Month: June 2007

It comes as a relief to find out I’m not the only one who can’t get his head around why Avista Capital Partners didn’t sever ties with Par Ridder the first day they heard about his non-compete problem? I am not sure, nor are a handful of local attorneys I’ve spoken with in recent days, whether it was ever entirely possible for Avista to essentially disown Par. Even upon news of his non-compete and downloaded Pioneeer Press data problems. But it sure would have been worth a shot.

As it is, the educated guess, (by the above-mentioned attorneys, not me), is that the best Avista and Ridder can hope for between now and when Ramsey County Judge David C. Higgs hands down his decision in the injunction MediaNews wants against Ridder and two other former PiPress execs is a settlement — finally — with MediaNews boss, Dean Singleton, and the ability to at least conclude the public end of this fiasco.

(Now watch Judge Higgs rule in Ridder’s favor or give him an “admonishing” tap on the wrist.)

The five attorneys with whom I spoke all practice some form of labor/employment law, are familiar with non-competes and the Business 101 no-no of transfering confidential, proprietary information. One had just returned from vacation and knew only the barest outlines, but has long wondered what special power Ridder has over Avista that they’d travel this far down the road with him. That attorney and three others insisted on staying off record even while expressing the same level of bafflement on the hook Par has in this largely faceless New York equity company.

Thankfully, Ron Rosenbaum is comfortable sharing his opinions with the public. The attorney/KSTP legal analyst and radio host has a long background in non-competes and labor/employment contract law and is completely in synch with his legal peers in failing to understand both why this thing wasn’t settled long ago and why Avista hasn’t cut Par loose by now.

“Courts don’t like to get involved in this kind of thing,” said Rosenbaum. “That’s why injunctions like this are so rare. A court doesn’t want to get into the business of telling private parties what to do.”

Nevertheless, here we are with Ridder in open court, with media snarks scribbling furiously, arguing that pretty much everything was just, like, you know, a series of honest, innocent mistakes.

“Innocent mistakes? Well,” said Rosenbaum, “either he’s lying or he’s flat-out stupid. I mean, what he’s saying just isn’t credible. Either way it’s pretty hard now to un-ring the bell.”

“The sad irony here is that we’ve got these two newspaper companies tied up in a mess like this. These are people that, theoretically at least, the rest of us rely on to tell us the truth about what’s going on in town. And as we all know there’s been a move afoot for quite a while now to attack the credibility of the mainstream press. A case like this is the equivalent of throwing red meat to the lions.”

None of the great legal minds with whom I spoke could offer a good explanation for why back in March when all hell started breaking loose Avista didn’t just say to Ridder, “It appears you have misrepresented yourself to us. Therefore we are voiding your contract and will be seeking another publisher. MediaNews’ fight is with you. Not us.”

Somewhere there might be someone who sees Par Ridder as a unique and irreplaceable talent, the kind of brilliant captain you follow into the briney deep rather than shove aside for a capable yeoman who can hold the wheel steady through the stormy night. But I haven’t met or read of that person. The rap on Avista Capital Partners is that they don’t know newspapering from toilet papering, and something like this goes a long ways toward confirming the worst cynics’ worst suspicions.

Back to Rosenbaum, who says he would hold Avista’s attorneys responsible for not
adequately explaining the extent of their clients’ liability and what by every visible angle appears to be a disproportionate downside to this case … if he didn’t suspect that they did offer their grim assessment. “In the end it’s always the client’s decision, and this may be a case where the clients ignored their attorneys’ advice.”

The assumption I make is that Avista has tried several times to settle this with Dean Singleton and Singleton has refused, preferring for his reasons the added impact of the public PR disaster Ridder and Avista have taken … along with a fat payday and the pleasure of watching Avista get stuck with the tab for his legal fees and those 2000 hours of computer forensics work.

So how many punches is that? Two big ones and two smaller ones? And on top of the Star Tribune projecting 20% less revenue than Avista bought six months ago? Crimeny! A restless, impatient private equity firm might just decide, “To hell with this!”, and seek a very early exit from their newspaper adventure. In that case, a smart, hard-nosed operator with a stake in the market might offer them a fire sale price, plead imminent financial catastrophe to federal regulators and promise the public a return to journalistic health via a one newspaper universe.

I couldn’t help be struck yesterday when a reporter colleague asked Singleton if he foresaw the Twin Cities becoming a one-newspaper town and Singleton instantly, reflexively said that that would be a disservice to, “the east metro”, implying that it would be the big, and plainly bad Star Tribune driving the Pioneer Press out of this market.

When I asked, “Well, but what if YOU are the survivor?” Singleton ignored the question and continued on with the well work-shopped scenario that paints him as the wronged and embattled defender of the loyal St. Paul-ites.

(More than one press wag has laughed at the irony that Par Ridder has managed to turn a cutthroat operator like Dean Singleton into the sympathetic, noble victim of this episode.)

Despite Ridder telling David Carr of the New York Times that, “We [meaning his family] are NOT A PART of Avista”, (my emphasis), I can’t get past what seems the most logical explanation for Avista bonding so tightly with young Par. Namely, that somehow, somewhere, in some way elder Ridders have a stake in Avista or entities closely associated with it.

A little after 11 this morning Par Ridder took the stand in his own defense. It would be an understatement to say he and his legal team have a ways to go to get back in the game. The battle is over him essentially waiving his own non-compete to leave St. Paul for Minneapolis and what on some level at least is a staggering amount of potentially critical, highly confidential financial he had a hand in transferring from the Pioneer Press to the Star Tribune. But their strategy became clear almost immediately.

In short, it comes down to this: It was all an innocent mistake. By “all” we mean that transfer and “migration” of confidential Pioneer Press financial data to Star Tribune computers anyway. (I had to leave before Ridder got into his explanation for the non-compete business.)

Ridder explained that what he did when arriving at the Star Tribune was exactly what he had done when arriving at the Pioneer Press from San Luis Obispo in 2004. He simply wanted his new paper’s financial data copied on to his “18 to 20” custom-built spreadsheets. Under his attorney’s gentle questioning Ridder explained that his laptop contained 10 years worth of sales and other financial data from every place he has worked.

The critical difference of course being that until he jumped to the Star Tribune he had only worked for one of his family’s newspapers and had never before slipped across town over a weekend to work for a direct competitor.

The prosecution team [excuse me, “attorneys for the plaintiff”], established yesterday that the names and contract specifics of 3890 Pioneer Press advertisers were on the files Ridder — or someone — downloaded from Pioneer Press hardware on or about March 6, 2007. In the early moments of Ridder’s testimony today he named only Star Tribune CFO, Mike Riggs and Sr. VP for Sales Mike LaBonia as people who had been given access to confidential Pioneer Press files, each with specific instructions from him, in e-mails, to “be careful” with the files.

Riggs was required to replicate the spread sheets Ridder preferred to use and LaBonia, apparently, to get an idea of how Ridder liked to break out advertisers by categories.

(For all you jargon lovers, Ridder described his “Three Bucket” delineation process. “Select” accounts for heavy-hitting customers like Macy’s and car dealers. “Key” accounts for middling clients, and “territory” accounts for small businesses in specific metro areas.)

During a mid-morning break I stopped MediaNews CEO Dean Singleton working his way back from the men’s room. I reminded him I was the guy who asked him yesterday if Avista had yet offered to settle this thing before a full and final public humiliation. “Yes, and I think I said I didn’t want to say anything about that.”

“Yeah, but my question really is whether a judgment against Par Ridder himself is enough. Would that alone satisfy you?”

“What do you mean?”

“I mean, in a barroom conversation yesterday I said a major businessman like you long ago learned to dial out emotion and to never let things like this get personal.”

“This isn’t personal. This is simply about what’s right and what’s wrong, and what was done here was wrong.”

“Right. But my question is is it enough to simply establish that, or, again, as a hard-nosed businessman isn’t the real vindication in the financial sting of a judgment in your favor?”

Singleton looked down, looked up, looked at the bank of elevators, and then said, “Look, I’ve been in newspapers since I was 15. Its really the only business I know. And all I’m really say here is that this wasn’t ethical, or right.”

“OK. Well, let me ask you this, are you surprised that Avista hasn’t separated itself from Ridder by now?”

“These are Wall Street people, investors. They are not newspaper people. I don’t think they understand the conflict of interest in this case.” He added, “In the case of Par I think some of the explanation [for his actions] lies in the fact that he had everything given to him. He felt he was entitled to act as he has.”

About this time Chris Harte, the lone newspaper person among the Avista hierarchy walked up. The two men clearly have known each other for some time and betray no animosity.

A small crowd began to gather and another reporter asked Singleton and Harte if they see “a floor” to the miserable state of the newspaper
industry.

“I hope so,” said Singleton with a rueful chuckle. He then launched into a familiar enough description of “the perfect storm” afflicting the industry today — cratering real estate listings, “migrating” employment listings and an automobile industry in worse shape than newspapers. To all this Harte nodded in agreement.

“Fine,” I said, “but isn’t another significant factor unrealistic profit expectations by companies like yours?” meaning both MediaNews and Avista.

“Well,” said Singleton, who has heard that one before, “a lot of people in this industry are fighting to make any profit at all.” He then mentioned the situation in Boston, and Harte reminded him of Seattle’s meltdown. Both the Pioneer Press and the Star Tribune, though, are currently profitable. Maybe not next year. But right now they’re making money.

As the recess ended I asked Harte, “Has Avista considered separating itself from Ridder?”

“Absolutely not,” Harte replied, shooting Singleton a quick glance, “not when we were threatened with a criminal suit.”

“But if you lose and it means making a large payment to Mr. Singleton would you then consider legal action against Mr. Ridder?”

Harte looked displeased with the question. His expression was of someone with a smelly sock stuffed under his nose. “No. Because I think what’s clear here, what the public will see, is that this,” meaning Singleton’s suit, “is an attempt to vilify someone for competitive advantage.”

Finally, the last prosecution witness before Ridder took the stand today was Karen Clary former VP of HR for the Pioneer Press. She reiterated that Ridder had originally asked to sign a non-compete like other members of the PiPress’ “Operating Committee”, or “Op-Com” as Clary called it in military command-speak.

She then said that Ridder personally instructed her to remove the non-competes from company files “sometime around December of 2005”. She said he told her, “he had decided to rescind the agreement”, because PiPress executives with long-term attachments to St. Paul would be left in a difficult situation after the sale of Knight-Ridder went down.

“Par asked if I was comfortable doing this,” she said, referring to pulling the files. “I said I was, but than I thought about it a bit and I went back to him and said I was not comfortable doing it without corporate approval.”

At this point she says Ridder told her he would talk to corporate, specifically Knight Ridder Sr. VP, Art Brisbane. Clary testified that Ridder got back to her, “a few days later and said he had talked to Brisbane and gotten the OK.” Brisbane’s videotaped deposition yesterday had him failing to “really recall” the conversation much less giving the “OK”. Either way, no written waiver exists.

Clary was asked about any concerns she had over the whole waiving of the non-competes business, and she replied that she did think it a bit odd, “that Mr. Ridder would be releasing himself” from a non-compete.