Following is the text of a letter I've sent to the Law Department, regarding recent events associated with the Gannett Foundation.
Dec. 22, 2008
Barbara Wall
Vice president, associate general counsel
Gannett Co. Inc.
7950 Jones Branch Drive
McLean, Va.
Via e-mail
Barbara:
I am a stockholder in the Gannett Co. Inc. I am writing to you in your capacity as Gannett's chief ethics officer.
I am reporting what may be violations of the Gannett Ethics Policy by Craig Dubow in his capacity as chairman, chief executive officer and president of Gannett, and as senior officer of the Gannett Foundation.
As I trust you will agree, there is an inherent conflict of interest in your investigating the company's chairman, chief executive and president. For that reason, I ask you to recuse yourself, and forward this letter directly to Karen Hastie Williams, presiding director on Gannett's board. I would like Ms. Williams and other independent directors to consider the following:
1. Protection and proper use of company assets
I question whether Mr. Dubow has complied with this provision as a result of his arranging for the transfer of at least $80,000 in Gannett Foundation money in 2004-07 to endowed scholarships at universities in North Carolina and Texas.
Mr. Dubow, through his representatives Tara Connell and Pat Lyle, has not accounted for the money's disposition.
In the case of $40,000 in grants Mr. Dubow directed to Western Carolina University in Cullowhee, N.C., I note the following: In November 2005, public documents show, Mr. Dubow and his wife established the Craig A. and Denise W. Dubow Endowed Scholarship Fund at WCU. The contract they signed says fund proceeds were to come from "family and friends.''
Yet, documents WCU has made public suggest instead that Mr. Dubow has been commingling foundation money with personal funds in the WCU Dubow family scholarship fund -- with no discernible benefit to the company or to its stockholders.
2. Conflicts of interest
I question whether Mr. Dubow has complied with a provision that says: "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."
I believe that Mr. and Mrs. Dubow receive personal benefits in the form of favorable publicity and enhanced social reputations in communities where Mr. Dubow has directed foundation money to scholarship funds honoring the couple.
I note, for example, that the WCU contract signed by the Dubows goes so far as to mandate the following: "It is requested that the recipient send a letter of thanks to Mr. and Mrs. Craig A. Dubow, 7950 Jones Branch Drive address in McLean, Va.,'' Gannett's headquarters address.
3. Disclosure policy
I question whether Mr. Dubow has fully complied with the following provision: "It is Gannett's policy that all disclosures in financial reports and public documents that it files with or submits to the Securities and Exchange Commission (SEC) and in other public communications of a like nature made by the Company should be full, fair, accurate, timely and understandable. Members of Gannett's senior management have the general responsibility for preparing such SEC filings and such other communications and will at all times endeavor to remain fully informed with respect to these matters and to see that such filings and communications comply with this disclosure policy."
I suggest that certain SEC documents filed by Gannett in calendar years 2004, 2005, 2006 and 2007 are incomplete and therefore inaccurate for the following reason: The documents fail to disclose any compensation value attributed to an employee benefit known informally as the "management grants program," administered by the Gannett Foundation, and available to select current and former members of the Gannett Management Committee.
I reserve the option of amending this report at a later date, as necessary.
Thank you in advance for your attention to this important matter. I look forward to your response.
Jim Hopkins
San Francisco, Calif.
Monday, December 22, 2008
40 comments:
Jim says: "Proceed with caution; this is a free-for-all comment zone. I try to correct or clarify incorrect information. But I can't catch everything. Please keep your posts focused on Gannett and media-related subjects. Note that I occasionally review comments in advance, to reject inappropriate ones. And I ignore hostile posters, and recommend you do, too."
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I am interested to see how they handle this response. Time will tell.
ReplyDeleteThe phrase "What goes around, comes around" seems appropriate ..... I do hope that your letter places some heat on this poor excuse of a CEO. Wow... he took a 17% volutary pay cut while giving 1000's of us a 100% pay cut. Merry Christmas Craig !! Humbug !!!
ReplyDeleteWow.
ReplyDeleteI'm glad you didn't drop this, Jim.
Great job, Jim. You're asking important questions, following the protocol just as we would ask reporters to do.
ReplyDeleteThanks very much for your time and energy on this. Hang in there.
Wow. Talk about a bomb dropped in the middle of a normally collegial board of directors meeting. Kaboom. I think that under the terms of Sarbanes Oxley, they are obliged to do something about this, or they are personally liable. Take a look at the terms of Sarbanes Oxley, and you see the consequences following from the failing of innacurate reports as you detail here.
ReplyDeleteTo be honest, some of this is driven by simple practical issues. I've had a big increase in readers over the past six months, and that's wonderful. It's brought many more perspectives -- and many, many more tips for me to pursue.
ReplyDeleteBut I need to be more productive, because I don't want to spend even more time on this blog. So, that means pushing very, very hard to get information that should be public -- so I can move along to something new.
This has gotten embarrassing.
6:47 pm: I don't think you mean the board is meeting right now, do you? (I think a key member is on a cruise to Bermuda or the Bahamas at the moment. Although they could always do a phoner.)
ReplyDeleteMaybe Tara will talk to you now. I can't think of anything else that would get attention but that letter. Very clever. Congratulations. Frankly, I would not have thought of taking this step because I would not have thought of it.
ReplyDelete7:04 No, I don't know when they meeting, but there has to be a board meeting coming up in the next few weeks to discuss the Q4 results and the annual report. So your letter is very timely.
ReplyDeleteIn 20 years as a Gannett employee, I learned to be a good reporter by using every legal tool available to get to the truth.
ReplyDeleteJim,
ReplyDeleteFor the first time, I finally view this blog as a viable news enterprise. Don't get me wrong, a lot of the information reported on this blog in the past year has been invaluable. However, you are going beyond the basics and carving a niche for yourself. Don't underestimate yourself, this blog and its topics are very important. After all, somebody needs to "police the police." Please don't give up. You provide a valuable community service. You should consider turning Gannettblog into a nonprofit organization. It would enable you to seek out more sources of revenue. This is truly 21st Century newspapering/media.
Earth to Jim...the Board approved these policies. You might have to go another route. This is so much ado about nothing it's laughable.
ReplyDelete7:13 pm: Have you seen these policies written down, memorialized or published in some other way?
ReplyDeleteIs it included in or referenced by any separation contracts between the company and any of the named executives in the management grant program?
How many of the current board members have ratified this policy -- assuming it was ever put before the board in the first place?
Jim:
ReplyDeleteGreat bit of reporting here. Very well done. Of course, if you don't hear back from the general counsel's office or anyone on the board, you can always contact the SEC. That organization encourages tips.
"Tips - Report a potential violation of the securities laws directly to enforcement@sec.gov. Please do not use this email box for general comments or questions."
I thought this was interesting. Looks like trouble...
ReplyDeleteFebruary 4, 2006
"EXCERPT: The U.S. Securities and Exchange Commission is giving corporate America a glimpse of the executive perks it wants disclosed to shed more light on top-management pay. Among its targets: personal use of company aircraft, yachts and club memberships.
The agency is revising its rules on compensation reporting for the first time in 14 years. On Jan. 27, 2006, it released a 370-page proposal that includes guidelines on everything from stock-option valuations to compensation tables in proxy statements.
The document also addresses the hidden world of perquisites. The rules, which are open to comment until April 10, may give shareholders an unprecedented window onto the lifestyles of the corporate elite and the kid-glove treatment some receive at company expense.
Although the SEC doesn't provide a detailed list, it's encouraging companies to reveal just about anything that isn't used for business purposes only, even commuting costs and exclusive discounts on company products.
DRAWING THE LINE "Where do you draw the line?" SEC Commissioner Cynthia Glassman said at a speech at the ALI-ABA Financial Services Institute in Washington Friday. "My own personal rule of thumb is if it walks like a duck and quacks like a duck, it's a perk." The proposal, the agency's first major initiative under chairman Christopher Cox, lowers to $10,000 from $50,000 the threshold for disclosing a top executive's aggregate perks."
http://securities.stanford.edu/news-archive/2006/20060204_Headline101227_Herald.html
Jim: Don't stop now! There's more here for sure. Three weeks to respond to a simple inquiry... this is what happens when a broadcast guy is in charge of a newspaper company. It's almost as if he doesn't understand that by waiting, it just gets worse.
ReplyDeleteRemember the saying about getting in a fight with someone who buys ink by the truck load? This is the new paradigm.
7:49 pm: What is this "ink" thing? ;)
ReplyDeleteI bet this not only goes on at the top but also thru out other Gannett properties.From accepting gifts to having people running depts that have a side bussines doing the same work on the side that they do for Gannett
ReplyDeleteYou should send copies to the SEC, IRS, Gannett board members and even the analysts who cover Gannett as the more who know, the less likely it is that Gannett/Dubow can ignore it.
ReplyDeleteGreat work in keeping this in view Jim.
Earth to Anonymous (7:13): This is not much ado about nothing. The nuance might escape you here, but then we live in a world in which nuance always seems to be losing out to black and white, good and evil.
ReplyDeleteHere's the nuance: The Gannett Foundation has been allowing its executives to appear far more philanthropic than they really are. The foundation, which is a non-profit organization, has been giving money to the pet causes of it's top brass for years. These causes don't exactly seem to fit the mission statement of the foundation, which specifies that grants and scholarships be given to folks in the area where Gannett has properties. (Specifically, Western Carolina University and the University of Texas in Austin don't really fit the bill.)
More nothing: the Gannett Foundation isn't getting any credit for these donations, instead allowing folks like Denise Dubow to look like she endowed the scholarship herself.
More, more nothing: The Dubows are signing their names on documents that say the source of these funds are "donations from family and friends" when in fact that's not the case. They're coming from the Gannett Foundation.
Even more nothing: It's starting to look more and more like the amount of money going to pet project grants to executives than benefit few, if any, Gannett employees and/or their families, and few, if any, journalistic causes that would fall within the foundation's mission statement actually exceeds the amount of money given via actual Jennings scholarships, the Gannett Foundation vehicle which is available to those people.
And the final bit of nothing: All of this Daddy Warbuck-ing by proxy is coming to light in a time when thousands of Gannett employees are being laid off. So on the Insensitivity Index, it's a 10, right up there with auto CEOs and private jets.
Just for starters, I'd say that's more than nothing.
Wilford
You go, girl!
ReplyDelete(Which was said to me, a guy, by my editor,a guy.)
(Meaning, you go, Jim!)
In my view....Dubow should have perks. His perks fail in comparison to most of corporate america. He oversees 40,000+ people. Yes, the Foundation should have been given credit- so be it. Move onto something else Jim. Texas and WCU are good causes. Let's hope those students don't go into newspapers!
ReplyDeleteI still say it looks like a tax evasion. For every practical purpose, this money appears to have been used for a presumably joint-tax-return couple's personal charitable donation.
ReplyDeleteBy using the Gannett Foundation as a false front, Craig Dubow and Gannett Co. evade employment taxes on $80,000 of Craig's (not Denise's) salary compensation and allow Craig and Denise to spend it on philanthropy as if it were their personal money, not Gannett Foundation's, at GF's full 100% deductible instead of only the portion they would be entitled to deduct on their personal taxes.
I don't think it's tax evasion. But it's also no longer a simple case of an innocent accounting snafu.
ReplyDeleteOn Nov. 29, I asked Tara Connell three questions:
1. Did the $40,000 go to the Craig and Denise Dubow scholarship fund?
2. If not, which endowed scholarship fund or funds received the $40,000?
3. How did these $40,000 in grants advance the interests of Gannett's shareholders?
Twenty-three days later, Connell, who is the executive director of the Gannett Foundation, has been unable or unwilling to answer those questions.
Why?
Jim, first of all, excellent work. But why are you certain that there was no tax evasion? Can you please explain clearly why we should just accept that nothing illegal happened here?
ReplyDelete12:49 am: Well, I didn't say I was "certain.'' It's just my gut instinct.
ReplyDeleteHe's done. If not for this, than the dismal performance of the company on his watch. It's over.
ReplyDelete11:50 PM here.
ReplyDeleteJim, are you saying your experience leads you to think federal authorities would not pursue tax evasion questions, or that you see no tax evasion as you understand tax law?
I would agree with you if you're saying tax questions will go nowhere. The sum is relatively paltry, and the contracts and definitions relatively loose and subjective to prove intent(did C and D think the foundation could be considered a "friend," for example?).
However, I think the proof is in the pudding that this "gray area" employment benefit evades taxes, legal or not, that us average taxpayer would pay on the save event. Tax lawyers may disagree with GF lawyers on a few points.
Oh, forgot: The answer to "why" an executive director wouldn't answer very simple accounting questions is easy.
ReplyDeleteIf there weren't something legally questionable, your answers would have been forthcoming three weeks ago. The best way to CYA is not to answer, we all know.
10:54, how do you know UT and WCU were good causes? Dubow hasn't made disclosure of who, if anyone, received a scholarship or on what qualification.
ReplyDeleteWhat if the money is sitting there as a slush fund for university officials to tap without detection? What if a scholarship went to Dubow's own kid, or his neighbor in a similar multimillion-dollar home?
We don't know the money went to a good cause if all information about it went to Craig and Denise personally and not to the foundation for public disclosure. The only way you could know, as you seem to purport, is if you are Craig or Denise.
Excellent. Hypocrisy exposed. I wonder how many Gannett executives have been terminated or left the company overnight "to pursue other interests" for similar type situations.
ReplyDelete8:23 a.m.: I haven't seen any evidence of tax evasion -- yet.
ReplyDeleteDoesn't the board have an audit committee with responsibility for overseeing compliance with the ethics policy?
ReplyDeleteAs a former Military Times worker who also felt Gannett's ax, I can only say: HOOAHHHHHH!!!!
ReplyDeleteGo get 'em, Jim.
Hey 10:54, are you stupid or what?
ReplyDeleteIt's one thing to earn perks when the company is doing well but quite another when things really, well - suck. And things have been sucking for a while.
I'm all for a compensation package when it is earned although I will say that no one is worth millions in a salary - CEOs, sports figures or anyone. Even musicians earn most of their money for performances and selling records or songs.
CEOs are just employees, period. 40,000 people don't report to them just as my entire operation doesn't report to me. I have "people" and I recognize them. I don't see much of that going on from CD's tower of power. All it sounds like from this perch is someone taking advantage of opportunity for personal benefit on the backs of others. As much as I dislike unions I think that is partly why they were formed in the first place.
5:39 & 8:33
ReplyDeleteI appreciate your comments..I truly do. I just think this blog is blowing it way out of proportion. I do not believe an academic institution would mis-use funds. Also in 2005 (when the gift was made), the company was doing far better. Also the Gannett Foundation could have said "no." They manage millions.....in my view, it was reasonable. In fact every employee can donate up to $10k per year and get a match. What benefit does Dubow get? More notoriety at TX and WCU....big deal.
I'm moving on from this...it just sounds like many of you have an axe to grind.
Part of the problem with journalism in general is that reporters don't understand the corporate world. These kinds of perks exist in most companies. I think Dubow is incredibly incompetent (and dumb), but chasing after foundation gifts in his name is a serious waste of your time. Follow the money. Who is getting the benefit? Are the scholarships awarded based on need or merit? If the answer to either is still "family and friends" you might have something with this. But nit-picking over your interpretation of the foundation's rules is a terrible waste of your time.
ReplyDelete@12/23 7:35 p.m.:
ReplyDelete"I do not believe an academic institution would mis-use funds."
Then, no disrespect intended, but you and the Easter bunny must be spending a lot of time together. Here in N.C., funds have been misused at three (or more; I just know of three) of the 16 campuses of the UNC system within the past couple of years.
Jim, I think Tara Connell finally broke her vow of silence. That 10:54 comment had to be from her...
ReplyDeleteGMC exec's have a specific allowance of GF funds that they may earmark to the charity of their choice. It has been going on for years, its not just CD. The money goes directly from GF to the charity, the money is never in the hands of the GMC exec. They would not be reporting it on their personal 1040.
ReplyDeleteI agree, this is a dead alley. The collapse of GCI is sad, but the GF is just a small potato in the corporate giving world and not part of the problem. Many small communities and small organizations have received great benefit from GF with funds they would not have received from larger groups or individuals.