Newsonomics: Did Digital First Media Owner Alden Cook The Books?
First published at Harvard’s Nieman Journalism Lab on March 9, 2018 as part of “Newsonomics: Tronc “Crashes”, DFM Owner Sued, News Guard Funded, Advance Tiptoes Into Paywalls — and The Big Lesson From Hypergrowing The Athletic”
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A court battle may well reveal more about Alden’s DFM management, recently excoriated in The Nation and in the American Prospect. Even LexisNexis’s Law360, which first reported the lawsuit, describes Alden as a “much-maligned ‘vulture fund.’”
- alleges “mismanagement”;
- accuses the MNG board of being beholden to Alden, “four of whom are directly or indirectly connected with Alden”;
- points to “a series of insider transactions”; and
- argues that Alden launched a new subsidiary (InvestmentCO in 2016), and that “those investments may involve transactions with Alden that are entirely unrelated to the Company’s core businesses, may disproportionately favor Alden, or may entail Alden and its hedge fund affiliates using InvestmentCO to monetize illiquid or losing positions. The extent to which InvestmentCO’s activities overlap with those of Alden and its affiliates has been purposefully obfuscated.”
In more detail, the suit alleges self-dealing by Heath Freeman, president and co-owner of Alden.
Takeaway: On the surface, of course, this appears to be an obtuse battle between two investors whose company has pursued the most aggressive, and sometimes mean-spirited, evisceration of some once-proud newspapers. They’ve done damage to the papers, but more importantly to their communities and readers. DFM’s business activities have seemed like a legal looting of the public trust. It may be as likely that these two parties will settle their profiteering differences out of the public eye. As one seasoned private equity investor cautions: “Most times, it’s wrath and fury signaling nothing, but every once in a while there is actually self-dealing or fraud of some sort.” For the moment, the lawsuit provides unusual visibility into the nest of secretive vultures.
