As Freedom Forum stumbles on big Newseum bet, documents reveal spending often veered far afield

Dr. Rachel Fornes's Home At Last adoption agency in Cocoa Beach, Fla., seems like an unusual non-profit to be receiving grants from one of the world's biggest charitable foundations devoted to free speech and a free press. Fornes, a chiropractor, started the business in 2001 as a non-profit initially called Babies Up For Adoption Agency Inc., in the small beach community better known as Kennedy Space Center's home.

Public documents show Freedom Forum in Washington, D.C., made $65,700 in donations to Home At Last between 2000 and 2007. This was when the private foundation should have been reining in its famously undisciplined spending. After all, administrators were about to tap the endowment, an investment fund that helps pay salaries and other expenses, in order to build a new home for the foundation's signature project -- a museum about news called the Newseum.

Freedom Forum disclosed the gifts in public Internal Revenue Service documents that do not explain why a journalism foundation would underwrite an adoption agency. The documents certainly don't disclose one likely reason: Fornes is the wife of Freedom Forum's multimillionaire founder, Al Neuharth (left).

The Home At Last grants are among hundreds of gifts Freedom Forum made in 2000-2007 to non-profits that seem to share little in common with the foundation's mission, a Gannett Blog review of more than 9,000 pages of IRS documents found. In other cases, money went to causes that appeared to benefit foundation officials more than the foundation itself. For example, Freedom Forum has given:

• $15,000 to the National Abortion and Reproductive Rights Action League, a leading political lobby.
• $34,500 to the United States Equestrian Team in Gladstone, N.J., to promote competitive horseback riding events.
• $23,000 to the 30-year-old Whale Museum, housed in a former Odd Fellows fraternal hall on an island near Seattle.
• $35,500 to the Montessori Parent Organization in Indian Harbour Beach, Fla.
• $46,500 to Holy Trinity Episcopal Academy in Melbourne, Fla.
• $5 million to the University of Mississippi for a journalism center not honoring Gannett or the foundation -- but the foundation’s chairman and CEO, Charles Overby, an Ole Miss grad, and long-time Neuharth aide.

Big paychecks for top brass
Meanwhile, Freedom Forum's administrators were paid handsomely, too, the IRS documents show.

Top earner: Overby, 61 (left), who pulled down $481,985 in wages and benefits in 2007, plus another $95,039 for expenses. That brought to $5.5 million his total pay and expense reimbursements since 2000.

Neuharth, 84, earned $225,000 in 2007, plus another $184,482 for expenses, as senior advisory chairman and one of 19 governing trustees. A daughter by his first marriage, Jan Neuharth, also a trustee, got $46,000. She is a former Los Angeles attorney who is now president of Paper Chase Farms, an equestrian center in Virginia horse country not far from Gannett headquarters. She runs it with her Swiss-born husband, Joseph Keusch, a champion fox hunter who competes on the international horse show circuit.

Another noteworthy trustee, former Sen. Tom Daschle of South Dakota, earned $19,500, the documents show; President-elect Barack Obama recently nominated Daschle to be cabinet secretary for Health and Human Services.

All this big spending took place as administrators were simultaneously drawing down the endowment to build a $450 million mixed-use complex for the Newseum. The news museum in Washington replaced a smaller version when it opened last spring -- three years late, and $200 million over initial cost projections, foundation documents show.

Last month, Newseum reduced its workforce by 10%, citing big investment losses in the Freedom Forum foundation's endowment. Amid the Wall Street crisis, Overby said, the fund had fallen to $450 million from $600 million. In 2000, the IRS documents show, the endowment held about $1.1 billion in corporate stocks, bonds and other securities.

Another shoe drops
Two weeks ago, the board of trustees announced a big change in management. Trustee Ken Paulson, 55 (left), a former Neuharth chief of staff who also is USA Today's top editor, was named president and chief operating officer of Freedom Forum and the Newseum. The appointment puts Paulson in line to succeed Overby. Paulson starts Feb. 1.

Freedom Forum spent $88.7 million in 2007 on grants, salaries and other overhead. Its single biggest expenditure was a huge grant, $57.3 million, to the Newseum, according to the 2007 IRS report, which accountants finished only last month. At my request, Freedom Forum shipped a hard copy of the report to me by overnight mail; I received it this morning.

The foundation says its grants are awarded in areas "consistent with the mission of the Freedom Forum Inc. and its affiliates, including allowing grants to charitable institutions," according to the 2007 IRS report, known as a Form 990-PF. On its website, Freedom Forum says it is "a nonpartisan foundation dedicated to free press, free speech and free spirit for all people. The foundation focuses on three priorities: the Newseum, First Amendment freedoms and newsroom diversity."

Freedom Forum's response?
Sunday, I e-mailed some questions to Newseum spokesman Mike Fetters. I asked about Freedom Forum's spending -- including for the adoption agency owned by Neuharth's wife -- and about the role of the trustees. Fetters has not replied to my questions, except to decline my request for trustee Daschle's contact information. (In fact, the foundation has refused to answer any of my questions since I began examining its IRS reports last spring.)

To be sure, the Newseum investment may still pan out, once the economy begins growing again. But in pouring so much into brick, glass and six-figure paychecks, Neuharth and Overby have risked a fortune that might have been devoted solely to saving journalism.

Columbia Journalism Review told how Neuharth came to sit on top of Freedom Forum's treasure in a story seven years ago with a memorable remark by Overby. He was responding to the trade journal's suggestions that the foundation was sinking too much into the Newseum. "I have found that there are three things that everybody knows how to run," Overby said. "They know how to edit a newspaper, they know how to coach a football team, and they know how to run a foundation."

In addition to his Freedom Forum job, Overby is a director at for-profit prison chain Corrections Corporation of America. The Nashville-based government contractor paid Overby $162,689 in 2007, according to U.S. Securities and Exchange Commission documents. Add that to his foundation pay, and Overby pulled in nearly $740,000 for the year.

Sharkskin suits, and vodka martinis
Neuharth launched the foundation in 1991 after reaching mandatory retirement age as Gannett's chairman and CEO, a position he reached by muscling his way to the pinnacle of American publishing.

In a story he recalls often in his weekly USA Today column, Neuharth was brought up poor by his widowed, seamstress mother in the small South Dakota town of Eureka. He joined Gannett in 1963. By the go-go 1980s, Neuharth had transformed the company into a coast-to-coast media giant of newspapers, TV stations and other businesses.

He and his buddies were Gannett's version of the rat pack, with Neuharth in the Frank Sinatra role. He favored sharkskin suits and vodka martinis. Women were drawn to him. With Corporate's jet as his personal limo, Neuharth competed on a world stage with other celebrity CEOs. He got President Reagan to speak at the 1982 launch of his greatest triumph: USA Today, now the nation's No. 1 circulation newspaper.

Yet, in retirement, Neuharth faced the prospect of losing all the trappings of a media baron's life, including an office suite equipped with his specially raised desk, so he could loom over visitors. Neuharth chose a path taken by many executives concerned about their legacies in the twilight of their careers: He would establish a major charitable foundation of his own.

Also like many executives, Neuharth wasn't going to pay for it. He made himself head of the original Gannett Foundation, started by company co-founder Frank Gannett in 1935. Next, Neuharth quickly pressured the company to buy the foundation's assets, about $650 million in GCI shares, CJR said.

Gannett paid the price to keep the shares from unfriendly hands; the deal included regaining rights to the Gannett Foundation name. It is now run as a "pass-through" foundation without a fixed endowment. (And it's been making some unusual grants, too.)

A friend in Obama's cabinet
Neuharth then hired Overby, a politically connected Gannett executive, and the two remade the foundation as Neuharth's baby. They named it Freedom Forum, and established it as one of the world's better-known charities focused on journalism.

Neuharth still doesn't miss a beat. Only last Friday in his USA Today column, he made a passing reference to his wife and the adoption agency -- without disclosing her ties to Freedom Forum. (Neuharth writes in a beachside treehouse overlooking Kennedy Space Center's launch pads, his foundation bio says; home is a renovated log cabin called the Pumpkin Center.)

In Friday's column, Neuharth also put the nascent Obama administration on notice that it needs to promote adoptions. "It might be one of the most humane of his ambitious Health and Human Services plans,'' Neuharth wrote. (Trustee Daschle, left, Obama's HHS nominee, no doubt already got Neuharth's memo.)

To be sure, as CJR recounted, Freedom Forum has hit plenty of rough patches. The New York state attorney general spanked Neuharth and Overby hard in 19941991, over the non-profit foundation's excessive spending. There was a controversy over a biography of Neuharth that the foundation commissioned, then killed, after author Michael Gartner turned up a woman claiming to be Neuharth's out-of-wedlock daughter. The book cancellation prompted a New York Times editorial, "Free Press, everywhere but here."

By January 2002, Freedom Forum was knee-deep in plans to replace the old Newseum with a more elaborate and certainly more expensive building on prime Washington real estate, not far from its original home on the other side of the Potomac in Rosslyn, Va.

$200 million overrun vs. Wolfgang Puck
Then CJR's story hit. The 4,400-word article is a must-read. It noted that Freedom Forum's endowment had plunged by more than a third, forcing Overby to reduce the foundation's workforce to about 170 from 290.

The museum's projected cost started at $250 million. But it mushroomed quickly, as did worsening financial problems in the very industry the Newseum was supposed to celebrate. The final price tag was $450 million when the complex of museum galleries, luxury rental apartments, and a restaurant by celebrity chef Wolfgang Puck (above) opened last spring.

Observers questioned the expenditure of so much money at a time when the industry -- including Gannett, the source of the foundation's original wealth -- was laying off thousands of journalists, and slashing the amount of news delivered. "Avoid the gilded disaster that is the Newseum,'' wrote Slate press critic Jack Shafer. "I want the Freedom Forum to sell off their monument valley installation and use the proceeds to actually support journalism. Like endowing a newspaper, for instance."

Neuharth's mantle
Administrators at the Newseum (left) might have anticipated its financial squeeze well before the museum's heavily publicized April opening. The economy began to tank in earnest in summer 2007, when the real estate bubble collapsed. Wall Street's meltdown followed -- pinching Freedom Forum's endowment, consumer spending, and the Newseum's attendance projections.

A month ago, the museum disclosed that it had reduced staff through buyouts and attrition. In news media interviews, Overby said the culprit was Wall Street. Then, two weeks ago, Freedom Forum announced the appointment of Paulson, the trustee; he's replacing another former USA Today editor, Peter Prichard, 65, who got paid $397,690 in 2007. Prichard is to work on special projects for a year before retiring, the foundation said. If all goes well, Paulson would replace Overby -- effectively inheriting the Neuharth mantle.

Paulson is not a professional museum administrator. But he's got one credential that's always passed muster at Freedom Forum: He's a Gannett insider. Hopefully, that's the first tradition Paulson jettisons.


This post sponsored by these generous donors
Anonymous (8)

Please join them!
And help an independent journalist earn a living. Any donation appreciated. Those who contribute $25 or more through PayPal will have the option of listing their name as a sponsor, above. (Names will only be listed on written request, in the PayPal message field; please include a phone number for verification.)

Please use the "Donate" tool in the green sidebar, upper right. Or mail cash/checks payable to: Jim Hopkins, 584 Castro St. #823, San Francisco, Calif., 94114-2594.

[Image: USA Today's debut issue, Sept. 15, 1982]