Pity the Billionaire: Sam Zell’s Club

Posted in Culture of Lickspittle at 1:51 pm by George Smith

Sam Zell, one time owner of Tribune, and by extension, the Los Angeles Times, joins the Pity the Billionaire riffing:

Billionaire real estate investor Sam Zell agreed with capital pioneer Tom Perkins that wealthy Americans are being unfairly criticized and said that the 1 percent work harder.

“The 1 percent are getting pummeled because it’s politically convenient to do so,” Zell said, an interview Wednesday on Bloomberg Television’s “In the Loop” with Betty Liu.

People “should not talk about envy of the 1 percent, they should talk about emulating the 1 percent. The 1 percent work harder, the 1 percent are much bigger factors in all forms of our society” …

[Zell] sees envy of the rich and class warfare as growing problems in America, blaming government regulations for a widening income gap.

Zell, under even the slightest examination, is easy to despise. A couple of my friends worked at the LA Times under the time of Zell and he was uniformly loathed.

As soon as he arrived at the newspaper he made it clear he hated journalists.

At 4:11 in this video taken at the Times, he curses and alludes to an incident a week earlier at another newspaper in the chain, the Orlando Sentinel.

There was laughter at his response. Believe me, no one was laughing after they saw the video of the incident.

Zell took possession of the newspaper chain using an elaborate financial maneuver no one really understood at the Los Angeles newspaper. It involved looting the pensions of Times employees in an elaborate scheme as part of the takeover and transformation of the newspaper into a private entity.

Employees became so incensed at Zell they eventually launched a civil suit. Poynter explains briefly:

A federal judge has granted preliminary approval of the $32 million settlement — announced in August — for former Los Angeles Times auto writer Dan Neil and Tribune employees. The final hearing is set for January 30. The plaintiffs contended that the leveraged buyout that resulted in creation of an employee ownership plan violated federal pension law. Tribune staffers became owners of the company when it was taken private by Sam Zell in 2007. The company filed for bankruptcy protection one year later …

The lawsuit, which was filed in November 2008 following the purchase of the Tribune Co. by Sam Zell and his company, raised claims on behalf of participants and beneficiaries of the Tribune Company Employee Stock Ownership Plan (ESOP). The lawsuit challenged the Leveraged ESOP buy-out of the company. The complaint alleged Defendants breached their fiduciary duties by causing the ESOP to pay more than fair market value for the Tribune stock purchased in April, 2007 by Sam Zell.

In 2012 the case was finally settled:

In the long legal fight over Sam Zell’s dubious use of employee funds to acquire control of Tribune, the good guys have won, more or less. A federal judge in Chicago gave final approval today to a $32 million settlement that will put some money back in the retirement accounts of Tribune employees, present and past.

In 2008, Pulitzer Prize-winning auto columnist Dan Neil and some colleagues in the Los Angeles Times newsroom (as well as in the great LAT scattering that has occurred under Tribune and Zell) took a courageous step and sued the keeper of their paychecks. At issue was the hinky financing that leveraged their employee stock accounts to allow Zell to get control of the company …

The Chicago judge approved the settlement tentatively reached last October. The roster of plaintiffs and the respondents have evolved through the years.Tribune, for instance, is no longer on the suit, though the company will apparently be chipping in some of the settlement.

It was obvious early that Sam Zell was a disaster for the newspaper business. There were lay-offs, more beratings and predatory behavior by Zell and his lieutenants at the top of the corporation.

It is perfectly described in this piece, Zell to LA Times — Drop Dead:

Zell was known for constructing complicated deals, especially ones in which he personally had very little at stake. For the Tribune deal, Zell put a paltry $315 million of his own money into a purchase offer of $8.2 billion. To raise the other $7.9 billion, he proposed making Tribune an S corporation owned by a nonprofit ESOP (Employee Share Ownership Plan), which would be exempt from federal income taxes. The ESOP could then borrow the rest of the money needed to buy the stock owned by the Chandlers, the McCormick Trust, employees, and other shareholders in order to complete the sale and take the company private. If the deal went through, Tribune managers would be rewarded with large “success bonuses.” The investment bankers and advisors, for six months of work, would take in about $160 million.

The deal would saddle the company with $12-13 billion in debt. In other words, everyone stood to gain except the newspaper, the company, and their employees, all of whom were risking a great deal and, in the case of the employees, without their consent. The deal from hell went through. Exactly 12 months later the company would file for the largest bankruptcy in the history of the American media industry. Over 4,200 people lost their jobs in the three years that followed.

Zell, then, is with the standard now set for the American class of billionaires. He looted the company and the Los Angeles Times. As the Times and Tribune’s other newspapers struggled, executives at the top of the Zell pyramid reaped millions in bonuses. Bankruptcy and unemployment were the result.

The only satisfaction was the clawback from the employee-led civil suit and a ruling that Zell would be the last on the creditors list to be paid in the corporation’s emergence in 2013 from bankruptcy.

Sam Zell, in his own words

Sam Zell calls someone a mofo.

Sam Zell on politics and the markets, back in 2012:

“The game is being stacked against me.”

“Stop the class warfare crap. Stop this politics of envy.”

“[People] are disincentivized if they don’t have to pay for their health care, that’s another thing they don’t have to worry about.”

“I succeed because I take the risks.”

“The [national] standard is how can we keep the greatest number of failing teachers in place.”

Sam Zell on Occupy Wall Street:

“I don’t see any justification for taking over private property. I don’t see any justification for creating health issues and attracting all kinds of people who, more than anything else, want to get on television…

“I would have evicted them on the first day.”

“We decided to set up a plant in the United States … we can’t find the workers.”

“The government, by definition, is the most incompetent producer of any kind of services”

[Do you want them to get out of education?]



  1. Ted Jr said,

    February 8, 2014 at 5:50 pm

    This particular scam of making the employees pay for a buyout and then losing their ‘investment’ is not new although it is not the first time some self styled newspaper tycoon has pulled it off.

    Mr. Conrad Black, Lord of the Realm, convicted felon, former owner of a newspaper company, did the same thing in the late 1970’s when the took the “excess” funds out of the Dominion stores pension funds and paid himself a nice little 25 million bonus if memory serves. The province of Ontario later changed the law so that this particular manoeuvre became illegal. When I think of pensioners who spent their lives bagging groceries ending up living on a lot less during their declining years, I just want to spit at useless pieces of garbage like Lord Black because they have no purpose in existance, not even as food to carnivores.

  2. bre said,

    February 9, 2014 at 1:37 pm

    It is clear you do not like Zell, and this is truly a sad story for everyone. If the income stream of Tribune had not tanked post take over, the story would of been very different.
    Realize that what happened to your industry has happened across America. The media just thought they were exempt but boy can they complain about it. Sorry you are a business just like everyone else.

    Business under it all is just about making money by providing good and services people want.

  3. George Smith said,

    February 9, 2014 at 4:19 pm

    What’s to actually like about Sam Zell? There’s a lot of him on YouTube, none of it flattering even though it’s mostly business tv using him as a guest.

    Newspapers never thought they were exempt. I worked for one in Allentown and free-lanced for alties for a long time. No one had illusions about their value and what was happening to the business model. Mostly, my experience was people in editorial doing what they could to make something good, always under worsening conditions.

    The history of the Times from Mark Willes to Zell was a disaster, most of it the responsibility of the owner’s leadership. It did not have to be that bad. There was ample publication of Zell’s lieutenants at Tribune enriching themselves all out of proportion to what other people in the company were earning all while things were building to bankruptcy. This, too, is not an unusual sight in the good ol’ USA.

    This particular scam of making the employees pay for a buyout and then losing their ‘investment’ is not new although it is not the first time some self styled newspaper tycoon has pulled it off

    Absolutely. Thanks for the Black reference.

  4. Frank said,

    February 9, 2014 at 8:00 pm

    I think the living creature that most resembles Zell is the lamprey.

  5. George Smith said,

    February 10, 2014 at 9:06 am

    Apt. Perhaps a little hard on the fish.