Feds scrutinize Salt Lake newspapers deal

The U.S. Department of Justice is scrutinizing a deal between owners of Salt Lake City's two daily newspapers, at least in part for its apparent similarity to a past attempt by the Mormon church-owned Deseret News to buy The Salt Lake Tribune.

Two sources confirmed the DOJ's inquiry, which comes as Utah's largest newspaper faces another round of budget cuts mandated by its corporate parent, New York-based Digital First Media.

The leader of a group of community members and former Tribune employees challenging the latest joint-operating pact between The Tribune and the News said she had been interviewed at length by a senior antitrust attorney.

Attorney Justin Dempsey also sought legal background from a nasty fight over Tribune ownership more than a decade ago, said Joan O'Brien, a former Tribune reporter and editor and daughter of the late Tribune Publisher Jerry O'Brien.

"I'm encouraged and gratified that they are looking at this deal," she said. "I hope they actually do something, but at least they're looking at it."

A second source, who asked not to be named due to the sensitive nature of the federal review, also confirmed the DOJ's interviews. A spokesman for the DOJ declined to comment on its review of the joint-operating agreement, or JOA, which took effect between the two newspapers Oct. 18, 2013.

Since last fall, the community group led by O'Brien has launched utahnewspaperproject.org and held several community meetings in an effort to draw attention to its cause.

One prominent Salt Lake City resident who joined the effort, retired University of Utah administrator Boyer Jarvis, said he welcomed signs the DOJ was getting involved.

"What's at stake here is an institution that is one of the most significant, important and valuable organizations in Utah," said the 90-year-old community activist. "It would be a tragedy of the first order if The Tribune doesn't continue to be independent."

Attempts by The Tribune in recent days to reach several Utah officials connected with the News and the JOA were unsuccessful.

Clark G. Gilbert, CEO of the Deseret News and Deseret Digital Media and executive vice president for Deseret Management Corp., his boss, Keith B. McMullin, CEO of Deseret Management Corp.; Brent Low, president and CEO of MediaOne, the company run jointly by The Tribune and News; and an official at the LDS Church public affairs office all did not respond to requests for comment.

Digital First officials and managers with Deseret Management Corp., which oversees the News and other LDS Church media holdings, renegotiated the JOA last fall. Among other changes to the decades-old partnership, the new rules shifted control and profit sharing solidly in favor of the News. Digital First also sold The Tribune's share of newspaper printing facilities in West Valley City as part of the deal, which involved an undisclosed but sizable cash payment by the News.

The revised JOA created an additional seat for the News on the partnership's governing board, giving it a 3-to-2 majority. And the deal accords the News 70 percent of profits from the newspapers' joint print advertising and circulation businesses. Previously, The Tribune had received 58 percent of JOA profits and 42 percent went to the News.

Digital First, which manages a chain of newspapers on behalf of the New York-based hedge fund Alden Global Capital, said it used the one-time cash sum to retire corporate debt.

In announcing the reworked JOA and press sale last October, Digital First CEO John Paton described the deal as "a triple win" in a wider strategy of shedding legacy print assets across the chain, reducing debt and investing in a more digital-focused future.

Paton reiterated that view Wednesday and said the DOJ had not contacted Digital First.

While editorially separate, The Tribune and News maintain a six-decade partnership governing their production, advertising and circulation. Under the Newspaper Preservation Act, modifications to their JOA are subject to review by the DOJ under antitrust laws. Barring direct DOJ intervention, the revamped pact remains in place.

O'Brien and about 70 community members and former Tribune reporters and editors immediately asked the DOJ, which oversees partnerships between newspaper competitors, to block the new Tribune-News arrangement. They contend the pact gravely weakens The Tribune financially, gives the News too much sway over joint operations and threatens to dilute and even silence The Tribune's voice as a watchdog on institutional power in Salt Lake City and Utah.

They maintain the deal also bolsters the media power of The Church of Jesus Christ of Latter-day Saints, which already dominates the Salt Lake City market with an influential TV station and website, three radio stations and broadcast facilities through church-owned Brigham Young University, as well as print and online editions of the News.

O'Brien, who is married to Tribune reporter Tom Harvey, said Monday the DOJ's March 31 inquiry and request for more information came a few weeks after the group sent a 14-page letter to the DOJ and others, detailing claims about the new JOA and the News' prior effort to buy The Tribune.

She said the DOJ attorney sought background on documents referring to what one News official in a court filing called "an ingenious plan'' more than 15 years ago to alter the Tribune-News operating partnership to make it easier for the News to acquire The Tribune without drawing opposition from federal regulators.

According to an Oct. 15, 2001, court deposition by L. Glen Snarr, then-chairman of Deseret News Publishing Co., the plan involved the News buying additional shares of the newspapers' revenue split and greater management control of joint operations.

The strategy was developed, Snarr testified at the time, because the Federal Communications Commission appeared likely to challenge the News' purchase of The Tribune, given the LDS Church's existing ownership of other Utah broadcast and print outlets.

The scenario came to light as former Tribune owners in the McCarthey family fought a protracted legal battle with newspaper magnate Dean Singleton, then CEO of the MediaNews Group chain, over The Tribune's ownership. Singleton took over The Tribune after the News' own efforts to buy the paper failed.

Beginning in 2010, The Tribune and other newspapers owned by MediaNews Group came under management by executives at Digital First, which controls some 280 daily and weekly U.S. papers on behalf of Alden Capital.

Considered an innovator in adapting to news industry challenges from the Internet, Digital First has struggled in recent years in the face of shrinking advertising revenues.

Last September, The Tribune, as a precursor to the renegotiated JOA, laid off nearly 20 percent of its staff, a loss of 17 full-time and two part-time reporters. Then-Tribune Editor Nancy Conway and editorial page editor Vern Anderson also stepped down.

Last week, Paton announced further cuts at Digital First, including closure of Project Thunderdome, a company initiative launched in late 2011 to centralize portions of national news gathering and production functions for the chain.

In addition to eliminating Thunderdome and its 52-member staff in New York, Digital First is seeking another 10 percent reduction in costs at its newspapers. Tribune Editor and Publisher Terry Orme said Tuesday managers were continuing to explore reductions in purchased content, newsprint and staffing to achieve those cost reductions.

tsemerad@sltrib.com

Twitter: @Tony_Semerad