Scrambling to squeeze every dollar from its erstwhile cash cows, Freedom Communications has outsourced dozens of jobs to India, including some from the Gazette, while laying people off, cutting pay and curtailing or eliminating employee benefits.
The Gazette, the company's second-largest newspaper, also laid off 11 people last week, seven from the newsroom. That was the latest move in more than two years of shedding jobs, most recently finance and accounting staffers who were let go this fall after training their replacements in India.
In another move, Freedom is trying to avoid paying a $28.9 million settlement to Orange County, Calif., carriers who sued for wages, overtime and expenses due them as employees.
It's all part of Freedom's push to bolster the bottom line as it goes through Chapter 11 bankruptcy, which is expected to result in JPMorgan Chase and other banks owning most of the family-owned media group.
Freedom officials are refusing to answer nearly all questions associated with the layoffs and outsourcing.
"Companies always screw their employees, unless it's a company who realizes its value is in having intellectual property," says Al Lewis, award-winning columnist for Dow Jones NewsWires who was Gazette business editor in the mid-1990s. "Engineering firms don't do this. If they don't have engineers, they're not an engineering firm. The greatest asset of a newspaper is its knowledge base, and you've got that knowledge base walking out the door. Newspapers have been so willing to let those people go."
The Gazette watched its only Pulitzer Prize-winning writer, Dave Curtin, leave in the late 1990s as well as many other experienced journalists who fled or were axed over the years.
With Friday's cuts, the local daily cast aside long-term employees deeply familiar with the community, including longtime reporter Bill McKeown, who covered transportation; photo editor Dave Turner, who had worked there more than 25 years; editorial writer and production assistant George Lewis, with 32 years' service; and social services and business writer Debbie Kelley. Also laid off were political reporter Dean Toda, photographer Kirk Speer and editor's assistant Pam Bella.
That afternoon, publisher Steve Pope spoke to the staff and, with his trademark lump in the throat, said layoffs are the worst part of his job but are dictated by the company's numbers, according to employees who attended the meeting.
Earlier, Freedom forced employees to take five days of furlough, imposed a 5 percent pay cut, reduced sick days from 10 per year to five and suspended contributions to retirement accounts. Its pension fund was frozen years ago.
Newspapers across the country have sunk into a financial morass, but Al Lewis says Freedom's owners squandered monopolies in markets across the country in an era that represented the biggest economic expansion in a generation.
"The people in charge of that company are responsible for its destruction," he says. "Freedom is a horribly managed company."
He adds that employees aren't the only ones victimized: "What business thrives by giving customers less and less every year? That's what newspapers have been doing."
Recently, the Gazette junked its full-time, Denver-based state legislature reporter and decided against sending writers and photographers to the Winter Olympics in Vancouver. Before that, it eliminated the TV guide (unless you pay extra) and stock pages, shrunk the size of the paper and converted obituaries to paid-only. It cut cartoons and relies more heavily on fewer wire services.
Perhaps most interestingly, the newspaper laid off accounting and finance workers after those workers trained their India-based replacements at InfoSys, a company with more than 50 worldwide offices. Freedom also outsourced subscriber-service functions.
Freedom won't comment about how many jobs were lost to outsourcing and what others may be. But Robert Emmers, its bankruptcy spokesperson, says in a written statement: "As we continue the process of transforming our business, we are always evaluating new efforts to create synergies that will allow us to lower fixed costs."
Freedom officials attended the 2009 Outsourcing World Summit held in February at La Costa Resort and Spa in Carlsbad, Calif. The company even tested sending page design and copy editing to India-based Mindworks Global Media Services in July 2008, according to the New York Times, which quoted a Orange County Register deputy editor as saying, "In a time of rapid change at newspapers, we are exploring many ways to work efficiently while maintaining quality and improving local coverage." Freedom refuses to comment on the test and whether it continues.
Freedom filed for bankruptcy two weeks before it was due to pay $28.9 million in a settlement of a class-action lawsuit brought by Orange County carriers who contend they were due seven years of back wages, overtime and other benefits as employees. Freedom contends they were contract workers.
"They timed their bankruptcy so they could grab this money back from the class [of plaintiffs]," plaintiff's attorney Daniel Callahan says, noting the claim is now lumped with all unsecured debts. "I believe it's egregious and a total misuse of the bankruptcy process.
"Not only did they mistreat people that led to the settlement and judgment, they're taking money away and giving bonuses to the top employees," Callahan adds, in reference to Freedom's handing $3.8 million in bonuses to top officials before filing bankruptcy.
Callahan says the bankruptcy creditors' committee, of which he's a member, is trying to obtain documents from Freedom, but has met resistance. Because the debtors want to fast-track the bankruptcy, creditors have less time to react, he says, which works in Freedom's favor.
"Freedom has done everything they can to stop these carriers from getting their money. They're offering one to two cents [on the dollar]. I happen to think that's appalling. We're getting railroaded."
Also on the creditors committee is Alan Bell, Freedom's former CEO, whose consulting and resignation agreements are among $17 million in consulting contracts and other deals Freedom wants to renege on, Callahan says.
Meanwhile, another bankruptcy complication looms: Federal Communications Commission laws that limit ownership of media outlets in the same markets by the same stakeholder.
The Wall Street Journal reported in September that JPMorgan Chase, through Freedom's bankruptcy reorganization, could become majority stakeholder of the company's newspapers and television stations. JPMorgan Chase could also wind up in control of Citadel Broadcasting, which is carrying $2 billion in debt and is teetering on bankruptcy.
In Colorado Springs, Citadel owns KATC-FM 95.1 FM, KCSF-AM 1300 AM, KKFM-FM 98.1, KKMG-FM 98.9, KKPK-FM 92.9 and KVOR-AM 740 in Colorado Springs. If JPMorgan Chase assumed control of both Freedom and Citadel, would it be forced to sell some local stations or the Gazette sooner than expected?
An FCC spokeswoman wouldn't answer the question but notes, "Any transaction to acquire control of a broadcast station requires prior Commission consent. Our rules limit or prohibit a party with an attributable interest in a daily newspaper from acquiring an attributable interest in a broadcast station in the same market."
Al Lewis says what happens to Freedom's newspapers, including the Gazette, under bank ownership is sheer guesswork.
"I'm trying to look at what an investment bank would want with a newspaper," he says. "Maybe somebody with some balls gets it for a low price and starts over."
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