already had begun on a $2-million rooftop meeting center, encircled by a running track and gym. Its $1-million art collection was purchased through a Cocoa Beach, Fla., art gallery owned by Barbara Whitney, a close, longtime Neuharth friend.

The foundation also made news when its trustees authorized a $40,000 purchase of copies of Neuharth's autobiography for donation to journalism schools and college libraries. Later, it was disclosed that the foundation's president ordered the books purchased from retail stores; some suggested that was to boost its standing on the best-seller lists.

Donald Alexander, commissioner of the Internal Revenue Service from 1973 to 1977, said these expenditures might violate rules for tax-exempt institutions.

"There is an absolute requirement in the rules governing charities that no part of the net earnings of the entity shall inure to the benefit of a private individual," Alexander said. "It would definitely forbid maintaining the lifestyle of one of today's more aggressive CEOs."

Neuharth said the furor is a creation of media hype. The foundation's building, he said, may be across the street from Gannett, but it won't rise so high as to block the view of Washington from Gannett headquarters.

"I promised," Neuharth said, "they could still look down on us."

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World
68°