Wed 23 Jun 2010
In preparing this posting, I was able to interview West Marin Citizen owner Joel Hack on the record, as well as Marin Media Institute vice chairman Mark Dowie briefly. Other MMI directors insisted on talking off the record. Corey Goodman, chairman of MMI, promised to make himself available for an in-depth interview Tuesday but stood me up. Much of the information here comes from a letter sent by MMI’s attorney to a bankruptcy trustee and from the trustee’s response.
The ongoing dispute between The West Marin Citizen and Point Reyes Light has become remarkably bitter. The Citizen on June 14 published an “extra” edition to announce the new owners of The Light have “launch[ed] a hostile takeover” because they could not buy The Citizen in a normal fashion.
The Light on June 17 published a brief response, saying its owners no longer have any interest in buying The Citizen. It added that it would “publish a thoroughly documented chronology of negotiations in an upcoming issue.”
What’s occurred has surprised the staff and owner of The Citizen, as well as the staff of The Point Reyes Light and nearly all the directors of Marin Media Institute, the nonprofit which owns The Light. Here’s the story.
Citizen owner Joel Hack is married to Kathie Simmons, an attorney in Sonoma County. Kathie, who does business as a one-attorney law firm, had to dip into her IRA several times in recent years to cover business expenses.
The problem, Joel told me, was that because she was under 59 and 1/2, she had to pay penalties for the early withdrawals. Without the funds to pay the penalties and failing to file some tax returns in a timely manner, the couple saw their initial debt of $4,000 to $5,000 to the IRS and the State Franchise Tax Board balloon to more than $20,000.
On Feb. 26, Joel and Kathie filed for Chapter 13 protection (from creditors) under US Bankruptcy laws. They then began paying off their back state and federal income taxes at the rate of $600 a month. Under Chapter 13, they could do this for 36 months without incurring additional penalties.
Meanwhile, Corey Goodman of Marshall and Mark Dowie of Inverness, who would later become the chairman and vice chairman of MMI, arranged for an appraiser to estimate the value of both The Light and The Citizen.
Out of all this came MMI’s purchase of The Light but no agreement with The Citizen. In fact, it appears the two sides never came close although MMI and its attorney tell a different story.
Initially both sides talked of a “merger,” but in the end it was clear that MMI wanted an acquisition. The staff and content of the two papers would not be merged; rather, The Citizen would be shut down.
Joel, in turn, claims the personal bankruptcy was disclosed at the appropriate time during negotiations, and the bankruptcy trustee reports that Joel and his wife did, in fact, list all of their assets when they filed for Chapter 13. In essence, what they failed to do was place a value on three assets.
In their brief statement of June 17, MMI directors called their offer to Joel “generous.” Their attorney, Doug Ferguson, wrote the bankruptcy trustee that it amounted to “$50,000, all cash for all assets constituting The West Marin Citizen, with this amount payable $40,000 to Mr. Hack and $10,000 to fund severance payments to key employees including editor Jim Kravets….
“Mr. Hack would be required to execute a non-competition agreement precluding for five years his engaging in the newspaper publication business in Marin County.”
As Joel sees the offer, it was hardly generous but ridiculously low. He said this week that at the time the offer was made, The Citizen had “good” accounts receivable of approximately $20,000 and had already sold $20,000 worth of ads for the next issue of The Citizen’s semi-annual Coast Guide, and would sell more.
“By giving me $40,000,” Joel said sarcastically, “they’d be giving me my own money that I earned.” The Coast Guide alone is worth several times that amount, he added.
In addition, Joel wanted to have a responsible position in a merged paper and for his daughter-in-law Shari-Faye Dell, who works for The Citizen, to get a job at The Light. Goodman rejected these conditions, and after a flurry of discussions, negotiations were dropped.
That might have been the end of the matter, but three weeks later, Ferguson, the MMI attorney, wrote the bankruptcy trustee, “The Point Reyes Light and The West Marin Citizen…appear to be finding it impossible to survive in what has unfortunately proven (in terms of necessary advertising revenues) to be a one-newspaper market….”
“I think it’s a two-newspaper town,” Joel responded with a laugh on Tuesday. “I’ve got advertising. I pay all my bills. My payroll is made on time. The newspaper is not anywhere near bankrupt.”
Citing attorney Ferguson’s letter, however, the bankruptcy trustee this month recommended the bankruptcy court convert Joel’s and Kathie’s Chapter 13 (individual bankruptcy) to Chapter 7 (possible liquidation) or Chapter 11 (reorganization).
Trustee David Burchard also noted that although Joel and Kathie had listed The Citizen, the Bodega Bay Navigator website, and her law practice as assets, they hadn’t put a dollar value on them.
Joel Hack in front of Toby’s Feed Barn.
Not to do so was a mistake even though, according to Joel, “[The Citizen] revealed everything to the trustee: payroll records, accounts receivable, accounts payable, bank statements. There was nothing concealed.”
As for the Navigator website, which is rarely maintained, it has virtually no value, and it would be difficult to set a value on Kathie’s law practice if she were not a part of it. She has no major clients, and many of the small ones she does have would probably follow her to a new office.
If Joel and Kathie had merely written “unknown” as the value of all three assets, it is unlikely the trustee would have paid much attention, he said.
As it is, the trustee’s recommendation that the court convert their Chapter 13 to Chapter 7 or Chapter 11 has already cost Joel and Kathie money for legal fees, and more costs are coming. “It’s costing me an extra $20,000 at a minimum that I wouldn’t have had to pay if [MMI] hadn’t f-cked with my bankruptcy,” Joel grumbled.
Joel said he and Kathie at this point have “several options, all of which will result in the debts being repaid and The Citizen standing free and clear from anything.”
As for The Light, I’ve yet to find anyone on its staff or board of directors who — in hindsight — thinks Ferguson’s letter to the bankruptcy trustee has done the paper any good. It’s needlessly given The Light a black eye and caused its staff to catch hell around Point Reyes Station.
From what members of the MMI board tell me, most were unaware that Ferguson’s letter was being sent. Editor Tess Elliott, ad director/business manager Renée Shannon, and front-office manager Missy Patterson knew nothing about it, Mark said. If the public is going to blame anyone, he added, blame Corey and him, not the staff or the rest of the board.
As for me, whom do I blame? Attorney Ferguson, who seems to have been too clever by half. While he did not explicitly ask the bankruptcy trustee to convert Joel’s and Kathie’s Chapter 13 bankruptcy to Chapter 7 or 11, he’s an experienced lawyer who should know how his letter could gratuitously muddle their personal finances.
I assume Corey and Mark signed off on his sending the letter, but I doubt they were in as good a position as attorney Ferguson to foresee the problems inherent in his gambit.
Those MMI directors who now defend attorney Ferguson say he was obligated to file a letter with the bankruptcy trustee because MMI was negotiating to buy an asset in bankruptcy. But it wasn’t. As Ferguson acknowledges in his letter, the negotiations had already been terminated. So why defend the attorney? Possibly because he was one of the donors when MMI was buying The Light.
Ferguson was clearly looking for the bankruptcy court’s help in getting Joel to accept MMI’s $50,000 offer for The Citizen. Sounding a bit too hopeful, the attorney wrote the bankruptcy trustee, “Should such an offer be of interest to your office, then upon so being informed, I will promptly submit a binding legal offer.”
“All it was,” said Joel grimly, “was an attempt to drive the price down. It was hardball negotiating.”