Sunday, November 17, 2013

As Freedom Forum posted another $48M deficit, non-profit paid retired CEO Overby nearly $1M; new documents disclose a comical money trail

A just-opened Newsroom exhibit tied to a new comedy stretches the free press mission.

Four months ago, Freedom Forum CEO James Duff raised hope for long-needed financial reform at the troubled charitable foundation after years of overspending on construction and sky-high salaries under predecessor Charles "Peanut" Overby, the chief executive for more than two decades.

Duff
There were ample reasons to move quickly. Freedom Forum's money-losing Newseum about news history in Washington had gnawed away at the foundation's crucial income-generating endowment. That spurred deep program cuts -- and an occasionally antic search for more revenue, like the museum's just-opened exhibit promoting Paramount's sequel to Anchorman: The Legend of Ron Burgandy.

Duff was named CEO two years ago -- only the second in the non-profit's history after Overby eased into retirement (or so it seemed) at age 65. He and Al Neuharth had turned the original Gannett Foundation into a refashioned Freedom Forum when the legendary jet-setting chairman retired from the media giant in 1989. The move has cost Gannett communities nationwide hundreds of millions in lost charitable support, however.

In July, after another round of job cuts, Duff told the Associated Press: "We’ve certainly worked on tightening up on expenditures. I think we’re making good progress. And certainly our numbers are very, very encouraging."

But now, newly released public documents show foundation finances grew even more precarious last year after Overby got a 55% pay raise and Neuharth's compensation hit a record high, jaw-dropping expenditures even for Freedom Forum.

For the seventh consecutive year, Freedom Forum racked up another, enormous deficit: $48 million, according to its annual Internal Revenue Service tax return. Total overspending has now reached $410 million during 2006-2012 alone, the period when the museum moved to new quarters costing nearly twice initial estimates.

By the end of last year, the endowment's value dropped to $351 million, a record low, according to an examination of hundreds of pages of tax returns. In 2000, before the museum buildup, it topped $914 million -- $1.2 billion in today's dollars.

Overby
A contributing factor comes as a surprise. Although Overby ostensibly retired in 2011, the foundation paid him $987,000 in 2012 as chairman of the namesake Overby Center for Southern Journalism & Politics at his Ole Miss University alma mater -- a position previously undisclosed in tax returns. Last year's pay was way up from $638,000 in 2011.

Overby's pay, which included $480,000 in deferred retirement benefits and a $207,000 expense account, was his third highest on record, exceeded only in 2005, when the foundation paid him $1.3 million, and just barely in 2008, when he got $991,000, according to tax returns.

By contrast, the Knight journalism foundation's highest-paid employee in 2012 was CEO Alberto Ibarguen, who got $742,000. With $2.1 billion in assets, Knight is three times bigger than Freedom Forum, even when real estate is included. The Miami-based charity donated $25 million to help open the museum's new home. Ibarguen is a former museum trustee. Knight is now represented on the board by former Gannett executive Michael Maness.

Overby's total: $9.2M
Last year, Overby was once more Freedom Forum's highest-paid employee, bringing to $9.2 million his total compensation since 2000, tax returns show. But he certainly wasn't the only Freedom Forum employee pulling down big bucks in 2012:

Neuharth was paid $602,000 as founder, the most he's ever received in a single year. It included a record $303,000 expense account. Neuharth died last spring at age 89.

Ken Paulson, former CEO of the foundation's First Amendment Center, also got $602,000 -- a record for him, too. That included a $367,000 salary plus $186,000 for his retirement account. In July, he became dean at the College of Mass Communications at Middle Tennessee State University. A former top USA Today editor, Paulson had once been a sure bet to replace Overby.

Finally, Duff earned $514,000, most of which was his $445,000 salary. To be sure, that was far less than in 2011, when he got $1.6 million, almost entirely in deferred retirement pay.
    Those fat paydays were followed by another round of cost-cutting early this year. Duff slashed dozens of foundation and museum jobs, sources told me, hitting the First Amendment Center and Diversity Institute in Nashville especially hard. Freedom Forum also canceled the Crazy Horse Journalism Workshop, an annual event encouraging young Native Americans to enter the profession.

    Whether Duff has made more progress stabilizing the foundation this year likely won't become clear until late 2014, when the foundation files its next tax return. I obtained a copy of the most recent one on Friday under open records law. They're the only comprehensive source of financial information non-profits are required to make public.

    Neuharth
    Neuharth's compensation and duties remain a mystery. Freedom Forum has repeatedly refused to detail his job responsibilities whenever I've asked. The tax return only says the late octogenarian media mogul averaged 40 hours a week in his role as founder -- an average $289 an hour.

    His $303,000 expense account suggests he traveled a lot, two years after double knee replacement surgery left him riding an adult-sized tricycle near his seaside estate in Cocoa Beach, Fla. He died in April after sustaining injuries following a fall at home.

    His 12-page will signed in 2009 included detailed plans for three memorial services, but no bequests to Freedom Forum or the museum. However, he did order their names chiseled on his headstone. And the Neuharth family is listed among donors of $100,000 or more to the museum.

    Meet the boss: his daughter
    Freedom Forum's latest deficit came during Neuharth daughter Jan Neuharth's first full year chairing the 11-member board of trustees. She replaced Overby. The foundation paid her $50,000 last year.

    Jan Neuharth
    There is considerable overlap between Freedom Forum's trustees and the museum's, which is a legally separate entity. Many are long-time close associates of Al Neuharth.

    Duff is on both boards. So is Neuharth's Cocoa Beach attorney, Malcolm Kirschenbaum, and the former Gannett newspaper publisher Mike Coleman. One of the more high-profile trustees is PBS NewsHour co-anchor Judy Woodruff.

    Over the years, Freedom Forum and the museum have become a popular way station to retirement for many other top Gannett executives, including Peter Prichard, chairman of the museum board and another editor of the paper Neuharth founded, USA Today. As a Freedom Forum trustee, Prichard was paid $44,000 last year.

    That the foundation and museum have been run by former newspaper editors, rather than trained professionals with experience in the field, suggests a major reason why both entities have become such financial boondoggles.

    Duff, 60, is an attorney who came to his job without any discernible experience in museum or foundation work. He was chief administrator of the sprawling U.S. court system, with 35,000 employees and a $7 billion budget. Before that, he was managing partner of the Washington office of Baker, Donelson, Bearman, Caldwell & Berkowitz.

    The office, which did legal work for the foundation, was founded by Howard Baker Jr., former majority leader of the U.S. Senate for Tennessee. Freedom Forum's tax return says he's a trustee and secretary, but the foundation's website says only that he's trustee emeritus. Overby, Paulson and the foundation also have deep Tennessee ties.

    Overby lives in upscale Franklin, Tenn., which draws country music stars from nearby Nashville. In addition to his Freedom Forum pay last year, he also earned $200,000 as a director at for-profit prison operator Corrections Corp. of America in Nashville. He's been on the board 12 years, piling up 89,000 CCA shares, mostly options, with a gross value of $3.2 million, according to U.S. Securities and Exchange Commission filings.

    Screenshot from retirement video.
    (In court, CCA is at odds with Freedom Forum's free press and free speech mission. It has unsuccessfully opposed Tennessee open-records laws, arguing it shouldn't be required to disclose public documents about lawsuits against the company. CCA is a major government contractor. Overby has contributed $25,000 to its political action committee since 2009, according to the non-partisan Center for Responsive Politics.)

    From Franklin, it's a four-hour drive to the Ole Miss campus' Overby journalism center. The center got its name after Freedom Forum donated $5 million to the school, one of a slew of eyebrow-raising grants. It's unclear whether it will continue paying him a six-figure salary as the center's chairman. On his retirement as foundation CEO, the university hosted a testimonial dinner that included a breathtakingly hagiographic video called Charles Overby: A Journey of Courage. It describes the $450 million museum as his "bold idea."

    $27 million for museum
    Whatever Duff accomplishes in belt-tightening, he won't immediately escape Freedom Forum's biggest ongoing obligation: the museum, which had 374 employees and a $68 million budget last year. The foundation gave the museum $27 million vs. $30 million in 2011. Freedom Forum's total 2012 spending last year was $56 million vs. $55 million. It generated only $8 million in revenue, producing the enormous deficit. The largest operating expenditures were employee pensions, salaries and wages.

    The museum has fought for a Washington audience where many must-see attractions are free. It charges $22 for adults, although tickets are sometimes discounted. Admission revenue has barely budged since it opened in 2008. Last year's $7 million was virtually unchanged from 2011.

    Newseum's Washington exterior.
    As with many cultural institutions, it derives most of its revenue from contributions, facilities rental and concessions: $13 million in 2012, according to the tax return.

    Its collection is eclectic, reflecting the breadth of its First Amendment mission: three-ton chunks of the Berlin Wall, newspaper comics and cartoons, and perhaps its most visible exhibit, an online collection of newspaper front pages from around the world.

    But as the news industry grows more diffuse in the Twitter age, the museum has stretched the bounds of what might advance the foundation's free press ideals. The newest display -- Anchorman: The Exhibit -- is as much a promotion for Paramount's latest comedy as it is about journalism. The museum says the exhibit explores sexism in 1970s newsrooms. Its perhaps unintentionally arch Twitter hashtag: #stayclassynewseum.

    Presley got star treatment in 2010.
    The exhibit includes props, costumes and footage from 2004's Anchorman: The Legend of Ron Burgundy, starring Will Ferrell. Organized with Paramount, it opened Thursday, ahead of Dec. 20's debut of the sequel Anchorman 2: The Legend Continues. The foundation's website features a trailer for the movie. Paramount didn't make any payments to the museum, according to The New York Times.

    To be sure, the exhibit isn't the first devoted to an entertainer; in 2010 the subject was Tennessee's adopted son, Elvis Presley.

    A $650 million start
    Neuharth, after retiring as Gannett's controversial CEO and chairman, held onto the company's philanthropic arm and installed Overby as chief executive. Founder Frank E. Gannett originally established the Gannett Foundation in 1935 for the benefit of Red Cross chapters and other needy causes in communities where the newspaper publisher did business.

    Frank Gannett
    Neuharth pressured Gannett to buy back $650 million in company stock that was the entirety of the foundation's endowment, then gave it a new name and mission, transforming it into a global journalism charity.

    But in 2000, he and Overby shifted gears, focusing the foundation's money on one project: the museum. A promoter of the First Amendment, the museum also was to be a lasting physical legacy of Neuharth's life and career. Housed in a mammoth 643,000-square foot complex on a $100 million Pennsylvania Avenue parcel in Washington, it also is home to Freedom Forum's headquarters.

    Opened years late for a whopping $450 million -- nearly twice initial estimates -- the museum now accounts for virtually all the foundation's annual gifts to non-profits. It wasn't Freedom Forum's first experience with runaway construction spending, however.

    In 1994, Overby negotiated a 17-page settlement with New York's attorney general when the foundation was still incorporated in New York. Overby and Neuharth agreed to curtail what the attorney general called excessive spending on Freedom Forum's first headquarters, such as a $40,000 desk for Neuharth's office. Its provisions effectively remained in force only three years, however.

    Neuharth and the other trustees paid $175,000 in restitution to the foundation. He later called the payments "utter nonsense," made simply to avoid a costly court case, according to Editor & Publisher. "Darts and arrows like this go with the territory for any action-oriented organization," he said.

    A "font-tastic" t-shirt.
    Under the settlement, Neuharth gave the Gannett Foundation name back to the company, which launched a new one under the same name. It has never returned to its former financial clout. Its most recently released tax return, for 2011, says it made $5.4 million in grants. Administrative overhead totaled only $194,000, however.

    Where the original Gannett foundation supported untold numbers of community groups, Freedom Forum is spending down its endowment while the museum's gift shop sells $20 gag t-shirts and bangle bracelets. The foundation's administrative costs hit $28 million last year -- not including another $28 million for the museum.

    But what about Elmira?
    The museum's website features a by-the-numbers breakdown of its operations, such as the weight in pounds of the artifacts moved in for the 2008 reopening (145,460), the height in feet of the building's tallest point (137) and the number of TV studios (2).

    Here are some numbers for last year that didn't get mentioned:
    • The museum's operating expenses: $185,850 per day.
    • Admissions revenue: $19,672 per day.
    • Foundation grants to the U.S. Equestrian Team (Jan Neuharth is a horse enthusiast): $1,000.
    • Overby's compensation: $475 per hour.
    • Grants to non-profit groups in Elmira, N.Y., where in 1906 Frank Gannett started his company: $0.
    Related: Read and download Freedom Forum's 2012 tax return and the Newseum's. Plus: See this spreadsheet showing foundation financial data for 2000-2012. And: Can Ron Burgandy save the Newseum?

    Please post your replies in the comments section, below. To e-mail confidentially, write jimhopkins[at]gmail[dot-com]; see Tipsters Anonymous Policy in the rail, upper right.

    33 comments:

    1. The word "shameless" comes to mind for this sorry-assed bunch.

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    2. Where does all the revenue go from the apartment rentals, restaurant leases including Wolfgang Puck and parking fees on the Newseum property?

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      1. The Newseum's separate tax return lists about $5 million in income from Newseum Residences LLC on Page 46.

        I suspect the Wolfgang Puck restaurant sales are part of the museum's catering/food court revenue. But it's not mentioned by name.

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    3. This is the head shaking news you referred to last week? Who gives a flying F. It has nothing to do with Gannett

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      1. From the third paragraph: Charles Overby and Al Neuharth turned the original Gannett Foundation into Freedom Forum when the legendary jet-setting chairman retired from the media giant in 1989. The move has cost Gannett communities nationwide hundreds of millions in lost charitable support, however.

        I'll add this: The present Gannett Foundation is a public relations vehicle advancing the company's image when it could definitely use a boost. But deprived of the $650 million from the original foundation, it has far less PR firepower.

        Ask the company's chief marketing officer, Maryam Banikarim, what she could do with that much loot.

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      3. More useless studies and silly commercials featuring USA Today so called stars. No, we dont need twerpy marketing, we need better products and people.

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    4. At least you can still get a match for charitable contributions. Although I'd like to be able to contribute & match more than two organizations.

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    5. You only need to look at the amazing journalism innovation and research financed by the Knight Foundation (knightfoundation.org) to realize what a force the old Gannett Foundation could have become if it had not been hijacked by Neuharth and his cronies.

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    6. Does this mean more Newseum employee layoffs between now and early 2014?

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      1. I don't know. In the long run, Freedom Forum has to either cut spending even more, or increase its income -- maybe both. Otherwise, it will eventually wipe out its endowment.

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    7. If these kinds of quid pro quos and abusive shenanigans went on in government, the"journalists" these jokers claim to celebrate would have swarmed like vultures to expose the story. Seems the long road doesn't run in both directions.

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    8. When does Al stop feeding at the trough of Gannett. Now it extends to his immediate family. Can we pay this guy to just go away? It will be cheaper in the long run.

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      1. Al Neuharth has already gone away -- far, far away.

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      2. Also, if Duff was serious about reform, he would have made the following a condition of his taking the job: a clean sweep of the board of trustees over a short period of time, replacing all the existing ones with people who are experienced in museum administration and philanthropy -- and all independent of the old regime.

        But he didn't do that, instead remaining in the job even after the board replaced Overby with Jan Neuharth. That election showed the institution as a whole remains under the Neuharth family's control.

        Neuharth himself has been dead seven months, longer enough for Duff to feel comfortable making this move. If he doesn't, nothing will change -- unless Freedom Forum gets to a point where it can't repay its creditors, then all bets are off.

        That Pennsylvania parcel may be the one deal Overby negotiated that was smart. Freedom Forum paid $100 million for it in 2000, and it may well be worth far more.

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    9. I see the Washington Post and New York Times kicking themselves for getting beat on this story. Good work, Jim. You can bet that the big boys will shake off the embarrassment and will assign reporters to find a fresh peg as a pretext to copy your piece.

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    10. What is going on with the First Amendment Center at Vanderbilt University? Exactly who works there and what is the Freedom Forum's contract to remain in the building? How many people work there? Ken Paulson is dean at the College of Mass Communications at Middle Tennessee State University and remains president of the First Amendment Center. Two paychecks, but the First Amendment Center pay must be finally shrinking.

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    11. Honestly, knowing what you know about the company and its fill (upper management's) pockets culture, how could this or any other excesses be a surprise.

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      1. This has nothing to do with the "company", notwithstanding this site's pathetic attempts to blow smoke.

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    12. Jim, I know you don't agree but I still think that this Freedom Forum/Newseum stuff would make an interesting 60 Minutes piece.

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      1. It would become a 60 Minutes story if the Newseum truly imploded.

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      2. Which seems to be quite the possibility.

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      3. Nice job of boiling all of this down into something readable, Jim. If it werent for the entertainment and shock value of this crew's excesses, I'd say get rid of all of them. Why are the trustees of this non profit axceting any pay at all?

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      4. Thank you.

        Ethics have never been the trustees' forté. If Freedom Forum were incorporated in a more progressive state -- which is to say, not Virginia -- I imagine the trustees would be staring down the business end of a civil complaint from an attorney general.

        But who knows? Maybe newly elected Gov. Terry McAuliffe will shine a brighter light on what's been taking place in plain sight.

        What Freedom Forum's administrators have never demonstrated is an understanding that the money in the foundation is not their personal piggy bank to do with as they please.

        It is the public's money -- that's you, me and everyone in between -- because Gannett took huge tax deductions as it made contributions to the foundation over many decades. In return, the IRS requires the foundation act as trustee and guardian for the money on behalf of taxpayers that cut them a break in the first place.

        James Duff could do a lot of good, now that he's no longer operating in Al Neuharth's long shadow. But so far, he's only been tarnishing what appeared to be a fairly good reputation for public service. Then again, maybe he's only in it for the money.

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      5. LOL. If there's skullduggery going on, McAuliffe—Clinton co-conspirator and one of the filthiest operators going—is on the wrong side of it to be shining any lights.

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      6. The suggestion that this is the public's money is risible. First of all, unless the marginal tax rate was 100%, then the tax savings was less than 100% and we're only talking about a fraction of the whole. More importantly, counting an offset to taxes as "public money" reflects an ideology that says all of your income belongs to the government in the first instance. (By that logic, if I refrain from stealing your car, you should thank me for "giving" you a car.)

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    13. $22 a ticket for a museum surounded by free world class museums makes no sense to me.

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    14. Pritchard and Paulson were just as overpaid and underwhelming when they were at Usa Today. But this really is outrageous, Jim.

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    15. I guess there are bigger buffoons than Ron Burgundy at the Newseum. Rich, ones, too.

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    16. Wow, the Nauseum.

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    17. Not too long after I retired in 2001, I wrote Doug McCorkindale suggesting the Gannett Foundation offer a grant to Salinas to underwrite the substantial cuts in community library hours -- a perfect use of Frank Gannett's foundation money. Is anyone surprised I never heard back ... and the library hours remained cut. (Aside, in writing this I caught what must have been a subconscious typo ... Dough McCorkindale).

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    18. Wasnt McCorkie the guy who authorized a $1 billion buyback when he was running Gannett? The guy who made sure Dubow replaced him? Genius.

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    19. Anyone who wonders how American journalism died can look to these grifters for one explanation of why it happened so easily.

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