Unity May Yet Break Out in Fractious Media Clan

Harry Hoiles took the news like a knife to the back.

Hoiles had gone to Florida in 1982 for a newspaper publishers’ conference just weeks after the death of his older brother Clarence, head of the family-owned Freedom media company. Harry, by all accounts a quiet and gentle man, was expecting to succeed him like a prince in a house of royalty.

Instead, Harry’s younger sister and her husband took him aside and said the family planned to look elsewhere for a new chief executive. They weren’t about to entrust mild-mannered Harry with the family’s golden goose: Freedom Communications, publisher of the Orange County Register and a string of smaller newspapers and broadcast outlets.

“It ruined him,” recalled Harry W. Hoth, a longtime friend who runs a Colorado-based broadcasting company. “It just completely devastated and confused him.”

But it also ignited him.

Harry Hoiles, who was in the second generation of ownership, shared the family’s staunch libertarian views rejecting government regulation of business. But he swallowed those principles to file a lawsuit seeking the breakup and sale of Freedom.

The legal challenge failed, but it drew the very private Hoiles clan into a very public feud, bitterly fragmenting the family even as its members remained bound to one another through their joint ownership of Freedom.

“After the lawsuit was filed, the birthday cards stopped coming, the invitations to weddings stopped coming,” recalled Harry’s son Tim, who retold his father’s account of the 1982 meeting. (The father died in 1998.)

The 20-year rupture has not healed. The bad blood bubbled anew this summer as Tim Hoiles--now the third generation--renewed a quest to cash out his family’s 8.6% stake in Freedom Communications, now the nation’s 12th-largest media company. In many ways, the Hoiles saga is a sequel to the stories of other notable American newspaper families, from the Binghams of Louisville to the Chandlers of Los Angeles. In each case, publishing empires founded by early 20th century entrepreneurs fell out of family hands as the later generations fragmented.

But in August, the Hoiles story veered from the script as members of the family’s fourth generation of ownership persuaded their elders to give them time to put together a buyout package that would give them control of the company, one of the nation’s highest-profile proponents of libertarian philosophy.

Only a few of the fourth-generation members have ever worked for Freedom. And only one--Raymond C.H. Bryan, 32--serves on Freedom’s board of directors.

But “the fourth generation is a very united group,” said Francois de Visscher, a Connecticut-based family business consultant working with the Hoiles descendants. “They are very attached to the family business, very attached to the family heritage and what Freedom stands for.”

And while the fourth generation has inherited a stake in the company, de Visscher said, its members did not inherit the feud that embroiled the second and third generations.

“They want to stay together as an investor group,” he said. “They feel the investment is sound financially, but there are other reasons for holding onto it. In today’s investment world, what opportunities do you have to be an owner of a company that’s been in the family for generations?”

Privacy Is Paramount

Despite making a fortune selling news, the Hoiles family remains intensely jealous of its privacy. None of the fourth-generation members and only one of the third--Tim Hoiles--would consent to an interview about the family legacy and future.

But a partial family history can be gleaned from court records and other documents, as well as interviews with old friends of Raymond C. Hoiles--”R.C.,” the first-generation patriarch--along with Harry Hoiles and former Freedom executives.

It is the tale of a family dynasty struggling to define itself against the weight of its success, and of its past.

One of the few notable newspaper families to have successfully handled the generational transition now confronting the Hoiles clan is the Sulzbergers, publishers of the New York Times, Boston Globe and other mostly Eastern U.S. papers.

The reason: The family carefully mapped out a plan for succession by grooming an heir-apparent in each succeeding generation, said Larry Pryor, an assistant professor of journalism at USC’s Annenberg School for Communication.

That standard bearer can “stand tall in the face of the onslaught of those who want to cash out” and “build bridges” to dissidents to keep the company intact, he said. The Hoiles family had no such plan, trusting that the loyalty of blood would overcome any disputes.

“The fact that they don’t have a Sulzberger that can rise to the occasion just makes it that much more difficult and unlikely that they’ll keep it together,” Pryor said.

Tim Hoiles said he advised his father in the early 1970s, a couple of years after R.C.’s death, to get the family to define the order of succession in writing. Harry refused, believing that family loyalty made such legalisms unnecessary.

“If he had a fault, it would be that he was very trusting of people,” Tim Hoiles said.

Blood loyalty did work for a while. R.C. Hoiles founded the chain in the 1920s with a few small newspapers in his native Ohio, and brought in his eldest son, Clarence, then about 20, to learn the business.

The elder Hoiles sold out his holdings in 1932 and took a few years off to read political and economic theory while moving to California to begin his newspaper career again.

“He was very bright man,” said Roy Smith, who as a teenager went to work for Hoiles in the 1940s and retired six years ago as publisher of Freedom’s Colorado Springs newspaper. “He had this terrific mind, so razor-sharp, and a nice air of independence.”

Hoiles took a modest view of his own wealth, said Smith, who considered Hoiles his mentor.

“He liked to drive big, fast cars, but he bought his suits off the rack at Penney’s,” Smith said. “He never used his wealth in any sort of conspicuous-consumption way.... He was an Ohio farm boy, with all those values, definitely a Midwestern ethos.”

Hoiles bought the Register newspaper in Santa Ana in 1935 and began building the Freedom chain by buying small-market papers across the country. The Register was his flagship, and it was renowned for its libertarian voice and at times anachronistic approach to journalism. Conservative activists used its letters columns as a political bulletin board, and news stories often were approached from a libertarian or conservative viewpoint.

That changed in the mid-’70s, when the Register stories began embracing more mainstream journalistic standards of objectivity.

A Standout Philosophy

Hoiles was a libertarian apostle, passing out books to recruit initiates, wearing buttons urging the United States to quit the United Nations and arguing on his editorial pages against government funding of education. He gained notoriety as one of the few publishers to editorialize against the detention of Japanese Americans during World War II.

His sons inherited the philosophy, Harry more than Clarence, and they practiced it as well. Over the years Freedom endured long-running battles with unions, refusing to enter into contracts and competing with union-financed newspapers in Lima, Ohio, and Colorado Springs.

Hoiles built his empire with Clarence, the heir-apparent, working alongside him. But he also included his second son, Harry, and his daughter’s husband, Robert C. Hardie, by making them publishers of Freedom papers. Harry settled in Colorado Springs, where he ran the Gazette. The daughter, Mary Jane, and her husband moved to Marysville, Calif., where Hardie published the Appeal-Democrat for more than 50 years. Hardie also served as chairman of Freedom for a number of years.

The first two Hoiles generations and their spouses ran the business until 1982, when Clarence died and Harry was pushed aside. Though the family brought in outside executives that year, descendants of R.C. Hoiles still retain tight control. At least five of his grandchildren or their spouses--the third generation--have played significant roles in running the company. Of six family members on the board, five are from the third generation.

Family members divide $13 million to $14 million in annual dividends under a complicated formula. Few ownership details are public, since Freedom is privately held by 11 branches of the family descended from Clarence, Harry and Mary Jane, some of it in family trusts and others held outright by individuals.

Clarence, Harry and Mary Jane each inherited about one-third of Freedom when R.C. Hoiles died. They in turn passed on their stakes to their children and grandchildren, which began the fragmentation of the holdings. Clarence and Mary Jane each had four children and 10 grandchildren; Harry had three children and eight grandchildren, one of whom--Tim’s daughter Sarah--died in a car crash in 1997 at age 20.

The largest single block of shares, about 9.6%, is controlled by R. David Threshie, former publisher of the Register and Freedom vice president, and the husband of Judith Hoiles, one of Clarence’s four children. Steven Hardie, one of Mary Jane’s sons, controls about 8.8%, and Tim Hoiles controls about 8.6%, according to internal documents.

Members of the fourth generation emerged at a family meeting of shareholders Aug. 10, convened at Tim Hoiles’ instigation to review options that included an outright sale of Freedom, and proposed keeping the company in the family by buying out those of the third generation who wanted to sell.

The fourth generation collectively holds less than 15% of Freedom, which analysts said makes it exceedingly difficult to raise enough money to buy out the third generation. It would take as much as $200 million to buy out Tim Hoiles alone, and more than $1 billion to buy control of the company.

Estimates of the company’s worth range from $1.5 billion to more than $2 billion. Freedom publishes 28 dailies, most in small cities, and 37 weeklies, with a combined circulation of 1.2 million. With a circulation of more than 300,000, the Orange County Register is by far Freedom’s largest paper. The company also owns eight television stations in smaller markets such as Albany, N.Y., and Lansing, Mich.

The push to cash out comes at a time when the company has struggled with losses tied to ill-fated forays into magazines and the Internet. Freedom has said it had pretax profit of $23 million for the first six months of this year, compared with $55 million in losses in the first half of 2001--before the industry was hit with revenue slumps tied to economic fallout from the Sept. 11 terror attacks.

Although Freedom has about $400 million in debt, much of it from the failed ventures, newspaper analyst John Morton believes the fourth generation could raise enough money with outside help and the possible sale of some holdings, such as Freedom’s television stations.

“If this is what it takes to keep the company in the family’s hands, I think they’ll find a way,” Morton said.

An Awkward Reunion

In many ways, the Hoileses are strangers to one another, the legacy of that 20-year-old falling-out.

Tim Hoiles, a compact, balding man of 50 with a passion for Harley-Davidson motorcycles, hadn’t seen his cousin Melissa Stewart, part of the Hardie branch of the family, in more years than he could track. Yet she lives less than two hours north of his home in Colorado Springs, where the Rockies shoulder their way west.

That’s what a fractured family can do--turn a scenic two-hour drive into an impossibility. But earlier this year Tim Hoiles needed Stewart and many other relatives.

He needed their votes to force Freedom to let him cash in his shares. So he called Stewart in Boulder and made his overture, then drove up on a weekend to see her. He was surprised to learn how far apart they had grown over the years, the distance formed by bad blood and wounded pride.

“I didn’t realize she was a painter,” Hoiles said last month in his office, surrounded by the bounty of hunting trips, including a giraffe mounted from the shoulders up, several antelopes and a bear rug. “I was blown away.”

Stewart declined to comment, but Hoiles said she gave him her support, part of 54% of the voting shares he said he has lined up behind his plan to sell the company. Those shares were drawn from the Harry and Mary Jane branches of the family, reversing the years-long alignment between the Mary Jane and Clarence branches that initially forced Harry out.

One insider said the current fight can be defined more closely. Tim is on one side. Spouses of two of Clarence’s daughters--Threshie and Richard A. Wallace, a Freedom board member and vice president--are on the other. The Hardies are in the middle.

Tim joined the family business in 1974 after leaving college without a degree. He was publisher of Freedom papers in Ohio and Texas before landing in 1978 as publisher of Freedom’s daily in the California high-desert city of Victorville, where he and his wife had a side business as local Amway dealers.

Paying Familial Price

The fallout from his father’s lawsuit against the rest of the family made it increasingly difficult for Tim, who backed his father, to be effective as a Freedom publisher.

“I had capital requests [to fund projects] on the books for three years and they wouldn’t give them to me,” he said. Meanwhile, he and his wife were dissatisfied with local schools. “Put those two things together and we decided to get out of it and go back to Colorado Springs to manage my parents’ assets.”

Tim remained a director and is still on the board. In recent years, he said, the dwindling value of Freedom and stagnant dividends--”I can do better in a money-market fund”--led him to revive his family’s desire to cash out their holding in Freedom.

He entered the August meeting set up to discuss options with the 54% of the shares in his corner, but some of that eroded when a small group of fourth-generation members made a pitch to buy out the third generation. It was a case of children telling parents they wanted time to pursue a plan.

Enough third-generation family members wanted to give their children that time that Tim no longer had his majority. “I decided not to push it,” he said.

But as he waits to see whether the fourth generation can raise the money to buy out his interest in the family company, he’s still not sure what is driving them.

“I’ve been trying to figure out how to ask them,” he said. “They’ve said they don’t want to lose the legacy of R.C. and libertarianism. But if that was such a big concern to them, as expressed at the gathering, why aren’t more of them in the business?”