Tuesday, December 30, 2008

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:
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.


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33 comments:

  1. Frank Gannett is spinning in his grave. I want to vomit. This is all so AHN except he isn't doing it with GCI funds but just funds that he looted from the original real Gannett Foundation.

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  2. Well done! Best of Gannett Blog!

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  3. This is fantastic. We always knew Neuharth was a dirtbag, but now we have incontrovertible proof. Craig's sleaze can't hold a candle to Al's. He didn't just make questionable donations... he made questionable donations TO HIS WIFE'S NONPROFIT! That's head and shoulders above anything Dubow could have imagined.

    It almost makes me want to resign tomorrow so the assholes at the top will have even more money to play with. Goshgeewillikers, I can't wait to see what they do next!

    Seriously, I just hope some independent-minded publishers out there are expressing some outrage to the higher-ups about all this. They've been put in the positions of having to lay off staff because of truly mindblowingly stupid decisions at Corporate, and now it's all out there for the world to see.

    Thanks, Jim. We owe you big time.

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  4. Why would a multimillionaire have to use a foundation's (someone else's) money to give only $60,000 to his wife's non-profit? It seems so petty. Couldn't he fund it himself?

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  5. Why do Freedom Forum's people in charge make so much money? It seems contradictory to the cause. When real journalists are starving, how can an administrator of a foundation make almost $400,000/year? Where's the charity in that?

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  6. *Sound of clapping hands* Excellent journalism, Jim!

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  7. I see Gannett offers adoption assistance as an employee benefit. Does the company use or contract with a single agency such as Home At Last, or do employees choose?

    Great work, Jim. Makes me sick, but great work anyway.

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  8. This is a great piece of reporting. I always thought moving the Newseum to Pennsylvania Avenue was a monumental mistake. The Arlington location was off the beaten track, but the Newseum there got a lot of visitors and there was no $20 entrance fee. The Newseums expense sheet would be very interesting to obtain. How much does GCI pay the Newseum for the USAT office space there, for example. Who rents the apartments in this building is another question I would like to see answered. How many execs take lunches at the ultra-expensive Puck restaurant, which is struggling?

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  9. The reason you're seeing these "don't fit the mold" grants is that the Freedom Forum has the same "discretionary" grant program for its execs as the Gannett Foundation. At one time, I think it included their Board of Directors, maybe still does.

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  10. 2:36 AM - My thoughts exactly. It seems the more money you make/have the less you want to spend it. I guess they would rather use other people's money.

    Scumbags, all of them.

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  11. Jim:

    Well, I don't want to take credit for your hard work, but I told you to look at the Freedom Forum!! The Gannett Foundation is but a sloppy student when compared to the zen master of waste, the Freedom Forum.

    What you've done here is really amazing. You've now illustrated that both the Gannett Foundation AND its spiritual ancestor, the Freedom Forum, have both been engaged in these kind of country club perks for years and years. Equestrian donations from the the Freedom Forum? Donations to evangelical (and homophobic) groups from the Gannett Foundation? Grants to Al's wife's adoption foundation? Grants to fund personal university scholarships from both? And hardly any substantial journalism related grants from either.

    Great job, Jim. Truly.

    Wilford.

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  12. 7:03 AM, the employee gets to pick his/her own adoption agency. Gannett only offer subsidies once the adoption is finalized, however. We're in the process of adopting, and we're out of pocket about 2 grand so far, with at least another year to go before we can finalize (so manybe 3 grand total?). By then, some of the expenses will no longer be eligible for reimbursement... if I'm still even at Gannett, that is, and haven't been kicked to the curb like so many of my former co-workers. I saw a commenter last week suggest cutting the adoption subsidy as a cost-savings measure, but I bet very, very little money actually gets used on that subsidy.

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  13. 10:38
    Thanks for clearing that up in my mind. I wish you the very best with your adoption and your employment.

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  14. So they make a $12.500 donation to the U.S. equestrian team and it just so happens that Jan Neuharth is president of an equestrian center in Northern VA. Bet there's no connection there, eh?

    Amazing.

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  15. p.s. Just to be clear, I said "spiritual ancestor" not because the FF is older than the GF but because that's where the culture of excess migrated to after Neuharth left Gannett.

    The Freedom Forum has been the retirement pasture of choice for many a Gannett executive. If you want to see a bunch of guys with no curatorial experience run a museum, while watching the Golf Channel with one eye, the FF is your place.

    If you want to see how a good old boys network works, consider that the 2008 Al Neuharth Award for Excellence in the Media was given to....drum roll. please...Charles Overby, CEO of the Freedom Forum. Wow, such a stretch. It must have been a really tight race, what with all the journalists killed in far-off places. But I think they made the brave choice, don't you?

    Like I said a week ago, Nero is starting to look pretty good compared to these guys.

    Wil

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  16. Sad story, brilliantly reported. Years after leaving Gannett, I still can't fathom the boneheadedness that drips down straight from the top.
    Signed, Ex-Morristown

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  17. One last note and I'll shut up:

    Ken Paulson said in and E&P interview recently that he was "not leaving USA Today to escape the mounting newspaper industry problems, but to go to what he calls the "Yankee Stadium of the First Amendment.""

    More like the Mount Rushmore of Perks. I mean, really. Does anyone actually consider the golden retirement home of the Freedom Forum to be the ground zero of the first amendment? A bunch of guys giving each other awards, giving their wives' foundations grants, wasting money left and right, building new museums when the old ones were fine, and buying expensive trinkets from the set of Citizen Kane? This is the ground zero of the first amendment???

    I think Ken Paulson should spend some time in a Chinese jail cell with some of the human rights advocates who were put there with the help of companies of Yahoo and Cisco. Sadly, that's the Yankee Stadium of free speech and free press, not some cushy offices on Pennsylvania Ave.

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  18. I wasn't going to read this - glad I did, GREAT reporting, but now I'm really sick to my stomach! HOW COULD THEY!!! think about throwing around sooooo much money while so many of their recently unemployed workers are floundering looking for work in this stressful time??? Instead of sending the monies out and about, why haven't they used some of it to help out the numerous papers that they themselves are helping to destroy! Or giving much deserved raises to those still employeed? Me, I'm an X, by choice, but would have stayed and weathered out the storm had I been paid properly - the going national rate for my position was at least $10,000. more per year. Those "millionairs" should have to reimburse all the recent laid offs with at least $10,000. each of their ill gotten gains and pay back the foundations for the "donations" they made in their own names!
    Sorry, just a little bitter after reading all those huge numbers being bantered about while I'm sitting here wondering if I can pay the rent on my tiny one bedroom or put food on my table!
    Maybe I can make up a charitable foundation.....Any suggestions?

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  19. ....Jesus Christ...and I just thought they were stupid.....

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  20. Hey, 2:36 a.m. How can they be so petty? Answer: Petty is really Allen H. Neuharth's middle name. (I think the "H" stands for HUBRIS.) He's the robber baron of Gannett, for sure, starting with the rape of the Gannett Foundation to fund his little monument to his humongous ego. Newseum? NAUSEAM ...

    Jim, brilliant piece, terrific reporting. Too bad you and I aren't doing this kind of thing for Gannett anymore. Then again, the meatheads at the top are too clueless to know what kind of ability, experience and dedication they jettisoned from the fold these past couple of years through buyouts and layoffs.
    Screw them.

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  21. Richard Michem12/31/2008 4:50 PM

    Jim your missing a couple of facts? One, why did Gannett's take out a loan and buy back their stock from the Freedom Forum? (yes I know why) The other facts, well, some of us, do not go threw the front door, to get our information.

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  22. When I joined USA TODAY in 1989, I had a chance to see the top floor of the Gannett tower where Al's office was. Including a full apartment, everything was gold plated. It was just ridiculous that the company would pay for this clown to have a full apartment in his executive suite. It certainly didn't feel like the rest of Gannett up there.

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  23. Al was also famous for using Florida Today staffers to do work on his house in Cocoa Beach. Pressmen were paid at least time and a half (company time) to go there and fix his leaking faucets.

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  24. @6:11 p.m. --

    Must be a Gannett tradition. Not that long ago, Montgomery's executive editor was making the administrative assistant clean her house after get-togethers.

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  25. A few months back, there was a Florida babysitter job posted on the official Gannett job site. The posting only stayed up a day or so. Was that for Al? If so, that's just wrong and against the ethics policy to have Gannett human resources wasting time on a non-business related job.

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  26. Great piece, Jim - very well done!

    Another connection between Al and the FF contributions is this. His kids have or are now attending both the Indian Harbour Beach Montessori School and Holy Trinity Episcopal Academy to which were provided a generous combined contribution -- according to your blog -- of $82,000.

    I sort of feel sorry for the guy and his wife, though. While there are plenty of folks who might say nice things about their monetary contributions, I've yet to hear someone say something nice about Al or his wife as people.

    Usually the Al and/or Rachel stories involve unfailing arrogance, ruthlessness and venom. Sad way to live........

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  27. Freedom Forum is not a foundation. It is, however, a guaranteed annuity for favored former Gannett execs.

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  28. Golden rule. He who has the gold, makes the rule.

    This becomes an entire non-issue by re-writing the terms of the charter or rules of the foundation. Should take five minutes and a voice-vote approval by the directors who seem to all be benefitting somehow.

    Unfortunately, we're screaming into a pillow here. Nobody cares, in the larger world. There will be no follow up, no investigation, no recrimination. A month from now, this will all be forgotten.

    Our public has become so accustomed to bullet points that an OMG long story like this would cause them to immediately turn the page - even if they were personally impacted by this money shifting. Without Britney, it's too boring.

    A shame? Perhaps. GB Shaw said 'we shall be governed no better than we deserve', evidently we get the fourth estate we deserve as well.

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  29. Jim, nice work. Keep it up.

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  30. Best of Gannett Blog indeed.

    On a side note, the foundation shift in the 1990s also involved the closing of the long-standing Gannett Newspaper Carrier scholarship program.

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  31. One other supreme qualification that Paulson has for the FF post: He's a lawyer. Nuff said.

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  32. 6:10 PM – Finally, after 20+ years I now know why the fixtures in the bathrooms at Florida Today were gold. Even the sinks in the public restrooms were hammered copper/gold plated when it opened.

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  33. Does anyone else think "60 Minutes" might have a lot of fun with this story?

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