A few weeks ago, Rolling Stone did a story about hedge fund king Dan Loeb's plans to address a conference of institutional investors and perhaps solicit new clients among the public retirement funds in attendance, despite his involvement with a political lobbying group that campaigns against those very types of defined benefit plans. When stories by Rolling Stone, Washington Monthly and the New York Post came out about Loeb's affiliations, Loeb canceled his scheduled speech at the Conference of Institutional Investors and fled the event, reinforcing the simple idea that powerful interests can be forced to choose between taking the public's money and involving themselves in regressive politics.
We have another one of those situations brewing now, only it's a much bigger deal this time – the much-talked-about, much-dreaded potential sale of the Tribune newspaper group to the odious Koch brothers. As first reported in the Times a few weeks ago, the Kochs, after years of working through the media with relentless lobbying and messaging, are exploring the idea of skipping the middleman and becoming media themselves, with the acquisition of one of the biggest media groups in the country.
The Tribune papers encompass eight major publications across the country, including the Los Angeles Times, the Allentown Daily Call, the Chicago Tribune, the Orlando Sentinel, the Baltimore Sun, the South Florida Sun Sentinel, the Hartford Courant, the Daily Press of Hampton Roads, Virginia, and Hoy, America's second-largest Spanish-language paper.
It should go without saying that the sale of this still-potent media empire to the cash-addled Koch brothers duo – lifetime denizens of a sub-moronic rightist echo chamber where everything from Social Security to Medicare to unemployment benefits to the EPA are urgent threats to national security, and even child labor laws are evidence of an overly intrusive government – would be a disaster of epic proportions. One could argue that it would be on par with the Citizens United decision in its potential for causing popular opinion to be perverted and bent by concentrated financial interests.
Of course, conservatives will argue that people like myself are only talking that way because the potential buyers of these people are conservatives. If George Soros or some other wealthy, Democrat-leaning meddler in national affairs was leading the pack to become the next Hearst, I wouldn't bat an eyelash – right?
Well, that's true. But the issue here isn't so much what I think about the Koch brothers. It's what the private equity firms and banks that are the major shareholders in the Tribune Company think of the Koch brothers. Because it turns out that some of these firms are heavily dependent upon investment from public unions, which would make their participation in the sale of a media empire to the public-union-bashing Kochs severely problematic.
The Koch brothers have always taken powerful and unequivocal stances against public sector unions and their retirement plans. They were primary financial backers of Scott Walker's anti-union movement in Wisconsin, where the Koch-backed Americans for Prosperity group engaged in massive ad buys and signature-collecting campaigns to back Walker's play to crush collective bargaining rights for public workers. Through direct donations and support of groups like the conservative state policy group ALEC, the Kochs have taken aim at public unions, public union lobbying and public pensions in multiple states across the country, among other things spending $4 million in California to support Prop 32, a state ballot measure restricting union political activity.
The potential conflict comes from the fact that two of the major stakeholders at Tribune Co. are investment management firms that manage billions of dollars of public pension funds. One is called Oaktree Capital, a Los Angeles-based group that owns 23.5 percent of Tribune Co. Another is called Angelo Gordon & Co., which is based here in New York and owns 9.4 percent of Tribune. J.P. Morgan Chase, another major Tribune stakeholder, also manages public-sector funds.
This sale really can't happen, obviously, without the assent of these companies. Yet these companies are financially dependent upon public pension funds.
Oaktree's client list includes the two monster California funds, CalPERS (the California Public Employees' Retirement System) and CalSTRS (California State Teachers' Retirement System), as well as the City of Philadelphia Board of Pensions, the Houston Municipal Employees Pension System, the Illinois Municipal Retirement Fund, the Illinois State Retirement Systems, the Los Angeles City Employees' Retirement System, the Los Angeles County Employees Retirement Association and the Los Angeles Fire & Police Pensions, plus public funds in Louisiana, Maine, Massachusetts and New Jersey.
Angelo Gordon's clients, meanwhile, include those same CalSTRS and Los Angeles Fire & Police funds, the Massachusetts Pension Reserves Investment Management Board, the New York State Common Retirement Fund, the New York State Teachers' Retirement System, Ohio State University, the Pennsylvania State Employees' Retirement System, the State Teachers Retirement System of Ohio and the Teachers' Retirement System of the State of Illinois, among others.
What this means, essentially, is that public-sector workers in the very cities and states where the Kochs plan to take over these iconic newspapers will in a sense be subsidizing or enabling the sale by keeping their monies under management with companies like Oaktree and Angelo Gordon.
Many of these groups have already contacted Oaktree and Angelo Gordon to express their concern. As was the case with Dan Loeb and his courtship of public-sector union money, the unions want to make sure firms like Oaktree understand that their decision on the Tribune sale may influence their own investment decisions.
"None of this is in a vacuum," explains Liz Greenwood, a trustee for the LA County Pension Fund (LACERS).
Oaktree declined to comment for this piece. Angelo Gordon has not responded to inquiries.
If and when the sale goes down – and sources indicate it's not an imminent decision – companies like Oaktree will be in a tough spot. If, as expected, the Kochs' bid turns out to be the highest by a significant margin (they are reportedly preparing a bid that would exceed a billion dollars for properties some estimate to be currently valued at a collective $600-$700 million), then the "fiduciary responsibility" argument would likely be part of the rationale should the Trib papers cave in and accept the Koch bid. Oaktree and A&G would likely say that they would have have a difficult time explaining to their other investors why they wouldn't take the highest bid.
The situation is far less ambiguous for the unions. In the long run, it would almost certainly be both financially and politically detrimental to all of these public sector employees who trusted their money with these management firms to see the massive propaganda power of the Trib papers unleashed upon them.
Conservative pundits have made no bones about their excitement at the prospect of doing an ethnic cleansing of the rolls of all these newspapers. One of the future affected, the Chicago Tribune's Cal Thomas – simultaneously one of the stupidest and most charmless columnists ever to keep a death-grip on a job at a major American daily for decades on end – gushed about how happy he will be when his office is finally rid of all the Bolshevik intellectuals he's been forced to share space with, and full up instead with unbiased folks like himself:
When news of the Koch brothers' interest in their paper reached the Los Angeles Times, columnist Steve Lopez asked for a show of hands from people who would quit if the Kochs bought the paper. According to a report in The Huffington Post, "About half the staff raised their hands."
That should make things easier for the Kochs. They can start by replacing liberal quitters and others whose ideology has turned off conservative readers. They could hire reporters and editors who will try to win back readers and advertisers by providing the type of ideologically balanced coverage they seek.
There are many good unemployed and underpaid journalists who could report the news fairly and without bias . . .
Classic Cal Thomas, calling for a purge of all employees who turn off "conservative readers" and in the same sentence cheering that process as a return to "ideological balance." In any case, this is the vibe of jovial, free-spirited debate we can expect from the print dailies in many of our biggest cities if this awful deal goes through.
Regardless of where you stand on union issues, this is a situation where the public-sector unions themselves need to know what kinds of activities their money-managers are involved with. These workers possess an enormous about of political power via their retirement plans, which lumped together with the plans of their co-workers often represent the largest institutional investors in the country.
Funds like CalSTRS and CalPERS can almost single-handedly move markets with their investment decisions, and as clients they have tremendous leverage – leverage they almost never use – over the banks and hedge funds that fight with each other for the chance to service the retirement holdings of public workers.
Greenwood tells the story of a Midwestern firefighters' union that campaigned against a certain private equity fund that invested in private ambulance companies, which compete with firefighters for jobs. When Greenwood looked into the fund, she found out that a teachers' union in another state was one of its big investors.
"We're investing in companies that lead to the layoff of our beneficiaries," she says. "We have to be aware."
The potential Tribune sale would be a high-profile litmus test of the unions' financial self-awareness. Public-sector workers from Massachusetts to California can force their investment managers to make a choice: sell to the Kochs, or keep managing their retirement billions. If the Kochs want to buy newspapers, this is a free country, and nobody can stop them. But the people whose benefits they want to slash don't have to help them get there.