Startups, Deals, Parties And Pals: Will News Exec Levinsohn Repeat The Past?

Mar 9, 2018
Originally published on March 9, 2018 4:42 pm

Editor's note: This story contains language that some readers may find offensive.

One of the nation's most important newspaper companies is attempting to shed months of labor strife, leadership crises and financial challenges through profound transformation.

That extreme makeover started this week at the Chicago Tribune. It is to radiate out to the company's other major regional dailies.

To sketch out its larger vision, the company, called Tronc, has placed its bets on its chief digital executive, Ross Levinsohn. He is perhaps best-known as a consummate salesman. He is an executive and investor with a mixed record defined in part by glamour and controversy.

Journalists at the Los Angeles Times, Tronc's largest property, have questioned whether the company's executives are making decisions in their own interest rather than the best interest of the paper's journalism or the company's shareholders.

In a previous job, Levinsohn successfully urged his corporate employers to acquire a company that he helped found. Similarly, while he was working for Tronc as a consultant, Levinsohn introduced Tronc executives to the CEO of another startup he co-founded. That CEO sought to persuade Tronc to invest in the startup.

In his current role, as CEO of Tronc's digital division, Levinsohn stands to influence what tens of millions of Americans read under the brand of some of the nation's most respected regional dailies.

Levinsohn oversaw the LA Times and the San Diego Union-Tribune for Tronc until January. He went on leave from the publisher's job after NPR reported on allegations of earlier workplace misconduct against him. Last month, Tronc said that it would sell both papers. The sale is expected to go through by the end of this month.

In announcing the LA Times sale, Tronc brought Levinsohn back, putting him in charge of devising a new digital path for the rest of the company. It is no small job. Levinsohn's decisions will help define daily journalism for digital readers in Chicago, New York City, Baltimore, South Florida and central Connecticut, among other major markets.

The two California papers represent about 40 percent of Tronc's revenues and audiences. With them, Tronc (a much-derided shorthand for Tribune Online Content) boasts 85 million unique monthly digital readers and counts among its properties newspaper titles in 10 of the nation's top 50 markets.

At last count, Tronc had nearly 6,500 full- and part-time employees. Corporate statements suggest the company is planning changes centered on flattening newsrooms to eliminate layers of editors and reporters, building up staff centrally, and striking deals to serve much more digital content for readers.

To gain insight into how Levinsohn may lead Tronc, NPR conducted 13 new interviews and drew upon 26 earlier ones. It also reviewed hundreds of pages of court cases, corporate documents, emails and texts. NPR sought repeatedly to interview Levinsohn, without success. NPR received replies to some questions from his lawyer, Charles Harder.

A close association

A review of Levinsohn's professional record finds he has frequently relied upon — and struck deals with — a cadre of familiar professional associates, in particular a serial entrepreneur named James Heckman. Theirs is a collaboration kindled in parties, press releases and payments and chronicled in photo galleries, email trails and corporate memos.

  • As the chief of Rupert Murdoch's Fox Interactive in 2005, Levinsohn led the purchase of a Heckman startup called Scout Media for $60 million and hired him.
  • In 2011, as a senior executive at Yahoo, Levinsohn encouraged the acquisition of a digital ad platform that he and Heckman had founded together called 5to1. Yahoo bought it for $28 million. Heckman later cut Levinsohn a check from his own private account, which Heckman said was in gratitude for the company's success. The transaction, which has not been previously reported, was confirmed to NPR by both Heckman and Harder, Levinsohn's lawyer.
  • After Heckman bought back Scout Media from Fox, Levinsohn became the digital site's executive chairman. It went bankrupt. Last fall, a small group of investors filed an ongoing lawsuit in federal court naming Levinsohn and Heckman along with other defendants. The Manhattan district attorney's office has sought more information about the firm's activities, an interest documented in emails reviewed by NPR.
  • In the past 18 months, Heckman wooed Tronc to acquire a major stake in his latest startup with Levinsohn, called Maven, while Levinsohn was already on Tronc's payroll as a consultant, according to filings submitted to the U.S. Securities and Exchange Commission.

"Ross and James went way back; they were connected closely," said Cheryl Aarsvold, former vice president for finance at Scout Media.

"They watched out for each other," she said. "One would get into a good business deal. And the nature of the deals they had done [was] that one was always going to bring in the other into the game."

"Gravitas with scale"

On Jan. 19, Levinsohn held court at a midsize meeting room at the five-star Lotte New York Palace Hotel in Midtown Manhattan, seeking to appeal to investment analysts.

Attendees saw a familiar figure, graying, charismatic and upbeat. Levinsohn did not offer much in the way of specifics. But he unveiled his guiding concept for Tronc, which he dubbed "gravitas with scale." He promised it would infuse the newspapers with new energy and resources.

"I want to talk to you about transforming great legacy brands into a modern media company," Levinsohn told the analysts, according to a recording posted by the conference. "We have great brands, and we have to build off of those."

He paid tribute to the essential nature of journalism, yet added that "gravitas with scale" would render Tronc "less dependent on the newsroom transformation."

This phrase chilled reporters throughout the newspaper chain, according to several journalists across Tronc properties.

They separately told NPR the remarks were interpreted to foreshadow job cuts and consolidation outside the newsroom. In a letter to Tronc's board, the LA Times' new union denounced the strategy, writing that it "would cheapen our journalism, damage our brand, betray our readers and ultimately shortchange our shareholders."

Levinsohn said he would shift the company's focus toward a broader definition of journalism to content that would prompt more reader interest online — worthy journalism but also greater revenue-generating traffic on its sites, services and on social media platforms.

In his remarks that day, Levinsohn said he would also rely on syndicated material and "content partners." He said he wanted to create focused digital mini-sites, run by "deep microniche vertical entrepreneurs," for all of Tronc around entertainment and several other topics. According to The Wall Street Journal, Tronc had been negotiating with Axios, a new site specializing in breaking political news and presenting it in readily digestible chunks. It could have supplemented — or supplanted — Tronc's own Washington coverage.

And then there's Maven, a company in which Levinsohn had a personal stake that also has sought to strike a deal with Tronc.

A "super-generous" payment

Ever since Levinsohn's deal at Fox to buy Heckman's Scout Media, the careers of Ross Levinsohn and James Heckman have been all but inextricable. The one followed the other, like a shadow.

In 2008, Heckman incorporated 5to1, a digital advertising platform, with Levinsohn as an investor and board member.

In 2010, Levinsohn became executive vice president of Yahoo. With Levinsohn's encouragement, the digital giant bought 5to1 for $28 million a year later and Levinsohn hired Heckman there. In 2012, Levinsohn became Yahoo's interim CEO for eight weeks, but he was passed over for the top job. Levinsohn and Heckman left shortly after.

Heckman later cut a check from his private brokerage account to Levinsohn, according to an email obtained by NPR. Heckman confirmed the payment, as did Levinsohn, through his attorney.

Heckman told NPR the check was a gift to Levinsohn for contributing to the success of 5to1. Heckman said he also sent checks to 15 to 20 other employees of 5to1. "I have a history of absolutely treating everybody super-generously," he said.

Heckman said Levinsohn had to dump his shares in 5to1 at below-market rates and had to recuse himself from negotiations for Yahoo to consider the deal.

Levinsohn's attorney, Harder, denied there was any direct relationship between Heckman's payment and 5to1. The gift "was a thank you for more than a decade of friendship and support," Harder wrote in an email to NPR.

A spokeswoman for Yahoo, which is now owned by Verizon, said the company no longer has records related to Levinsohn's role.

Troubles at Scout

While working for Yahoo, Levinsohn and Heckman had arranged parties for potential advertisers at glamorous locales, including the Hamptons and the south of France. Some of these festivities nettled colleagues, as NPR has reported.

The pattern continued, former co-workers say.

Heckman had built Scout on a network of 200 sites dedicated to collegiate and professional sports. With big investors, Heckman bought Scout back from Fox in 2013 to combine it with a publishing and merchandise company appealing to members who fish, hunt and engage in other outdoors activities.

Levinsohn became Scout's executive chairman in July 2014. He served on the board and held a 2 percent stake, initially drawing a $15,000 monthly fee, according to internal documents. The two men rerouted the company to a digital course.

It was not a smooth shift. Privately, Heckman conveyed concerns about their company in exchanges obtained by NPR. "[D]o not share our financial situation with anyone!" he texted to an executive in 2014 as profits sagged. "Nobody! ... We need to go on, as if nothing is wrong." To another executive, Heckman complained: "We're bogged down in this shitty business."

NPR spoke to four former Scout executives who said Levinsohn was not hands-on but gave Heckman strong support. Parties played a recurring role for their ad sales strategy. As problems mounted, company officials questioned their travel and entertainment expenses, Aarsvold and three other former Scout executives told NPR.

Heckman invoked the two men's ability to bond with investors and advertisers, former colleagues told NPR. Several said those efforts came up short.

"[Levinsohn] was supposedly a digital guru. We were told he knew how to turn the digital side of the business to gold," said Aarsvold, the Scout vice president of finance. "We were paying him ridiculous amounts of money for access to advertisers and digital industry people.

"We were going to be the new Yahoo and take over the world. And we didn't," she said.

Partying as a strategy

In June 2015, Heckman defended the parties as an indispensable tool — promising Levinsohn's full attention on a yacht in France.

"I'm doing my 'Obi Wan' routine in Cannes," Heckman wrote in an online chat with the then president of Scout. "I'll have super-hot girls on the boat, music that is typically only played for guys like Richard Branson and Bob Pittman [at] private parties (super famous musicians among the elite), the Yacht is ridiculous. ...

"So when you see expenses, plane tickets for girls you don't know from Lithuania or something weird, just know that it's not random but part of a well-orchestrated plan," Heckman wrote.

He promised the spectacle would keep key players happy.

"[W]e'll have some girls stuffed in one of the small rooms. Don't judge it, and if people complain, tell them to shut the f*** up," Heckman wrote. "This is how I raise money, build relationships, and have established that arrogant image that people hate."

The glitz masked mundane but serious problems.

Scout's changes to its billing system proved disastrous, according to the ongoing federal lawsuit against Heckman, Levinsohn and two others. Subscribers to the old outdoor sports business were no longer automatically charged monthly membership fees. Revenues shriveled further as Scout killed off its print magazines.

In June 2016, Heckman was under siege as some investors and board members sought to force him out. He sent an email, obtained by NPR, lashing out at several of the men he had seen as allies. To Levinsohn, Heckman wrote in frustration: "I've stood by you, in every way possible, for years. No human being has given more to you than me."

Levinsohn stood by him once more. The Scout board ousted Heckman a month later. The product and engineering team followed him out the door. So did Levinsohn.

Content "mavens"

In the federal lawsuit filed last year, restless investors claimed executives raised money fraudulently by hiding the billing failure and the company's dwindling revenues. They also pointed to the expenses. They accused Levinsohn, the former board chairman, of failing to prevent those alleged acts.

This winter, prosecutors for the Manhattan district attorney's office started to interview former Scout executives, according to two people with direct knowledge and emails reviewed by NPR. The DA's office did not comment.

Heckman told NPR investors had approved of his decisions and known of his expenditures. The defendants' response to the lawsuit is due to be filed late this month.

In the meantime, a new opportunity beckoned. Within days of departing Scout, the two men and their colleagues set up shop in the living room of one of Heckman's Seattle neighbors, drafting plans for Maven.

Content partners. Self-defined experts. Passionate political advocates. Entrepreneurs and investment advisers. Wellness devotees. These were the pillars — or "mavens" — on which the network arose, hosting sites from Erick Erickson's conservative "the Resurgent" to the Human Rights Foundation.

Some writing there is original. Some authors aggregate and condense articles posted elsewhere. Some authors repurpose their own pieces from other sites. Some promote their own professional services. Heckman says he hopes their combined audiences will help him bind together an elite audience against which to sell ads online.

As Heckman told NPR, Maven offers the kind of content a digital publisher might want to ease its reliance on its papers' newsrooms.

A wounded industry

To understand the reservations journalists have about Levinsohn's "gravitas with scale" strategy, it helps to consider the wounded but proud institutions where they work. The LA Times has a rich tradition of muckraking investigations, incisive coverage of wars and foreign crises, immigration and the environment. Its reporting, opinions, criticism, cartooning and photography have together won 44 Pulitzers and often set a civic agenda for Southern California, Sacramento and beyond.

Many of its sister papers at Tronc play similar roles: The Chicago Tribune has chronicled the ravages of gun violence in the city. The Baltimore Sun exposed details of police abuses. Sister papers such as the Sun-Sentinel, the Courant and the Daily News are mainstays of civic life in South Florida, central Connecticut and New York City, respectively.

The same financial pressures beset newspapers around the country. In response, The New York Times, The Washington Post and The Wall Street Journal have ramped up paid digital subscriptions and invested more in enterprise reporting. The latter two benefit from billionaire proprietors.

Regional newspapers have been hit harder. And Tronc's properties have had an especially tough time of it. The old Tribune Co. went into bankruptcy and was taken over by investment management firms before Michael Ferro, its chairman, led a group in buying the newspaper division and establishing it as the company now known as Tronc.

Ferro says he is seeking new models to sustain daily journalism.

In 2009, Levinsohn invested in a digital experiment to do just that.

The veteran editor Lewis D'Vorkin had created a platform called True/Slant blending news and opinion. He paid a few star writers handsomely. Others shared in far more modest advertising revenues. Levinsohn invested money from the fund he founded, called Fuse Capital, and joined True/Slant's small board.

D'Vorkin's model inspired Forbes magazine to buy True/Slant and hire D'Vorkin as chief product officer in 2010. Forbes became a digital content hub, leaning on unpaid writers seeking exposure and people paying for the right for their articles to appear, often people pushing products, services or insights. Clicks spiked and higher profits ensued. Yet Forbes' journalistic identity suffered. (A controlling stake in Forbes has since been sold to a Hong Kong investment group.)

Levinsohn joined the old Tribune Co. board in 2013. It prepared itself to split into separate newspaper and television companies. The board unanimously voted to give the newspapers' real estate assets to the television arm to fatten up the latter for sale. The Sinclair Broadcast Group is now seeking federal approval to buy Tribune Media — the TV properties — for $3.9 billion.

Tribune Media recently sold the LA Times' printing plants and the downtown headquarters for $290 million. The LA Times is currently seeking new offices.

Maven woos Tronc

Tronc first hired Levinsohn on June 1, 2016, as a consultant. He was paid $600,000 for a year's advice on digital strategy and the direction of the LA Times.

On July 22, 2016, Heckman incorporated the Maven Network, according to records at the Nevada secretary of state's offices. Levinsohn was a founding director.

Months later, Maven disclosed in filings to the U.S. Securities and Exchange Commission that it would seek to sell a major stake in the company to Tronc.

On June 1, 2017, Levinsohn's stint as a Tronc consultant ended as a new gig was set to begin: In late August, Tronc sacked the leaders of the LA Times and Levinsohn became its publisher.

Levinsohn's base annual salary was $600,000, plus a sign-on bonus of $100,000 per quarter, and he was also eligible for an annual bonus of $1 million. His contract guaranteed stock grants worth more than $7 million at the time. It also promised additional millions in stock options over three years and made him eligible for added incentive payments for syndicating Tronc's digital content. At the time the contract was drawn up, it would have been worth well more than $4 million a year over three years in pay, bonuses and stocks, according to Alan Johnson, head of Johnson Associates, a New York City-based executive compensation consulting firm.

In a note posted to investors, Heckman wrote that Levinsohn "would continue to contribute to Maven in his role as a member of our board of directors and as a strategic advisor." Heckman said Levinsohn had made introductions for Maven to Tronc the previous year: "We plan to continue our discussions with them, as with other potential partners."

Early last October, Levinsohn named D'Vorkin, his former partner in True/Slant, as editor-in-chief of the LA Times.

Soon after, Levinsohn resigned from Maven.

Heckman told NPR he had had big hopes to connect Maven with Tronc — and to do business with Levinsohn once more — but nothing has come of it so far. "I thought we'd have a chance," Heckman said. "It didn't happen." A Tronc spokeswoman says the company has no current plans to do business with Maven.

The LA Times' news shop was torn by dissent during Levinsohn's brief tenure in LA, driven by lingering resentment of past cuts and mismanagement by previous owners and a mounting distrust of Tronc. A newsroom union won recognition for the first time in the paper's history.

In late January, D'Vorkin was pulled from the LA Times after repeated clashes with journalists there. D'Vorkin had failed to defend the paper's reporting against the Walt Disney Co.'s attacks; he harangued reporters openly over leaks and suspended the paper's business editor, because he suspected her of being a source for The New York Times. (She denied leaking anything and has since been reinstated.)

D'Vorkin is now chief content officer under Levinsohn at Tribune Interactive, Tronc's new digital division.

Back in the game

The Huffington Post had been a pioneer in drawing upon unpaid contributors since its inception in 2005. The new editor of the rechristened HuffPost has dropped the model. "When everyone has a megaphone, no one can be heard," HuffPost Editor-in-Chief Lydia Polgreen wrote recently in a note to readers. Forbes has similarly moved to pay contributors but will eliminate the least-read each year.

The new billionaire owner of the LA Times, Dr. Patrick Soon-Shiong, is a Southern California inventor and surgeon. He says he intends to honor its journalistic traditions, though he has not offered specifics.

Last month, Tronc hired a law firm to review Levinsohn's professional behavior in light of NPR's report on accusations of past workplace misconduct. Levinsohn was one of multiple defendants in two separate sexual harassment lawsuits settled by two different employers, AltaVista and Fox. He was also accused by a former executive of the Hollywood Reporter of using a slur to characterize gays.

On the day that Tronc announced the sale of the LA Times, it transferred Levinsohn to the Tribune Interactive CEO job, citing "an independent investigation and a report to the Board of Directors finding no wrongdoing."

Tronc did not release the report by the law firm, Sidley Austin.

Tronc has also not answered key questions: whether the review was limited to Levinsohn's time as publisher at the LA Times; what it found about his earlier behavior; and what due diligence Tronc did prior to his hiring.

On the day Levinsohn's appointment as CEO of Tribune Interactive was announced, Tronc acquired control of BestReviews.com, a site rating contractors and services. A Tronc spokeswoman tells NPR that "gravitas with scale" remains a key element of the company's strategy online.

Ross Levinsohn is back in the game.

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