The Washington PostDemocracy Dies in Darkness

Heath Freeman is the hedge fund guy who says he wants to save local news. Somehow, no one’s buying it.

Heath Freeman says he hopes his hedge fund “will be remembered as the team that saved the newspaper business.” The reporters who work for him — and the swelling number who no longer do — say that’s not the case. (Goldin Solutions)

Ask Heath Freeman why he got into the newspaper business and the explanation is specific and bloodless.

It was 2009, and the Great Recession was forcing many major newspaper chains into bankruptcy. Freeman was a finance guy in New York, still in his 20s, with a sports-bro patter about his days as a place-kicker at Duke and an eagerness to make his mark. He looked at some spreadsheets, decided that media execs didn’t know what they were doing — and started making some purchases.

“We saw an opportunity,” Freeman told The Washington Post, “to help fix the broken model.”

Pretty soon, Freeman’s firm, Alden Global Capital, had gained control of MediaNews Group, owner of more than 50 papers including the Pulitzer-winning Denver Post, St. Paul Pioneer Press and the San Jose Mercury News. And he was just getting started.

If Freeman, 40, had never bought into newspapers — if he had stuck to investing in discount retailers like Payless ShoeSource and Fred’s pharmacy, both of which Alden shepherded into bankruptcy — he could have remained one of those faceless hedge-funders who, for all their influence over the global workforce, rarely get much attention outside of the photo galleries for Hamptons charity benefits.

Instead, he got into an industry whose purpose is enshrined in the Constitution and whose workers are well-versed in questioning authority and defining a narrative — and started cutting their jobs.

Now, through MediaNews, Alden is not only one of the largest newspaper operators in the country, with titles including the Los Angeles Daily News, the Boston Herald, New Jersey’s Trentonian and around 200 others — it’s the one that critics accuse of having done more than any other to shrink and dismantle local media. And Freeman himself has become a symbol of the withering of the free press and the risks it poses for our democracy.

The reporters who work for him — and the swelling numbers who used to — call him a vampire, a vulture, an embarrassment; some have protested outside his Hamptons home or his Midtown Manhattan office. Twenty-one senators have urged him to stop his “reckless acquisition and destruction of newspapers,” and mayors bemoan his papers’ shrinking coverage of their cities. Meanwhile, Alden is circling yet another major group of newspapers that includes the Chicago Tribune and the Baltimore Sun.

As a secretive hedge fund guts its newspapers, journalists are fighting back

In Freeman’s view, his capitalist-villain image is undeserved — bad press, if you will.

“I would love our team to be remembered as the team that saved the newspaper business,” he told The Post in May, in his first interview — part of his effort to rewrite the narrative about himself, along with letters to select lawmakers and communications with other newspaper publishers. He has told friends the pragmatic truth is that newspapers need to be cut to be saved.

The American newspaper industry was built by families whose commitment to civic life and First Amendment principles is reflected in the think tanks, prizes and academic buildings that still bear their names. Freeman, though, has been invisible in the communities his papers cover and silent about the journalism they produce. So this might be the most convincing case Freeman can make for himself:

No, he’s not a Pulitzer or a Scripps or even a William Randolph Hearst. But those kinds of titans don’t want to run newspapers anymore — and maybe the Heath Freemans of the world are the best this beleaguered industry can get.

This is what Freeman's approach to saving the newspaper business looks like in St. Paul, Minn.: A local sheriff blew his budget by $1 million and there was no Pioneer Press reporter available to cover the county board meeting. In San Jose: There was no reporter on the education beat at the Mercury News when the pandemic started closing schools. In Denver: In the aftermath of the 2012 Aurora movie theater mass shooting, the editor was asked to slash staff to improve the next month's budget numbers. In Vallejo, Calif.: There is exactly one news reporter left at the Times-Herald to cover a community of 120,000 people.

“I feel honored to be the last hard news reporter in town,” John Glidden said. “But it hurts to see the paper like this. Vallejo deserves better.”

Studies show that reductions in local news coverage lead to reduced civic engagement, inflated city budgets, more polarization and lower voter turnout.

The current era has been rough for the entire newspaper industry, hit by collapses in both ad revenue and circulation, missteps in the move to digital publication and competition from Web platforms for the remaining readers and advertisers. In the decade-plus Alden has been in the newspaper industry, the number of employees at U.S. newspapers has been cut in half, according to Pew Research Center. But Alden’s cuts have been far deeper — more than 70 percent of unionized staff, according to data from the Communications Workers of America union — and its circulation losses steeper, according to Alliance for Audited Media.

A word from Freeman: “I wanted to clear up some misconceptions.” The business of local news has been broken a long time, he notes. “We have bought almost all of our newspapers out of bankruptcy. Many of these papers were left for dead, and would have been liquidated if not for [our] seasoned newspaper executive team stepping up.”

This is partly true, argues the man who gave Freeman a foothold in the industry.

“They became big players in the newspaper industry because nobody else wanted to,” said Dean Singleton, the co-founder and former CEO of MediaNews Group, who oversaw the company’s bankruptcy.

And yet: Many newspaper chains declared bankruptcy in the aftermath of the Great Recession, including the owners of a wide swath of papers such as the Chicago Tribune and the Shawnee (Okla.) News-Star. And all of those chains (Tribune, GateHouse, Lee, among others) came out of the process slimmer but not decimated.

Singleton doesn’t blame Freeman for slashing jobs: That’s just what hedge-funders do. But he scoffed at Freeman’s notions of being an industry savior.

“The only way Heath could refer to a newspaper was as ‘these assets,’ ” said Singleton, who stayed on for several years as chairman of the Denver Post after Alden gained control. “It was always, ‘You aren’t getting enough out of ‘these assets.’ . . . Don’t buy the idea that Alden is trying to save newspapers. I don’t think any idiot would buy that.”

(Freeman retorted: “We’ve saved the very newspapers that Dean Singleton ran into bankruptcy, so take his recriminations with a grain of salt.”)

A key pillar of Alden’s strategy has been to sell a newspaper’s real estate assets — in some cases to Alden-controlled side companies — and move operations to cheaper space. The Denver Post consolidated at a printing facility outside of town, in the county ranking among the lowest in air quality in the metropolitan area, where reporters complained of breathing problems.

A hedge fund’s ‘mercenary’ strategy: Buy newspapers, slash jobs, sell the buildings

“The first major change was that they liquidated anything that wasn’t nailed down,” said Robert Salonga, a Pulitzer winner for the San Jose Mercury News who represents the paper’s guild.

Douglas Arthur, a managing director at Huber Research, which analyzes the investment prospects of communications industries, says Alden approaches newspapers “as a vulnerable target with down-and-out stocks, down-and-out business prospects, a lot of assets, and a lot of cash flow” with a strategy of “get in inexpensively and strip the assets and liquidate buildings and liquidate the lightbulbs, and squeeze as much cash out as possible.” (Alden has also been investigated by the Labor Department for questionable investments of employee pensions; Freeman said the matter has been settled but declined to give details. A spokesperson for the Department of Labor declined to comment.)

Freeman’s defense: “This is a very challenging industry,” he said. “For years, advertising dollars subsidized the product, and we have seen a significant decline in those dollars for well over a decade.”

He wants it to be understood that he’s neither a nonprofit manager nor a billionaire philanthropist. In conversations with friends, he has complained that many of the industry’s actual billionaires escape the scrutiny he’s received — such as Peter Barbey, a Pennsylvania retail heir who sold the Reading Eagle to Alden’s Media­News and also bought and shuttered the legendary Village Voice.

Alden’s most aggressive cuts seemed to come after the firm has tried and failed to find someone to take its ailing newspapers off its hands.

The most notable case was in 2014 when Alden tried to sell all of its newspapers, in a failed auction that signaled just how little value the business world put on print media. The highest bidder was the private equity firm Apollo, whose offer Alden deemed too low. Freeman expressed the view in a meeting with Apollo that he believed they could make more money from the newspapers by taking cash out every year, according to someone involved in the process who spoke on the condition of anonymity to describe private deliberations.

“From that point on,” said Jim Brady, a digital media consultant working with the papers at the time, “it was cut, cut, cut, cut.”

Freeman's father, Brian, was in finance, too. His investment banking clients included labor unions, though, with some that represented journalists.

As a kid in Short Hills, N.J., the younger Freeman played soccer and competitive tennis at the highly rated Pingry School alongside the children of CEOs and Wall Street elite; his parents enlisted Yankee second baseman Pat Kelly and Giants running back Rodney Hampton to make appearances at Heath’s bar mitzvah. After he enrolled at Duke, alma mater of his two older sisters, his parents founded the university’s Freeman Center for Jewish Life. Freeman later acknowledged that he was never very active in it, staying busy with his fraternity and sports. (At a charity auction years later, he paid nearly $120,000 for the jersey Duke basketball star Christian Laettner wore when he scored the game-winning shot in an epic 1992 win over Kentucky.)

He joined the football team as a walk-on yet never played until his senior year. But he was a hard worker, recalls his coach, Carl Franks, beloved by teammates. “There are some players you just remember,” Franks said.

In October of Freeman’s final year, his father took his own life, a month before the team played him in his first game. He was 24 when his mother, a real estate agent and former teacher, died as well. The loss of their parents solidified a tight bond between the three siblings — he later helped one of them launch a chain of New York Pilates and fitness studios — and propelled Freeman, then working at a boutique investment bank in Manhattan, into adult life. A couple years later, he joined a family acquaintance, Randall Smith, at Alden, making distressed assets his own special focus.

“Their untimely deaths helped me learn how the world works at a young age,” said Freeman, who is married with two children. “It made me sensitive to reality and focused on the importance of hanging in there to get to the other side, whatever that may look like.”

It wasn't only the slashing cuts he made at his newspapers — hardly the only shrinking media organizations in this era, after all — that cemented Freeman's image as a journalism-killer. It's that he allegedly used the savings to prop up Alden's non-media investments.

In 2018 — the same year that staff at the Denver Post and other Alden-controlled papers openly revolted over the latest round of cuts — an investment group that owned 24 percent of the Alden-controlled papers filed suit to open up the newspaper group’s books, alleging that Alden siphoned the newspapers’ cash to prop up Alden’s flailing Fred’s pharmacy as well as investments in risky Greek government bonds and other properties “entirely unrelated to the company’s core businesses,” and hid relevant information from other shareholders. The newspaper group denied wrongdoing. The suit was later settled.

The future of local newspapers just got bleaker. Here’s why we can’t let them die.

That’s why so many were distressed when Alden attempted last year to acquire Gannett, the largest newspaper chain in the country. Freeman made his first approach by inviting a Gannett board member, Larry Kramer, for breakfast at Manhattan’s NoMad Hotel.

Kramer, former president and publisher of USA Today, knew Freeman casually and assumed the meeting was for industry shoptalk. Kramer said Freeman walked in with a story about his Hamptons home renovation.

“He just strikes you as someone who is young and made a lot of money fast,” Kramer remembered. “He was self-confident, highly self-confident, about both his position and what he wanted to do.”

Toward the end of the meal, Freeman started talking business. “He said we should probably all get together, [that] the answer to all the industry trouble is going to be a roll-up” — a merger of multiple newspaper chains. Kramer criticized Freeman’s business model: “I said that they concentrate on immediate profits and we were in it for the long haul, so we did things that we hoped created value over the long term, whereas their approach . . . was damaging long-term prospects for the product.”

But Kramer never imagined that their breakfast was a precursor to a hostile bid. When Alden made an unsolicited $1.3 billion offer for Gannett, Kramer was appalled. “I sent Heath a note, which had one word in it: ‘Really?’ . . . It felt in retrospect that [he] was not straightforward.”

After Gannett turned the offer down, Freeman went straight to its investors in an attempt to gain seats on the company’s board, arguing to them that the chain’s financial strategy was doomed. But in the end, Alden’s bid failed.

Freeman is likely to run into less resistance as he goes after other papers, especially as the economy plunges. Alden has set its sights on Tribune Publishing, the owner of the Chicago Tribune, the Baltimore Sun and the New York Daily News. Last fall, Alden acquired 32 percent of Tribune’s stock and was granted two board seats in exchange for not buying any more of the company until the end of June. In January, many of Tribune’s papers offered buyouts to its staffers — a signal they may be attempting to cut costs ahead of a further incursion from Alden.

Concerned about the papers’ future, three Democratic senators — Charles E. Schumer (N.Y.), Richard J. Durbin (Ill.) and Tammy Duckworth (Ill.) — wrote Alden seeking more information about its backers and its strategy. Freeman’s reply expressed his belief “in helping local papers operate successfully over the long term.” He also boasted that Alden had never closed a daily newspaper — strictly true at the time, but a month later, it shuttered two weeklies in Minnesota.

What happens to local news when there is no local media to cover it?

Gary Marx and David Jackson, two veteran investigative reporters at the Chicago Tribune, have spent months seeking potential buyers who might save their paper from Alden.

They have asked to meet with Freeman. “We wanted to talk to him about how investing in news is the best way to protect our democracy and our way of life,” Marx said. “We wanted to explain why we believe so fervently in what we do.”

Freeman hasn’t responded to their letters. But they haven’t given up. “Heath Freeman is not the only one who has taken advantage of the news media over the past 10 years,” said Marx. “But this is the last stand.”

Again, Freeman asserts that all this pain has a purpose, to “safeguard the news business” and put it “on a path to sustainability.”

But what does that path look like?

Across the river from Alden’s depleted St. Paul Pioneer Press is the Minneapolis Star Tribune. It, too, filed for bankruptcy a decade ago and was later bought by a rich guy. But this new owner, local billionaire Glen Taylor, made only modest cuts, with the goal of trying to sustain a paper worth subscribing to, according to publisher and CEO Mike Klingensmith.

The “Strib” is now by far the better, stronger newspaper with a promising new digital strategy. And yet the Pioneer Press, while gasping to get by with a fraction of the staff it boasted at its peak, is still alive. Alden even raised the subscription price, having realized that older readers will keep paying for it, whether out of loyalty or sheer inertia.

Klingensmith warns that the Press can’t possibly stay on this course and stay in business: “People catch on to you.” The readers will drop it or die, new ones won’t subscribe, the bottom will fall out, and another city will have that many fewer journalists covering it.

But in the meantime, Alden will try to squeeze a profit from it.

Jonathan O’Connell and Alice Crites contributed to this report.