CHARLESTON – The state Attorney General wants to investigate last month’s merger of Charleston’s two daily newspapers.
Patrick Morrisey’s office filed a petition Aug. 13 in Putnam Circuit Court to enforce an investigative subpoena looking into possible state Antitrust Act violations and to enjoin the Daily Gazette Company from continuing the merger of the papers.
“The Attorney General has probably cause to believe an apparent merger of the Charleston Gazette and the Charleston Daily Mail newspapers may violate the West Virginia Antitrust Act,” Morrisey’s petition states. “The Attorney General is informed and believes the Gazette Company and/or Gazette-Mail possesses information relevant to the inquiry. …
“Obviously, the operators of the two former newspapers conspired …merging the operations of the daily newspapers into one.”
The petition says Morrisey’s office began investigating the merger on July 19, the day it was announced. Two days later, the office issued a subpoena to the Daily Gazette Company directing it to answer interrogatories and produce documents and information specified to the AG’s office by July 31. It was hand-delivered to Gazette Company Chief Operating Officer Trip Shumate on July 21. Mike Callaghan, an attorney with Neely & Callaghan that is representing the newspaper company, objected to the subpoena, saying there was no probable cause to issue it.
Morrisey’s office claims the probable cause is that the apparent merger violates the Antitrust Act. The office seeks an order compelling the Gazette Company to answer the interrogatories and produce the documents requested within two weeks. It also seeks an order enjoining the Gazette Company from further merging of the two papers until it complies in full with the subpoena. It also seeks court costs and attorney fees.
The July 19 merger came five years to the day after a federal antitrust settlement was reached regarding Charleston’s two daily newspapers. Morrisey’s memorandum notes that the announcement came hours before the expiration of the final judgment in that settlement.
“Importantly, the Attorney General is not seeking to enforce the terms or to remedy a potential violation of the Final Judgment,” the memorandum states. “Rather, the Attorney General is simply seeking to enforce the validly issued investigative subpoena in order to determine whether the Gazette-Mail was created in violation of the Antitrust Act.
“The timing of the events, as they are currently known, combined with the prior conduct remedied through the Final Judgment instills, at the very least, an honest belief in a reasonable and prudent person that the Gazette-Mail was arguably created in violation of the Antitrust Act.”
On July 19, 2010, U.S. District Judge John Copenhaver approved an antitrust settlement to regulate both newspapers.
"The Charleston Daily Mail shall continue to be published as a daily newspaper," he wrote then.
In his memorandum, Morrisey says, “Indeed, based upon the information currently available, it is entirely reasonable to believe that the Gazette-Mail represents exactly the same single daily newspaper the owners of the Gazette and Daily Mail attempted to create beginning in 2004 – an effort that was challenged, and ultimately reversed, because it violated antitrust laws.”
In the 2010 order,Copenhaver wanted proof that Charleston Newspapers, the operating partnership between the papers, didn’t discriminate against the Daily Mail, which then was an afternoon newspaper with a smaller circulation than the morning Gazette. He sought that proof of compliance for five years. That five years expired Sunday, and staffers were gathered that afternoon and told of the merger.
Then, according to reports, newsroom staffers at both papers were gathered and told of the newsroom merger. They papers had shared the same press and business operations since forming a joint operating agreement in 1958. The Sunday Gazette-Mail has been published for decades, and the Saturday Gazette-Mail has been around for nearly a decade. Last year, the papers began printing combined holiday editions.
After new Charleston Gazette publisher Susan Chilton Shumate told the staffers of the merger, they had just hours to put together Monday’s paper, according to wvfocus.com.
“The action itself is not something I am surprised about,” one employee told wvfocus.com. “I’m surprised with the way they went about it, but then, I don’t know all the circumstances.”
Employees who weren’t at the meeting received an email announcing the change around 5 p.m. Sunday.
“Beginning today, the two newspapers are combining newsroom functions with the exception of editorial page content,” the email said. “Welcome to the Charleston Gazette-Mail.”
Like the announcement in the July 20 morning’s newspaper, the email said the new Gazette-Mail would retain two independent editorial pages – one conservative and the other liberal.
“This is not one paper gobbling up the other,” the announcement said. “It is a combination of the two newsroom staffs working in cooperation to produce the most comprehensive news product in West Virginia.”
“The email they sent made it sound like the Charleston Gazette-Mail would be bigger and better than before … But I don’t know that the situation was handled well enough to make me feel totally confident about that,” the anonymous employee told wvfocus.com. “Just based on the way that they’ve handled it so far, I don’t think that they will tell us any of their plans before executing them at any point in this transition.”
At a July 20 meeting, newsroom staffers were told they’d have to reapply for their jobs, and that the new Gazette-Mail newsroom would employ about 65. At the time of the merger, the Gazette employed 45 workers and the Daily Mail 33.
Copenhaver’s 2010 final judgement was in an antitrust case brought by the U.S. Justice Department against the Daily Gazette Company and MediaNews Group.
Although the Daily Mail’s and Gazette’s joint business operations were known as “Charleston Newspapers,” the Daily Gazette Company owned the Gazette and MediaNews owned the Daily Mail. Both companies had 50 percent stakes in Charleston Newspapers until 2004 when MediaNews sold out to the Daily Gazette Company for a reported $55 million.
In 2007, the Justice Department filed a suit alleging the Daily Gazette Company “planned to deliberately transform a financially healthy and stable Daily Mail into a failing newspaper and close it.”
Last month, a federal agency spokesman said missed contributions to Charleston Newspapers’ retirement plan and the company’s application for a distress termination of the plan are not related.
Pension Benefit Guaranty Corporation spokesman Marc Hopkins said PBGC attached a lien on behalf of the plan earlier in the month. That’s a standard practice when required pension payments of $1 million or more are missed. Hopkins said Charleston Newspapers and other entities responsible for that retirement plan have missed payments for the last few years. The $1,341,121 in missed payments took several years to reach that amount, he said.
Regarding the distress termination of the plan, Hopkins said PBGC received that application in June.
“A plan sponsor that makes such an application must demonstrate to PBGC that it can’t stay in business and continue its pension plan,” Hopkins said. “PBGC will evaluate the company’s financial condition and make a decision based on those findings.
“It’s PBGC’s preference to keep plans going with their sponsors. If that can’t happen, we’ll step in and take responsibility for paying the pension benefits of all plan participants up to the legal limits. For plans that end in 2015, the maximum guaranteed benefit for a 65-year-old retiree is $60,136 a year.”
Shumate said the liens had been placed against the entities named as plan sponsors – Charleston Newspapers, Daily Gazette Company, The Daily Gazette Company, Daily Gazette Holding Company LLC, Charleston Newspapers Holdings LP, Daily Gazette Publishing Company LLC, G-M Properties Inc., ABRY/Charleston Inc. and Ridgeview Express Delivery LLC – because of lack of payments.
“We are behind on our minimum contributions, so we had the lien filed against us,” Shumate said last month. “We’re now working with the PBGC to get caught up. We have been talking to them since January to get this taken care of. We will be done and caught up with our payments in the next few weeks, next few months.
“The PBGC guarantees benefits are there for those in the plan up to a certain maximum. And more than 99 percent of those in our plan are under that maximum.”
In the Putnam County petition, the AG's office is being represented by Assistant AG Douglas L. Davis and . The case has been assigned to Circuit Judge Phillip Stowers.
Putnam Circuit Court case number: 15-C-201