Stop the Press

by James W. Ure

  —David Nicholls

  In 1985 the LDS Church's Deseret News served the first of several notices to its JOA partner that it wanted to publish mornings. It was a News aspiration that went back at least to the 1970s and possibly earlier, according to one former Deseret News staff writer.1 The paper felt hamstrung by its afternoon publication as required in the JOA.

  At the time the News was a solid, if conservative newspaper, and its reporting was kept separate from the views of the church that owned it. Its demands were built around the assertion that the evening News circulation was being eroded by the changing habits of readers brought on by television news. The paper hoped a morning edition would increase circulation.2 This was the spark that would smolder in the minds of church officials and would eventually erupt into conflagration.

  On June 9, 1989, the church again announced its intention to go mornings, but subsequently backed away. Jack Gallivan (by then semiretired but carrying the title publisher emeritus) and publisher Dominic Welch had to dissuade the church from going mornings time and again. Historically the News had never been able to achieve much more than one-third to one-half of the Tribune's circulation, in spite of many attempts to increase its readership. The Deseret News's strength and weakness was its own credibility. A Brigham Young University poll found that 70 percent of Utah voters thought the News slanted its coverage in favor of the church.3 It was again a matter of active LDS members already knowing what the Deseret News would print; they wanted to know what others were saying about them.

  Thomas Monson (who would later become president of the Church of Jesus Christ of Latter-day Saints) had worked for the Deseret News and sat as a board member on the JOA for forty years. He clearly saw the economic benefits of the JOA to the church. The church's newspaper was making a lot more money under the JOA. The advertising rates were designed in a way that made it foolish for any advertiser to place his notices in just one of the papers. If advertisers insisted on buying an ad in just one paper, they would pay a premium. As an example, for a hundred dollars you got your ad in the Tribune; for $110 you got the combined circulation of both papers to carry the same ad and get one-third more readers. Monson could explain the finances and dynamics of the JOA to those in the church who wanted a more aggressive attack against Tribune control. But as Monson rose in the church hierarchy he resigned from the JOA board. His departure ended the regular reeducating of the LDS Church leadership as to the needs and benefits of the joint publishing business in Salt Lake City.4

  Again in 1990–91 the News sought to shift to morning circulation and even tested the waters by circulating mornings in mostly Mormon Utah County.5 Jack Gallivan compiled statistics that showed that newspapers shifting from evening publication to morning publication had failed to generate a single new reader after the change, and those papers in fact suffered a loss in circulation of 3 percent, which requires an average of ten years to recover.6

  Gallivan, in his June 14, 1999, memo to John Malone, wrote of his dealings with Gordon B. Hinckley, by then president of the LDS Church: “A very vicious circle exists. President Hinckley tells me that the Deseret News management has assured him of success [by publishing] in the morning. The same management tells me that they are mandated by President Hinckley to make morning distribution a success.”7

  As Jack Gallivan would later write in a plea to have Utah billionaire Jon Huntsman Sr. buy the Tribune, “The Salt Lake JOA, as the annual financial and circulation audits of NAC for 49 years disclose, it has been the most successful JOA partnership in the United States in profitability and in maintenance of historical circulation averages and share of market circulation.”8 (Gallivan's plea for Huntsman to buy the Tribune would echo until Jon Huntsman's son, Paul, stepped into the Tribune's picture in 2016.)

  Why, in the face of evidence that afternoons switching to mornings died aborning, did the LDS Church persist in pursuing this illusion?

  With the existing JOA the Deseret News had done very well, since it was supported by the Tribune. During the period from 1988 to 1999, yearly advertising revenue for the JOA went from $62,262,411 to $102,273,562, an increase of 66.9 percent.9

  As far back as 1977 the publisher of the Deseret News, a former advertising executive and active Mormon named Wendell Ashton, sought answers as to why the News had half or less the number of subscribers as the Tribune. He reasoned the Tribune was not twice as good as the News. He looked at the historical fact that the Deseret News from its outset was the official newspaper of the LDS Church and appealed to its hard-core, tithe-paying members. The News had always been a solid, if conservative, voice. Bob Mullins, one of its reporters, had even won a Pulitzer for spot news reporting in 1962.10

  Ashton decided to implement the “LDS Stake Promotion” in 1977 (a Mormon stake is roughly comparable to a Catholic diocese).11 He concluded that the JOA was not properly marketing to its Mormon base because there should be more than 50 percent of all LDS homes subscribing to the News.

  The Tribune, through the JOA, agreed to help finance the LDS Stake Promotion through the use of the JOA's circulation crews. In April 1978, almost four thousand soliciting phone calls made by the Deseret News resulted in 1,074 homes agreeing to receive the News free of charge for two weeks. Ashton—a high-profile church figure—wrote personalized letters to each of the 1,074 at the beginning of the free delivery and again one week later. He urged subscription renewal. The results were revealing: of 686 stake leaders sampled, seventy subscribed. Of 388 Sandy and East Millcreek stakes sampled in the suburbs of Salt Lake City, twelve subscribed. There were no renewals, according to Gallivan's memo.12

  One can speculate that church members got all they needed in terms of LDS news from their attendance at the multiple weekly meetings the church asks of its members. On the other hand, said Rod Decker, a long-time Salt Lake City television reporter, low Deseret News readership might be blamed on the idea that “Mormons don't understand how dull they are.”13

  It was in the 1990s that the LDS Church felt that the Tribune could be silenced. If so, the Mormon leadership could tell their story without pesky contradiction from the Catholics and their cohorts, the dissidents, who led in criticizing the church and its social and political clout. They could run the newspaper business as they saw fit. While the LDS Church officially denied any interest in obtaining the Tribune, court documents would later show this was untrue.14 The church watched, waited, and planned its takeover.

  Mike Korologos, former assistant editor of the Tribune, had been hired away to head the public relations arm of one of Salt Lake City's biggest advertising agencies, David W. Evans and Associates. “It was after I went to the Olympic Committee—which was in 1994—that Glen Snarr took me to lunch at the New Yorker [a local restaurant] and asked me point blank what I thought about the LDS Church buying the Tribune,” said Korologos. “I told him it would be a PR disaster for the church.”15 An astute observer of the Salt Lake scene, Korologos was ignored.

  Snarr was the architect of the church's strategy against the Tribune, a secret attack being conducted by the First Presidency of the LDS Church, including Gordon B. Hinckley. Snarr had retired from advertising, and in the tradition of the church sending its people on missions (see “Iron Mission” and “Indian Mission” in earlier chapters), Snarr was assigned the “Tribune Mission.”16

  Meanwhile, since 1993, the owners of the Tribune were contemplating the future of the paper. Its profits had grown significantly since supporting the JOA, which had also provided sanctuary for the church's Deseret News. By 2000 the Salt Lake City JOA showed a profit of $60 million.17

  Not only did the newspaper make a profit, but the Kearns-Tribune Corporation, parent of the newspaper, had come to own about 15 percent of TeleCommunications Inc. TCI had grown into the largest cable company in the world.18

  By now 80 percent of the ownership of Kearns-Tribune was in the hands of two elderly widows, descendants of Senator Thomas Kearns. When they died there could be tax consequences to their
children of up to $150 million.19

  In 1995 a plan was suggested to swap stock with TeleCommunications Inc. so that K-T shareholders could hold their stock interests individually.20 The Kearns-McCarthey widows and their children were not sure this was a good idea. The newspaper was a family heirloom and a profitable one at that. They felt it was also an institution needed for balance in the community.21

  The major shareholders balked but left the door ajar when they heard there might be a way to have their cake and to eat it too.

  Jack Gallivan as publisher emeritus was still active in the business affairs of the paper. He was in fact so prominent in the community that many believed he owned the Tribune, an assumption that grated on the McCartheys.22 Gallivan spent many hours conferencing with the Tribune's legal counsel. Together with his friend John Malone, the president and major shareholder in TCI, they came up with a plan to trade and sell shares in both companies in a way that would benefit the Kearns-Tribune's elderly shareholders and their heirs while at the same time avoiding onerous tax consequences. It was a clever but complicated deal.23

  The transaction would include a management agreement that allowed the Kearns family heirs and their publisher to continue to run the Tribune. It also provided an option agreement for the Kearns family to buy back the Tribune after a period of five years, which was the time required by the IRS to keep the stock exchange tax-free.24 And the deal would give Kearns-Tribune liquidity through the TCI stock. The critical element was the agreement for the family to buy back the paper after five years.

  The McCarthey family held a very large piece of the Kearns-Tribune Corporation, and they didn't trust any of the deal makers. There were shouting matches as the options were encouraged by Gallivan's side and questioned by the McCarthey side.25 Adjustments to the deal were dialed in as talks progressed, and as the McCartheys became more interested, the TeleCommunications stock swap heated up.

  The McCarthey siblings were children of the senator's oldest grandson, Kearns McCarthey. He had been the only one of Senator Kearns's children or grandchildren to make the newspaper his career, working in the advertising department for forty years. On several occasions, Gallivan is said to have talked Kearns McCarthey out of selling his interest in K-T as had so many of his siblings and cousins. As a consequence, by holding on and exercising buy-sell agreements, Kearns McCarthey's ownership had grown.26

  The unassuming Kearns McCarthey, as a major shareholder on the board of directors, was actually Gallivan's boss. On one occasion he took Gallivan for a ride in his car and told Gallivan that a decision he had made was not his to make, but that of the board.27

  By 1997, attorneys for K-T had reworked and refined the plan for the TCI deal, and the corporation decided the time was ripe to execute it. While several newspapers, including the Chicago Tribune and Los Angeles Times, had expressed interest in the Tribune, it made sense, according to publisher Dominic Welch, to make a deal with TCI, since it already held much of its stock. And it looked as though the family could save a bundle in taxes.28

  McCarthey family members were still wary. They were eventually persuaded to go along with the deal. After all, it was their fortune that was most threatened by the inheritance dilemma that triggered the merger talks in the first place.29

  During the Kearns-Tribune–TCI negotiations, the News believed it had an important legal weapon it could invoke should the Tribune be sold. This was the clause in the JOA that said that neither partner could independently transfer or sell its interest in the JOA. It came to be described as the veto power, or the right to consent to any sale of the Tribune via its stock in the JOA.

  Family reluctance notwithstanding, the deal was made in July 1997, and the papers were signed between K-T and TCI.30 K-T shareholders got more than $730 million in nonvoting TCI stock, a management agreement to continue to operate the Tribune, and an option agreement to buy back the newspaper in five years.

  Philip McCarthey, one of the heirs, said, “We were told…the management and [buy-back] options were rock solid.”31

  Meanwhile, the McCartheys bought out other heirs and formed the Salt Lake Tribune Management Company (SLTMC).32 Gallivan had proposed that he and Dominic Welch run the management company and the paper, but the proposal “infuriated the McCarthey family. Board members Sarah, Tom, and Philip McCarthey felt left out of the newspaper's future.”33

  The McCartheys paid $1 million for an option to buy back the newspaper five years down the road.34 The SLTMC, with the involvement of the McCartheys, continued to run the newsroom and got the long-standing 58 percent Tribune to 42 percent News profits from the JOA. The Tribune people viewed it as a temporary sale of the newspaper.

  “We always meant to get the paper back,” said Bob Steiner, a shareholder and great-grandson of Senator Kearns. “What we didn't expect was that TCI would be shopping around the Tribune within three months.”35

  On the day the sale to TCI was final, the Tribune's law firm, Jones, Waldo, Holbrook & McDonough, dispatched a letter suggesting that there might be a catch. In their July 31, 1997, letter they explained, “We note in this regard that, if this option is exercised by [the Tribune]…the transfer…of [Kearns-Tribune's] shares in NAC will require consent of the Deseret [News] Publishing.”36

  The letter was written to TCI. Philip McCarthey says he never saw it. If he had seen the qualifier about the consent of the Deseret News, he “would absolutely have stopped the deal.” Apparently, Jack Gallivan never showed him the law firm's letter.37

  The deal was supposed to reduce the tax burden on the McCarthey family, but according to former editor Jay Shelledy, it was also designed to work Gallivan's sons into the management of the Tribune, with Michael Gallivan as publisher and John W. Gallivan Jr. as editor.38 Michael, or “Mickey” as he is known, was a prominent civic figure and advertising man. John, known as “Champ,” had extensive experience in television production and news direction. Certainly both had the credentials.

  Speculation aside, Jack Gallivan gave assurances that he could easily obtain consent to exercise the buy-back agreement from the LDS Church.39

  The deal was signed. It made instant millionaires of twenty-four of the Tribune writers and editors, used to living paycheck to paycheck. This was thanks to an employee stock ownership plan that held a lot of TCI stock. Shareholders in the Kearns-Tribune Corporation received a very big, tax-free payday and retained management of the paper.40

  But the door to the takeover by the Mormon Church was now open, and preparation for it was well underway.

  “News executives carefully planned to portray the purchase of the Tribune as their own acquisition, not an initiative by the LDS Church,” according to a story the Tribune would later publish.41

  After the sale of the Tribune, Leo Hindery Jr. had become president of TCI, replacing John Malone. Hindery was a businessman, a Democratic political operative, and a sometime race car driver.42 He was a friend of the Mormon Church, having nearly joined its ranks earlier when he coached an LDS Church basketball team in Farmington, New Mexico. Hindery placed himself on the board of the Kearns-Tribune Corporation.

  On March 10, 1998, less than a year after the sale by the Tribune, an explosive announcement hit the communications world: AT&T had just purchased TCI for $55 billion.43 As part of the package AT&T got the Salt Lake Tribune. AT&T was not interested in being in the newspaper business.

  After the sale to AT&T, Hindery then became CEO at AT&T Broadband and was involved in liquidating the unwanted asset. On May 13, 1999, Hindery sent a letter to the publisher of the Tribune, Dominic Welch, demanding that the recently formed Salt Lake Tribune Management Company buy the Tribune immediately or it would be sold elsewhere.44

  In a memo to Hindery, Gallivan put his finger on Hindery's motives: “John Malone has indicated, Leo, that your anxiety to sell the Tribune to the Deseret News is motivated by your fears of political or other reprisals against AT&T [by the church] if it does not make such a sale.”45

  Unbek
nownst to anyone in the Tribune camp, Hindery was also secretly negotiating with the LDS Church. He said it should consider buying the Tribune. Hindery was suggesting to the LDS Church that the Tribune could be purchased for about $175 million. He also put out a secret feeler to Dean Singleton, owner of MediaNews Group, a publishing empire that included the Denver Post.46

  In spite of published denials, the church's Glen Snarr (whose title was president of the LDS Church's Deseret News Publishing Company) jumped at the chance to buy the church's long-time foe and rival from AT&T. His mission was approved by the highest offices of the church, certainly with the involvement of Gordon B. Hinckley, first counselor to the president of the church.

  “If the church wants to strengthen its voice, this may be the opportunity we have been looking for,” Snarr wrote at the time.47 News executives crafted a number of scenarios to take over the paper. News editor John Hughes even proposed firing Tribune columnist Robert Kirby, “whose Johnny-one-note stuff is Mormon bashing.” He would also “clean up” other Tribune columnists.48

  Meanwhile, Snarr was working behind the scenes with AT&T's Hindery to purchase the Tribune.49 Flying in the face of Snarr's testimony in later court records, the Deseret News ran a lengthy article, “20 Questions: Trying to Make Sense of the Newspaper War”:

  Does the Deseret News want to own the Tribune?

  Answer: Absolutely not, in the words of L. Glen Snarr, chairman of the Deseret News board of directors. The News, he says, believes Salt Lake City should have two competing newspapers, independent of each other.50

  AT&T did not want to be in the newspaper business. They made a secret, tentative deal with the Mormon Church, but hearing about it, the Tribune threatened a suit and predicted the public relations disaster forecast by Mike Korologos in his conversation with Snarr in the 1990s. Meanwhile, AT&T's Hindery, according to Peter Waldman writing in the Wall Street Journal in 2000, had insisted that the Tribune had brought on its own demise “by treating their church-owned business partner, the afternoon Deseret News, unfairly and by making bigoted comments to visiting AT&T executives.”51