AG Targets Register “Shutdown” Bonuses
(Updated) State Attorney General Richard Blumenthal plans to intervene in the Journal Register Co.’s Chapter 11 bankruptcy case to try to block bonuses planned for executives in return for shutting down newspapers and laying off more employees.
Blumenthal (pictured) announced the move Monday in reaction to a story in the New Haven Independent focusing on a motion attached to a petition the company filed in federal bankruptcy court in New York Saturday seeking protection from creditors.
The Yardley, Pennsylvania-based company owns the New Haven Register and 19 other daily newspapers and some 180 weeklies.
As part of its proposed bankruptcy reorganization plan, the company wants to give 31 “key” executives $1.7 million in bonuses — some termed “shutdown bonuses” — if they meet certain goals.
Those goals mainly consist of shutting down newspapers and firing employees, the main strategy of a business plan it began implementing in late 2008 after consultation with creditors.
Company officials said in their court filing that the bonuses will save the company money because it would cost more to hire outside consultants to handle the complicated task of dismantling staffs and newspapers.
The bonuses came under fire Monday from both Blumenthal and State Senate Majority Leader Martin Looney.
“That’s really outrageous,” said Looney, who represents New Haven. “They’re basically going to pay people to salvage the company. They’re going to pay a premium for layoffs.”
Blumenthal said his office plans to file an objection to the proposed bankruptcy plan with the federal court within the next week to ten days. He said the objection will pertain specifically to the executive bonus plan.
“These bonuses seem unnecessary and excessive given the apparent financial failure of the company,” said Blumenthal. “It certainly has the appearance of rewarding failure. They’re closing newspapers and laying off employees.”
“It fits the general concern that many people have with bonuses — in this case ‘shutdown bonuses’ — that seem very inappropriate. We’re going to review exactly who receives what bonuses in what amounts.”
The Connecticut politician who has made the most headlines lately attacking executive bonuses is U.S. Sen Chris Dodd. His office at first said Sunday that he might have a comment on the proposed Journal Register “shutdown” bonuses. But by late Monday it had yet to produce one.
Estimates of the Journal Register Co.’s debt range from $500 million to $1 billion. It reported under $500 million in assets.
But first a judge must approve the plan. Which gives Blumenthal an opportunity to register Connecticut’s objections.
Register Publisher Edward Condra could not be reached for comment. Nor could a spokesperson at the company’s Pennsylvania headquarters.
Monday yet another media company, the owner of Philadelphia’s two main daily newspapers, also filed for Chapter 11 bankruptcy protection.
Journal Register is the second corporate parent of a New Haven print newspaper to file for bankruptcy protection in under three months. Chicago-based Tribune Co, which owns the New Haven Advocate and the Hartford Courant, filed under Chapter 11 on Dec. 8.
Like most other print newspaper companies, both Tribune and Journal Register have watched revenues wither under the dual glare of a recession and the flight of news readership and advertising to the Internet.
The two companies have suffered for an additional reason: a decision by corporate execs to plunge deep into debt to finance acquisition of newspapers across the country. Their strategy — to continually slash costs by shrinking newsrooms, among other areas — increased profits for a while, but eventually gave readers less reason to keep buying.
A new round of cuts is expected to hit the Courant and Advocate newsrooms over the next week.
Journal Register suffered in particular because of a decision to purchase weekly newspapers outside Detroit — just in time for the meltdown of the Motown-centered U.S. auto industry.
Despite those bad calls, Journal Register now wants a bankruptcy judge to OK paying bonuses to 31 execs to continue that strategy, in order to salvage at least some of creditors’ money.
The company proposes to do that by cutting even more newspapers and employees. Already in the past few months Journal Register has closed or sold dailies and shuttered dozens of weeklies in Michigan, Pennsylvania, New York, and Connecticut, including a group of town weeklies in Greater New Haven.
A motion included in the Saturday court filing asks court approval for an “incentive pay” plan for 31 “officers and key employees.” The plan would provide up to $1.7 million in new bonuses in coming months on top of $486,000 already paid out in the past few months to reward execs for layoffs and paper-closings.
The pay would be based on carrying out in stages a business plan approved last October between creditors and company brass.
These bonuses, including a “shutdown bonus,” are based on carrying out two major objectives.
One objective involves “significant headcount reductions.” In other words, firing people. One of those layoff measures “remains unperformed,” according to the motion.
The “key” employees received $486,000 in bonuses for carrying out previous layoffs by Dec. 31. The next wave is scheduled to take place by March 31, according to the motion, at which point the key employees would pick up an additional $486,000 in rewards.
Objective number two: “Restructuring.”
Execs will pick up another $486,000 in bonuses (or $15,700 per “key employee”) “if certain publications slated for elimination in the Business Plan are shut down in a timely manner,” according to the motion.
“The Business Plan contemplates the elimination of many non-daily publications and several daily newspapers, with the goal of making the Company a leaner, more profitable enterprise,” the motion reads.
Those publications are scheduled to be closed by Feb. 28, according to the motion. It doesn’t name them.
A third $486,000 batch of bonuses awaits the execs if they are found to have met a goal set for improving EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization) for the fourth quarter of 2008.
A final $253,000 more in bonuses are to go to 10 top employees upon “consummation” of the reorganization plan.
It’s Hard Work
Why reward execs who destroyed a company for sweeping the final ashes into the furnace?
The motion argues that the execs deserve the bonuses because they “have been called upon to take on significant responsibilities in addition to their normal day-to-day functions” of their jobs. Furthermore, these tasks “are critical to the achievement of” some salvaging of creditors’ losses.
Hiring “outside professionals” to perform the same work would cost more money, the motion argues.
Observers expect the Journal Register to keep the New Haven Register in business, since it reportedly turns a profit. The company planned to close two other Connecticut dailies this year, in New Britain and Bristol, unless a buyer emerged; one did.
The Register has endured waves of layoffs on and off since the early 1990s. Last March the paper laid off its last Capitol reporter, Greg Hladky, and closed a bureau that had served several of its dailies. In November it laid off 20 employees and closed its entertainment weekly, Play. In December it closed weeklies from Clinton to West Haven to Shelton to Stratford.
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Posted by: robn | February 22, 2009 5:10 PM
Of course.... essential to any American corporate bankruptcy plan is rewarding executives for failure and allowing them to continue that failure by making their product cheaper and less desireable.
Posted by: JRC refugee | February 22, 2009 5:33 PM
Thank you, Paul, for putting this development into perspective for everyone. While newspapers might indeed be enduring their end of days, the Journal Register's behavior over its short lifespan is more responsible for its currently bleak situation. And even in its death throes, it continues the arrogant, myopic pursuit shareholder value over common sense that landed it here in the first place. For years, JRC executives ruled by creating a culture of fear, managed by screaming, violating every known principal of good journalism to protect the bottom line, and sucking the good will and idealism out of hundreds of employees. Maybe JRC is just one more of hundreds of print media compainies that will collapse in the next few years. But for many of us who had any contact with this toxic corporation, it feels more karma.
Posted by: City Hall Watch | February 22, 2009 5:58 PM
What the bankruptcy judge should do, is fire all the exectives and get some people in there who know what the hell they're doing. It is stunning that a news organization could go so low even in these times. The internet aside, they have for decades, cheapened the news, not covered the news, opted for staff cutbacks and generally failed at providing a viable product for the communities they served. In the process, this company has screwed its employees, their families and in some cases, ruined careers as well. As a former newspaperman myself, I am deeply resentful of their business plan now, the business plan, such as it was when they purchased the Detroit area papers and their abdication of responsibility to the community for years. While there has been some rebound in the Register recently, prior to the current administration, the former publisher saw no evil, spoke no evil heard no evil and was an intricate part of the demise. Shame on them.
Posted by: The Advocate | February 22, 2009 6:12 PM
Why reward execs who destroyed a company for sweeping the final ashes into the furnace? .... more objective reporting.
Seriously ... mark your opinions so. Not defending anything JRC has done but you're adding to the downfall of objective journalism by not acting properly.
Come on Paul. We thought you were better than this.
Posted by: I'm Broke | February 23, 2009 12:26 AM
Bass. Why'd ya publish this inflamatory b******t. Johnny Boy's gonna want more for bankruptin New Haven. 'Bout $5,000,000 I reckon. 'Bout a million to pay off his governors run debts. That's why he's so hot on public funded elections. The rest for pocket money. Us tax payers just need prayers.
Posted by: One who got out in time | February 23, 2009 5:42 AM
I thank my lucky stars every day that I decided to get out of journalism in the mid-80s. The worst thing to happen to newspapers everywhere is ownership by these heartless chains. They don't care about journalism and they're bad managers.
Posted by: Bill | February 23, 2009 8:27 AM
It interesting that the conclusion by the writer is that the executives destroyed the company. I would think the blame should be the editors and writers for their shoddy journalism and irrelevant information they chose to publish.
Posted by: Steve Collins | February 23, 2009 8:53 AM
Thanks, Paul, for a cogent explanation of what the JRC is doing now. I read that stuff Saturday night and it made me too mad to write anything coherent. I'm still livid.
And, to Bill, who just commented here... You have no idea what you're talking about.
Posted by: Fedupwithliberals | February 23, 2009 8:58 AM
"essential to any American corporate bankruptcy plan is rewarding executives for failure and allowing them to continue that failure by making their product cheaper and less desireable."
Sort of like seeing high government officials like Chris Dodd and Barney Frank tank the world economy without consequences.
Posted by: Good Job | February 23, 2009 11:12 AM
Good Job of reporting, interpretation and analysis. Lots of 'news' outlets published/posted the JRC press release without any added value. Paul Bass shared his insight.
Posted by: Tony | February 23, 2009 11:16 AM
I as my neighbors who get the paper with the home delivery. But with the way and where they put the paper drop off you might as well read the paper rap in the street curb. For over the year I have talked with many people and they all say the same thing.... "The paper delivery to the home SUCKS". The throw it in the bushes, street, sidewalk, everywhere but the home. I have written to the delivery service, editors and the ghost in the paper. If they gave better service then I know people would buy it but they over look the front line.... Good By News Papers.
Posted by: robn | February 23, 2009 1:04 PM
Yeah but sort of like change the names to Republicans who were in charge for the majority of the last 28 years.
Posted by: Peter | February 23, 2009 1:46 PM
What a shame they had to turn in their corporate jet and country club memberships. These corporate idiots stripped our once great paper and it is time for someone local to rescue them.
They have no idea how to run this publication..Just look at their web site
We need local ownership
Posted by: Doug | February 23, 2009 6:35 PM
I'm a JRC refugee myself. These bonuses are more of the same -- they pay poverty wages to the people who do the work of producing and delivering the paper, and egregiously overpay executives who do nothing to carry their weight and whose job it is to simply extract all the value from the product to satisfy bad loans and shareholders. Even those shareholders have been left out in the cold and now I'm sure the banks won't get their money either... who's left standing? The jrc executive crew. This is criminal and I hope Blumenthal can somehow hold them to account.
Posted by: Ed Anderson | February 23, 2009 7:33 PM
I hope advertisers learn of the plan for bonuses and immediately cancel their advertising. All this bonus crap is so disgusting. Key executives are the ones who have gotten newspaper companies in the mess they are in today. Key executives don't listen to their readers or their advertisers. NO bonuses should be paid to key executives.
Posted by: chip | February 23, 2009 7:52 PM
As I have already indicated, the N. H. Register has been scamming advertisers by giving papers away. For three years after cancelling, I regularly receive free papers ( today for example ) and most times there are two papers in the bag. They are a losing operation. The cure is to actually hire real reporters that "investigate" and delve into a story. Bonuses? For what, ruining a paper? I think not!
Posted by: Jon Searles | February 23, 2009 8:41 PM
The real issue in this story is not how poorly run the JRC was or even that they are planning to give bonuses which may or may not be undeserved. The real issue is that Dick is inserting himself into this matter where he has no role or responsibility.
Dick Blumenthal is once again overstepping his bounds in search of a headline for his office. Today it's the villified JRC. Tomorrow it may be your company or employer.
Political corruption grows unchecked in this state. Maybe that's because the head watchdog is spending his time at the wrong house.
Posted by: Walt | February 24, 2009 6:37 AM
Blumenthal seems to have press releases twice daily, but rarely does he follow up , or is anything really accomplished,
The Register has shrunk in value, but delivery by 6:15 daily is excellent, despite the comments above,
Posted by: fairday | February 24, 2009 9:19 AM
What ever happened to " a fair day's work for a fair day's pay"? If an executive's job for the week is working out the details for shutting someting down, why is their a need to give a bonus? Doesn't their pay for the week worked cover those efforts? Where is the extra work? Can't the Attorney Gen. push to pay the money, that was set aside as a bonus, to the creditors who are geting stiffed? Give the executive a nice fruit basket when his time is done. If they don't like it, get rid of them now, as I am sure there are plenty of unemployed people who would love an opportunity to earn what an executive makes just for doing their job. All these bonuses are is unbridled, openhanded arrogant raiding of the public usuary and unchallenged theft. There is no control and no fear of reprisal, so it just happens. Sadly, this is part of the American Dream, for some. Raiding the public trust.
Posted by: Bad Blumie | February 24, 2009 9:41 AM
Of course AG Blumenthal is trolling for headlines. That's what he does.
It would be nice if, somewhere in the press release, he indicated the state's authority to intervene in and object to this private bankruptcy process.
Posted by: robn | February 24, 2009 10:11 AM
On the subject of free papers and with all due respect to people who hold jobs at printing presses...I don't want free papers, nor do I want advertising bundles mailed to me (which I immediately throw into the recycle bin). It would save a lot of paper and give advertisers an honest look at who is actually reading their adverts if the state would pass a law about advertising mailers similar to the do-not-call list.
Posted by: FunnyGuy | February 24, 2009 11:44 AM
It is remarkable what people write on this site. It is all a bunch of bs - without paying bonuses, which are minimal compared to other companies, the company would not stand a chance of survival.... maybe that's what everyone wants, but that will only lead to more job loss and more shutdowns. People need to worry about themselves and stop worrying about everyone else. If people don't like it they should find something else to do!
Posted by: FunnyGuy | February 24, 2009 11:48 AM
The current State Attorney General has too much time on his hands and should worry about the pile of work he has on his plate instead of worrying about bonus money that is negligible to the big picture! Politicians are the biggest crooks out there!
Posted by: Brian | February 24, 2009 12:04 PM
To those who are blaming the reporters and editors for the failure of the papers, don't. These papers were micro-managed from the top down. The former President of the company, Robert Jelenic issued mandates about coverage from the top down. He decided the crap they would cover. He eliminated coverage of real news in favor of little league games and church socials. He put publishers in place that followed his orders to the letter. They gutted any experienced staff, slashed wages for remaining employees to levels that qualified most employees for food stamps, cut their health insurance, eliminated basic necessities like pens and pads, forced employees to work overtime with no pay.
They extracted every penny of profit out of these papers and are now in the process of trying to squeeze even more money from the rotting corpses of these once proud papers.
I hope Blumenthal puts a stop to the bonuses. Give the money to the employees who are losing their jobs. They deserve it a lot more.
Posted by: Jakey | February 24, 2009 12:41 PM
Executives should not get bonuses for doing additional work. When they laid off employees and other employees had to "pick up the slack", those people had to do more work than they were initially hired for but did not receive any bonus or additional benefits. Executives caused this mess - let them clean it up or fire them.
Posted by: ROBN | February 24, 2009 1:02 PM
When a corporation files for Chapter 11, they're transferring part of the cost of their failure to the taxpayer and therefore, the taxpayers have a say in how they conduct themselves.
Posted by: William Kurtz | February 24, 2009 2:05 PM
I'll readily admit that I know little-to-nothing about corporate finances and chapter 11, but Funnyguy's claim (which he makes twice) that the 'bonuses' are insignificant doesn't pass the straight-face test.
Let's see. . . 1.7 million, divided by 31 'key' executives . . . hmmm . . . carry the 2 . . . WOW! More than $54,000 each, assuming it's divided evenly. That alone is a pretty comfortable annual salary.
I've got an idea: why doesn't the company give 62 'key' employees $27,000 each in severance before letting them go.
Sorry, but if you're going to call it a bonus, you really ought to give it away for something worthwhile.
Posted by: FunnyGuy | February 24, 2009 2:21 PM
Bottom line; existing board and lenders writing down the debt agreed to the plan so people should get over it and move on! For those folks that work for the company and do not like the incentive plan then they should seek other employment(good luck with that), or just suck it up and be thankful they still have a job! And if you don't work for the company and don't like it then just don't read about it! Far bigger problems in the world my friend.
Posted by: robn | February 25, 2009 1:06 PM
Bottom Line? The bottom line IS irresponsible corporations. Take a look at the front page...If you can find one.
Posted by: Charlie | February 25, 2009 4:41 PM
Has anyone ever did an investigation on Mr. A.G. Blumenthal himself? How much does he make? I have a hunch he & his wife easily make as much as these execs he's constantly after. If he got paid for all his media face time, I'm certain he'd be a zillionaire.
Posted by: robn | February 25, 2009 7:55 PM
I just did an investigation and I found three things...
1) CT Statutes, Chapter 35, Sec. 3-124. ...The Attorney General shall receive an annual salary of one hundred ten thousand dollars....
2) CEO of Journal Register Mr. James W. Hall makes $650,000 a year.
3) You have no idea what you're talking about.
Posted by: Charlie | February 26, 2009 9:38 AM
I'm sorry, by I can't help being cynical about our politicians. Bush was a millionaire in office, and not from his salary. Ganim and Rowland lined their pockets with freebies and went to prison. Kerry and McCain married into millions and millions of dollars. Dodd a got sweetheart mortgage from Countryside. Daschle and Killefer "forgot" to file taxes. It goes on and on, and always has. Maybe it's just my reaction to the AG's "holier than thou" attitude; I'm just suspicious I suppose.
Posted by: eddie | February 26, 2009 10:36 AM
The larger issue, to me, is that nobody saw this coming a long time ago. This all isn't rocket science. The JRC's entire business model was based on maxing out its credit to acquire new properties, then cannibalizing them. Since they were essentially ruining the properties in the process, they had to keep acquiring to show a profit. Doesn't exactly take a genius to guess that as soon as the economy goes sour, the whole pyramid scheme (and that's what it basically was) would collapse in on itself.
I don't have a business degree and I could see this clear as day 10 years ago, when I worked at the Register. Shouldn't the analysts and creditors who are paid big money to understand this stuff have wised up to the scheme a long time ago and cut off the flow of money.
Posted by: robn | February 26, 2009 11:28 AM
I think you may have lead to the coining of a new business term...something like..
Posted by: riverita | March 5, 2009 7:13 AM
Chapter 11 uhm? , Bonuses for get rid of people uhm?// I worked for this company for 4 years (quit twice in between) depeloving products , Play and a Spanish Weekly , Since the first week I was told forget about the client just get their check , we an give them credit later. Till this day there are utomers out there that hate me because of pre-pay accounts that are in collection agencys, maillers (yes those wrapers that go to your house full of flyers) that wre never delyver to the place of order; and every time I protested they remember me how good I was suposed beeing payd in bonnuses// How this ended? couldn't take it anymore left the place with a doctor leave of absence , went to te unemployment ,they refuse saying I was a contract worker and I abandom the job and my hardwork developings of 4 years one was closed without any warning and the other one is a joke of six page a week with the most expensive price per inch ads in it category in the State.
VERY SORRY FOR PEOPLE LIKE [name omitted] IN THE MAKE UP DEPARTMENNT 28 YEARS ENDURING ABUSE EVRY DAY AND THE GUY OF SEURITY 2ND SHIFT 32 YEARS THERE AND NO HEALTH CARE COVERAGE
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