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Putting their money into the right to know

Times Staff Writer

Herbert and Marion Sandler guided Golden West Financial Corp. for 43 years, past the frauds and failures of other savings and loans in the 1980s, through a long California recession and sinking home prices in the early 1990s and to the brink of the mortgage meltdown last year.

Then the Sandlers sold their Oakland-based company, the parent of World Savings, for $24 billion, emerging with impeccable timing from the battered home-loan business.

What to do for an encore? The Sandlers, long active in environmental, human-rights and political causes, decided to support another troubled business: news reporting, specifically investigative journalism, which they fear is threatened by the rise of the Internet and resulting newsroom budget cuts.

Last month they unveiled ProPublica, a nonprofit news organization, with Paul E. Steiger, former managing editor of the Wall Street Journal, as editor in chief.

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With $10 million a year from the Sandlers’ foundation, and their assurances that he will operate independently, Steiger will assemble 24 investigative reporters, editors and researchers in Manhattan. ProPublica will begin operating in January with the stated mission of exposing abuse and neglect in powerful places -- government and business, of course, but also unions, universities, hospitals, the media and nonprofits.

Stories will be provided free of charge to news organizations and nonprofits. As a rule, they will be offered first as exclusives to major news outlets, with an eye toward maximizing the effect of each article, the Sandlers said in an interview. But their eventual destination will be ProPublica’s website, posted for all to see and print.

“We’re looking for top-flight investigative stories that have moral force -- stories that may be able to change things,” Herb Sandler, who will be ProPublica’s chairman, said from the foundation’s San Francisco offices.

Additional financial support is expected from the Atlantic Philanthropies, the JEHT Foundation and the John D. and Catherine T. MacArthur Foundation.

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It’s part of a trend in which foundations have funded about 40 nonprofit news organizations, many in nations recently freed from authoritarian rule, said Sheila Coronel, founder of the Philippine Center for Investigative Journalism and director of a Columbia University investigative journalism program.

None of the other nonprofit investigative outfits have budgets to match ProPublica’s, said Nicholas Lemann, dean of Columbia’s Graduate School of Journalism. Lemann said the Sandlers spoke at length to him and several other journalism experts while trying to define ProPublica’s mission and scope.

The Sandlers were co-chief executives of Golden West and owned about 10% of the company, making their share in its sale to Wachovia Corp. about $2.4 billion. They donated $1.3 billion from the sale to the Sandler Family Supporting Foundation and assumed their new role as billionaire philanthropists, with a 31st-floor waterfront view looking out past Alcatraz Island on one side and the San Francisco-Oakland Bay Bridge on the other.

What didn’t change, Herb Sandler said, was his philosophic perspective, shaped by what he saw on the streets and learned from his father while growing up poor on Manhattan’s Lower East Side.

“He was always on the side of the underdog,” Sandler said. “I am deeply opposed to wealthy people who exploit the poor, powerful people who prey on the weak, and government representatives who betray the trust of the people they supposedly represent.”

ProPublica has attracted about 400 job applications, including from reporters and editors at the top media outlets, said Richard Tofel, a former assistant publisher of the Wall Street Journal, who will run ProPublica’s business operations.

The nonprofit also caught the eye of media and conservative watchdogs who questioned whether the Sandlers, longtime supporters of Democratic candidates and causes, might try to pass down a political agenda along with their millions.

Writing online in Slate, Jack Shafer tallied a few Sandler gifts, including $2.5 million to the MoveOn.org Voter Fund and $8.5 million to Citizens for a Strong Senate, a group started by aides to former North Carolina Sen. John Edwards, now a Democratic candidate for president, that has run hundreds of ads supporting Democratic candidates for Congress.

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Editors considering publishing ProPublica work should demand “proof of a firewall preventing the Sandlers and other funders from picking -- or nixing -- the targets of its probes,” Shafer wrote.

Radio host Rush Limbaugh chipped in: “ProPublica, it’s a Latin name. Does it not sound like something a bunch of socialists would come up with?”

The Sandlers said any effort to skew the outlook and targets of ProPublica would undermine its reputation and effectiveness.

“All we’ve done is to spend our time minding our own business,” said Marion Sandler, who noted that in her case such efforts included founding the American Asthma Foundation this year.

Added her husband: “We personally are progressive, and I’m not ashamed of it, but this is going to be totally nonpartisan.”

ProPublica’s strongest defense against such charges may well be Steiger, who earned a reputation for tough but evenhanded news coverage during his 16 years as the top editor at the Journal, a publication with a famously opinionated -- and conservative -- editorial page.

Steiger is one of a number of journalist friends the Sandlers made over the years. Another is Berkeley resident Lowell Bergman, a prominent print and broadcast reporter and producer who helped start the nonprofit Center for Investigative Reporting in 1977 and teaches a graduate seminar on investigative reporting at UC Berkeley.

Herb Sandler said he consulted with both men regularly as he developed the idea for ProPublica. Steiger slowly emerged as the perfect fit to run it because of his impeccable reputation and the fact that he turned 65 this year, meaning he had to retire by year-end under the policy of the Wall Street Journal.

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Steiger said ProPublica would play an important role because newspapers across the country, forced to shrink as readers and advertisers migrate to the Web, were reducing international and investigative reporting.

“The future of daily newspapers is going to be much more focus on local reporting and local ads,” he said. “If it tries to be too national or too global, it may well find itself not able to pay its bills.”

He said he intended to offer publications exclusives to ProPublica stories when the stories were 75% or 80% completed. That way a newspaper or magazine would be able to run the reporting through its own editing system, raise issues to be addressed and help give final shape to the project.

If a publication were to turn him down for any reason, Steiger said, he would hold no grudges. If the Journal decided not to publish a business-oriented story that seemed a good fit, he said, he would simply take it elsewhere, say to BusinessWeek magazine. Or publish it first on the Internet, where all ProPublica’s work will wind up within a few weeks anyway.

“I hope he would come to us first,” said BusinessWeek Editor in Chief Stephen J. Adler, another Wall Street Journal alumnus.

“It would depend on if it was a topic we care about and if it was framed in a way that makes sense to our readers,” Adler said. “But Paul is an absolutely first-rate journalist. The fact that he is leading the group is reassuring.”

Los Angeles Times Editor Jim O’Shea sounded a more skeptical note.

“I have some problems with the concept of having someone else do investigative reporting for the L.A. Times,” he said.

In addition to concerns over maintaining The Times’ journalistic standards, along with “huge libel implications,” O’Shea said, “this kind of idea might be more suited to papers that don’t have the investigative resources and ambitions of a paper such as the L.A. Times.

“Despite cutbacks across the country, I think there is still much great investigative work being done by American newspapers large and small,” he added. “That being said, I wish [ProPublica] the best.”

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scott.reckard@latimes.com


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