Manager: Foundation powerless to enforce rules; punts on questions about $40K and Dubow fund

The Gannett Foundation's manager conceded today that the company's charitable arm lacks sufficient safeguards to ensure grants are properly managed by non-profit groups getting the money.

In a telephone interview, Pat Lyle also shifted blame to Western Carolina University for failing to credit the foundation for at least $40,000 in grants given to the North Carolina school at the behest of CEO Craig Dubow. "They did not correctly attribute that money to Gannett Foundation,'' she said.

Lyle said she does not know the whereabouts of the WCU money, despite growing signs it was deposited in the school's Craig A. and Denise W. Dubow Endowed Scholarship Fund. Lyle also said the foundation has no way to force any recipient, including WCU, to comply with requests that money be properly credited as foundation gifts. "That's their responsibility,'' she said. "We can't control that.''

Dubow is also chief executive on the foundation's seven-member board, its public tax returns show. The foundation's executive director is Gannett's chief publicist, Tara Connell, the returns show.

Dubow said intervening
Lyle contacted me after speaking to Dubow concerning questions I've raised recently about the foundation's management. "He told me to be forthright and honest and to answer your questions,'' she said.

Lyle said she received similar instructions from her immediate supervisor: Connell, the executive director. As vice president for corporate communications, Connell also is Gannett's top spokeswoman.

I first asked Connell about the disposition of the $40,000 on Nov. 29 -- more than three weeks ago. Lyle could not explain why it took until now for Dubow (left) and Connell to deputize her to answer my questions.

Lyle said she sends money to recipients with a letter reminding them about a rule governing gift attribution; the rule is on the foundation's website: "In any public acknowledgment or signage, be sure to note that this grant is from the Gannett Foundation."

But Lyle said the foundation doesn't have the resources to check every recipient to ensure compliance with rules, once checks have been sent. That is because Lyle is the foundation's only employee, solely responsible for processing 7,000 individual grants per year, she says. "I'm a staff of one person -- me,'' she said.

Ethics 101: Selling Marion, down river
Lyle's annual case load includes the huge employee GannettMatch program. If she worked 365 days a year, she would still need to process and review for compliance more than 19 grants a day -- an impossible workload. Plus, I do not think Pat should be expected to tell retired Chief Financial Officer Larry Miller: No, sir, you may not use foundation money for that purpose.

To me, Lyle's remarks simply add to questions about whether the foundation's officers are complying with Gannett's ethics policy on "protection and proper use" of company assets. "Theft, carelessness and waste have a direct impact on the company’s profitability,'' the policy says. "All company assets should be used for legitimate business purposes."

And, then there's the conflicts of interest provision: "Conflicts of interest also arise when a director, officer or employee, or members of his or her family, receives improper personal benefits as a result of his or her position with the company."

Dubow is the foundation's top ranking officer. It is funded entirely by Gannett, typically by selling newspapers and contributing the proceeds to charity.

In 2007, for example, Gannett donated the Chronicle-Tribune in Marion, Ind., to the foundation, which soon after sold it down market to Paxton Media Group in Paducah, Ky., after 36 years ownership. Price: $12.3 million, the tax returns indicate. That was more than enough to pay for the $40,000 to WCU between 2006-2007.

Questions: How would transferring company property into the Craig A. and Denise W. Dubow Endowed Scholarship Fund -- a fund off-limits to virtually every Gannett employee -- advance the interests of Gannett stockholders? How come I have to pry this information loose, even as everyone keeps dodging two basic questions:

• Did the $40,000 get deposited into the Dubow account?
• If it is not in the Dubow account, where is it?

Hello? H-e-l-l-o-o-o, board of directors?

The Dubows established their scholarship fund in November 2005 under a contract they signed with WCU that says the source of the fund's money would be "donations from family and friends.'' (Detail, left.) The Dubows restricted their scholarships to students in three N.C. counties, effectively making them off-limits to thousands of Gannett employees.

Lots of finger pointing
WCU has refused to say whether it deposited the $40,000 in the Dubow account, citing university policy on privacy of donor records. Responding to a public-records request I filed under North Carolina law, the school said last week only that the foundation had provided "support'' to the Dubow fund.

Dubow steered the money to WCU in two $20,000 grants, last year and in 2006, the foundation's public federal tax returns show. Clifton Metcalf, executive secretary of the WCU Foundation, said he could release information about the Dubow account to me, only after receiving permission from its donors.

Today, informed of that, Lyle said she would contact Metcalf to discuss the matter.

Dubow's move to release information followed growing and unfavorable attention I have focused on the use of foundation money, under a benefit limited to top current and former executives. The Dubow-directed gifts came as he preached fiscal discipline, and began imposing sharp budget cuts across Gannett that have cost thousands of employees their jobs in the past year.

The management grants program allows executives to earmark $20,000 in annual contributions for favorite charities, ones that would often be ineligible under more strict rules for average employees. Last year, its blue-chip participants included Dubow; Chief Financial Officer Gracia Martore; two retired CEOs, plus retired Chief Financial Officer Larry Miller. Gannett is simultaneously paying Miller a $600,000-a-year consulting fee -- for the rest of his life, U.S. Securities and Exchange Commission documents show.

Under the program, the foundation has given more than $1 million in 2004 to 2007, according to tax returns. I examined the documents under the federal Freedom of Information Act.

Tax returns: policy overlooked
In several cases similar to Western Carolina, the money funded scholarships named for executives -- without any credit to the foundation or to Gannett. Indeed, in a handful of cases, the foundation's own tax returns showed the money was going to scholarships honoring retired Gannett executives. That suggests the foundation itself isn't following its own procedures.

Lyle said it is important for the foundation to get credit for gifts -- as opposed to, say, the Dubows or other executives receiving credit. "It's one of the reasons why we give grants,'' Lyle said. "When we give money, we don't do so anonymously.''

Last year alone, the foundation gave $11.3 million to charity, according to its public tax return. Its mission is to help non-profit groups in communities where Gannett owns newspapers and TV stations. WCU is in Cullowhee, N.C.; the nearest Gannett business is the Asheville Citizen-Times, 53 miles away.

I asked Lyle why it was appropriate for the foundation to give $40,000 in a community without a Gannett business. She said the gifts "conform to the policy we have for management grants.''

The Dubow ties to WCU are unclear. Jackson County property records show the Dubows own a $1.5 million country estate on two acres in the gated Trillium golf community in Cashiers. That may explain why the couple restricted their scholarships to students from Jackson and two adjoining counties.

Buncombe County, home to the Citizen-Times, didn't make the cut.

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[Image: today's front pages, Newseum]