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Randy Michaels
  • from Broken Deal
  • Randy Michaels
Some thoughts on "Broken Deal", this week's riveting Tribune series on Sam Zell's buyout of Tribune Company in 2007, and on the bankruptcy that soon followed and from which the battered company didn't emerge until last December. The yarn told by Michael Oneal and Steve Mills deserves to be expanded into a book, of course, but as I read I kept thinking, HBO series.

HBO for the vulgarity—"You know, shit happens, OK," said Zell to a Wall Street audience he was sucking into his caper. "So anything is possible." But in the pages of the Tribune business section, ONeal and Mills couldn't say shit—and lasciviousness.

"Broken Deal" didn't get into personalities much, though personalities left scars that won't soon fade from the souls of the Tribune Company rank and file who lived through the era. A book will make room, and HBO will revel in them. For instance, it can introduce Zell at the 1999 birthday party he threw for himself in the Aragon Ballroom. Cops closed the Lawrence el station to accommodate Zell's private trains, and Redmoon Theater provided strolling musicians and masked actors dressed as birds on stilts. The writer Joy Bergman, who hooked on with Redmoon to get inside, later described the scene to me:

Trojan warriors at the front door and girls painted in gold body paint with vines twisted around their nipples wearing little bikini thong bottoms. They were nymphs of some sort, bodacious nymphs draped along the buffet. I don't think his guests had a very good time—that was the big take-away for me. The theater people I was with had a really good time and ate great food and saw great entertainment, and the people who were his guests were there to make an appearance with Sam Zell. I didn't sense a feeling of celebration for this man's birthday. It was a see-and-be-seen business function. . . . James Brown was the opening act. The guests ignored him. They treated him like a Holiday Inn cover band.

What a great way to introduce the swaggering guy who a few years later will take over a vast corporation in an industry he doesn't know and has never shown any particular respect for! It's a scene that begs for premium cable treatment. And then there's the scene a few years later inside Tribune Tower, now dominated by Zell's minions. Oneal and Mills are sparing with specifics: "Rowdy behavior that later made headlines—crude jokes, sexual innuendo in front of employees, a poker party in Tribune Tower with beer and cigars—reinforced notions that an inner circle existed. To some employees, complaining seemed futile."

What jokes? What innuendo? HBO would happily tell us, and it could go to town on that poker party. It took place in the old office of Colonel McCormick, the publisher who made the Tribune the Tribune. Zell's top people were there, and the Tower's new head of security posted pictures on Facebook with the comment, "We are in the office of the guy who ran the company from the 1920s to 1955. It's normally a shrine. We pretty much desecrated it with gambling, booze and cigars."

Having its way with that debauch, HBO would leave itself just enough time in the episode for a matter "Broken Deal" didn't mention at all but the New York Times's David Carr gave space to in his page-one October 2010 report, "At Flagging Tribune, Tales of a Bankrupt Culture." It seems that in December of 2008 the Tribune Company board got an anonymous letter warning that a new grab-ass managerial culture exposed the company to "potential litigation risk." For instance, the board was told "that a senior executive and a female employee had been discovered by a security guard engaged in a consensual sexual act on the 22nd-floor balcony." A blow job, I've been told, though there's just enough reason to believe the story's apocryphal that HBO would have a call to make on whether to write it into the script.

Carr's story had repercussions. Within days, Zell's CEO was sent packing. That was Randy Michaels, a radio guy who, "Broken Deal" tells us, brought a "mix of free-flowing ideas and decisiveness" to the cloistered Tower, along with "adolescent high jinks" and an alleged pattern of "sexual harassment." Carr, for his part, introduced Michaels not with a description but with an anecdote, the one in which Michaels, sitting at a bar with senior colleagues, "said, 'watch this,' and offered the waitress $100 to show him her breasts."

The colleagues were "dumbfounded," reported Carr. But words fall short. The moment cries out for visual rendering.

Above, Joy Bergman describes Zell's birthday party guests arriving to suck up to him. A cable treatment could turn that eagerness to please into a leitmotif. "Broken Deal" tells us that when Zell was putting together his Tribune deal—an unbelievably complex plan involving huge debt and employee ownership—lenders kicking the tires swallowed huge doubts that the thing could work because . . . Well, because Zell had such an overwhelming personality, and such an intimidating reputation as a "grave dancer" who restored dead companies to life. So the skeptics caved. And with Zell, and then his man Michaels, in command, "it did not take long," Oneal and Mills write, "to notice things had changed at Tribune Co.—and not just because suit-wearing executives suddenly showed up in jeans, like their new bosses."

What goes unremarked here, but could be discussed in a book and explored for all it's worth by HBO, is the contempt in the air for these denim-clad survivors—probably Zell's, certainly the rank and file's, and possibly their own for themselves. But you do what you think you have to do. "Broken Deal" tells us, "Pressed by deteriorating financial conditions and an onerous debt load, the Zell team bought out or laid off at least 5,000 employees across the company. Many employees were angry that managers continued to receive millions of dollars in incentive bonuses."

Furthermore, when Zell's deal was struck, "Documents show that the company's top 38 managers received almost $150 million in payments triggered by the deal, including various incentive and severance packages, as well as cashed out restricted stock and options. [Departing CEO Dennis FitzSimons] alone walked away with a total of more than $40 million, including proceeds from stock holdings accumulated over his career at Tribune Co."

If these top managers had previously done their jobs with any distinction, Tribune Company might not have been in such wretched shape by mid-decade that no one but Zell would buy it. What they skipped out with, as a staff writer now puts it to me, was "outrageously large sums of money as payment for outrageously bad management."

Wednesday's concluding installment of "Broken Deal," written by Oneal alone, examines the outrageously large sums of money sucked out of the bankrupt company over the past four years by vultures with MBAs who profit from bankruptcy. Some were original creditors trying to recover what they could; others were opportunists buying debt for pennies on the dollar in the hope of turning the pennies into dimes. And lawyers feasted. "The cost to Tribune Co. in legal and professional fees alone will likely run to more than $500 million," Oneal tells us.

It's probably hard to dramatize bankruptcy. My hopes are high because Oneal tells his story with such dispassionate clarity that his larger point never drifts out of sight. He states it at the outset: "For those trapped in the Tribune Co. saga against their will [such as the staff of the newsroom Oneal sits in], arguments about creditors' rights and legal process seem more like a smoke screen to justify how Wall Street interests are allowed to profit with little or no concern for the health of a company or its employees."

The story is hardly over. Tribune Company is now controlled by two "controlled-debt specialists" (Oneal's phrase), Oaktree Capital Management and Angelo, Gordon & Company, who will be selling it off in pieces. Rupert Murdoch is reportedly interested in the Tribune and the LA Times, and it's evidence of what the Tribune's been through that one of its senior writers tells me that Murdoch looks pretty good to him. This is the same publisher who triggered a mass exodus when he bought the Sun-Times 30 years ago, and it's not as if he's now a born-again paragon of First Amendment virtues. On the one hand, Wall Street Journal readers tell me that paper's a lot better now that Murdoch owns it; but on the other hand, Murdoch was summoned before the British Parliament last year and deemed by a committee looking into the phone-hacking scandal to be "not a fit person to exercise the stewardship of a major international company."

But unlike Zell and Michaels and the Oaktree boys, Murdoch at least is a newspaperman.

Would the miniseries have any good guys? If I were writing it, I'd be tempted to nudge Gerould Kern, the Tribune's editor, into the limelight. He wound up in the job in July of 2008, getting it mainly because editors with more impressive credentials were bailing out. He had Michaels to live with. ("Broken Deal" tells us that in a memo to Zell, Michaels "argued for radical change in the content and design of the company's newspapers to make them more appealing. He wanted to 'rethink' the front page and eliminate stories that jump to inside pages. To add humor, he suggested features like 'Knuckleheads in the News' and a section called 'Strange.'") Kern also had to live with the open contempt of many of those departed editors.

For instance, 13 months ago, Dean Baquet, a former editor of the LA Times who'd earlier done investigative reporting at the Tribune, went off on a tangent while speaking at a journalism forum. Kern, said Baquet, "knows zero about newspapering. It was staggering to me. He was just a guy who, you know, just kept giving the right answers to his bosses. And never, and never—he knows I feel this way, I've said it to him . . . he was a guy who just gave the right answers to his bosses and never learned how to really be a journalist—to my way of thinking."

Yet the Tribune today is not simply a decent but actually a very good newspaper, a paper I spend an hour and a half reading every morning. I've asked a couple of his newsroom's mainstays if it would be stupid to give Kern the credit for this. Go ahead and give it, they told me.

And if I were writing the HBO series, I think I'd invoke artistic license and slip in a scene that I doubt ever took place. It's a wistful conversation between Sam Zell and the widow of Bob Lurie, whom he met as a fellow Alpha Epsilon Pi pledge at the University of Michigan in 1959 and with whom he created Equity Group Investments, both of them becoming unimaginably rich. Zell would talk about the deals he'd done and the tag he'd earned as a "grave dancer." And he'd insist that if the economy hadn't gone into the toilet the Tribune deal might have worked despite what everybody says. And Ann Lurie would talk about how at the same time he was doing that she was endowing the Ann & Robert H. Lurie Children's Hospital of Chicago.

"I guess there's more than one thing you can do with a fortune," he'd say.

"I suppose there is," she'd agree.

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