Print Comeback Stumbles as O.C. Register Parent Is Sued by Former Owners

Wednesday, November 06, 2013

In July, a year after former Hallmark card executive Aaron Kushner and a partner bought Freedom Newspapers and its flagship Orange County Register, he told an in-house  interviewer that his biggest surprise had been the quality of editorial employees.

Kushner might want to revise that assessment after withholding purchase payments to the previous owner because of what he called “deliberate misconduct” that “constitutes fraud.” He made the claims a week after the interview in a letter to Angelo, Gordon & Co., the investment firm that handled the sale.

Angelo, Gordon responded by suing Kushner for $17.45 million. The money being held back was originally placed in a trust at the time of the sale and its payment was contingent upon unexpected costs after closing and other factors.

Kushner alleged that his company faces $62.3 million in unexpected liabilities because of misrepresentations that included unfunded pension liabilities, improperly reported credit card charges and illusory savings through technology.

The Los Angeles Times said the legal fight isn’t the only one Freedom is embroiled in. Two ex-Freedom executives sued for $4.5 million in severance pay, and an adviser hired to assist the company in exploring a purchase of the Boston Globe and other media said it hadn’t been paid enough and sued for $14 million.

Although Kutcher and his partner, tech entrepreneur Eric Spitz, didn’t buy the Globe, they have spent the past year expanding the Register’s print and online presence and buying other newspaper properties. They doubled the size of the Register newsroom to more than 350 employees, re-opened the Washington, D.C. bureau, beefed up business and news coverage, and spiffed up the company’s 26 community newspapers.

The owners also installed a paywall to make access to the newspaper’s online publication subscription-only, got rid of about 90% of its blogs and baffled media observers by emphasizing print over digital. Their expansion and emphasis on print is counterintuitive in an industry that has undergone a painful constriction over the past decade.

Freedom Newspapers launched the Long Beach Register in August to compete with the established Long Beach Press-Telegram and announced last month that it was purchasing the Riverside Press-Enterprise for $27.25 million from Dallas-based A.H. Belo Corp. Freedom is often mentioned as a potential suitor for the Los Angeles Times if, as expected, Tribune Co. puts it and seven other newspapers on the market soon.

–Ken Broder


To Learn More:

Angelo Gordon Suing Freedom Communications over Sale Pact (by William Laudner, Wall Street Journal)

Former O.C. Register Owners Sue Buyer over Withheld Payment (by Ken Bassinger, Los Angeles Times)

The U-T's New Strategy: Hyperlocal (by Jonathan Horn, U-T San Diego)

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