Answering an unhinged Terence Corcoran

Cranky McCrankypants

I fear I may have pushed Terence Corcoran over the edge, to use one of my least favourite puns on my name. “I can’t go on,” the 80-year-old National Post columnist confesses at the end of his rambling vivisection of my latest contribution to the literature on Canada’s beleaguered newspaper industry. “Edge’s book is a muddled fact-filled ideological smear job which is as malicious as the book’s cover suggests.” What Corcoran sees are nothing less than Nazis.

“The Nazi theme is echoed on the book’s cover, a smudgy yellow and black effort that includes partial images of the National Post’s masthead re-set in a typographical font similar to the masthead of Der Sturmer, a Nazi weekly published in Germany from 1924 through to the end of the Second World War.” 

Of course, I have had nothing to do with designing the covers for any of my books, other than to make a few suggestions which New Star Books publisher Rolf Maurer usually dismisses out of hand. The covers of my most recent books with New Star have been designed by Oliver McPartlin of Victoria, and you can tell from his website that he does fantastic work. 

I am hardly an expert in typefaces, but it seems to me that the type on the cover, which does indeed say National Post, is of the Old English font similar to those used on the masthead of such newspapers as the New York Times and the Times of London. It is apparently descended from the Blackletter or Gothic font, which dates to the 12th Century and was used for numerous European languages well into the 20th Century, including German until the 1940s, when it was officially discontinued after Hitler found it “Jewish-influenced.” Frankly, it doesn’t look to me at all like that used in Der Stürmer. 

Speaking of Herr H., what really got Corky going was my daring to reference a book by the former German Reich chancellor. The headline to his diatribe was “A malicious smear job — What does Mein Kampf have to do with Canadian media?” I attempted to explain, but my comment on the National Post website was “de-activated” for somehow violating its community guidelines. 

We are clearly operating here under Godwin’s Law, which is sometimes interpreted as stating that “the first person in an argument (usually in an online comment thread or forum) to mention the Nazis or Adolf Hitler has lost.” By this measure, Corcoran lost with his opening salvo. 

I did manage to get one comment in under Corcoran’s column before being cut off. It was in answer to his assertion that I claimed “the Public Policy Forum (PPF), headed by Edward Greenspon, conspired with Postmedia to produce The Shattered Mirror, a 2017 report that called for the government to help rescue the newspaper industry from the tech revolution.” I made no such charge but merely outlined the sequence of events, which would lead any reasonable reader, even Corcoran, to suspect that something was going on. 

My other two deleted comments urged others to read the book for themselves, and provided a link to Chapter 1, which is posted on this blog and on my website.  

Corcoran’s main complaint seems to be that I outline in my book how former Postmedia CEO Paul Godfrey “orchestrated a Hitlerian ‘propaganda’ campaign to create public support for a government bailout of the ailing newspaper industry.” He also laments how I “trash the PPF and Postmedia for having produced a propaganda masterpiece.” First, I have no evidence of Postmedia’s involvement in producing the PPF report The Shattered Mirror. In fact, the negative response I chronicle to it by newspaper industry association News Media Canada, of which Postmedia is by far the biggest member, would suggest otherwise. There is little doubt, however, that PPF head Ed Greenspon soon began working with other bailout proponents in a group I call The Newspaper Lobby.  

I also stand by my assertion that The Shattered Mirror was a propaganda masterpiece. I questioned it at the time, but the more I looked into it, the worse it smelled. It was Prof. Dwayne Winseck of Carleton, however, who really blew the lid off the report. All I could do was sit back and marvel.   

My case, noted Corcoran, “boils down to classic leftist nonsense that cabals of think tanks and corporations control and monopolize Canadian media and politics.” In making my case, I include much propaganda theory and research into the phenomenon of think tanks like the PPF. They are extremely influential in public policy making, from what I can tell, and many are driven by the ideological biases of their donors. Readers can make up their own minds if I have made my case or not. 

Corcoran even manages to compliment me and insult me in the same sentence. “He is a meticulous researcher, documenter and footnoter who manipulates and twists his fact-filled work through a warped and ignorant leftist misunderstanding of business, newspapers, journalists, governments and media consumers.” That’s called my perspective, Corky. An historical researcher, which is what I was trained as, is first taught to assemble all the relevant facts, then importantly to interpret them through a lens that should be explicitly stated, as I have done with propaganda theory and research into think tanks. 

He adds that my book “is filled with detail, conjecture and Edge’s twisted view of the media and how and why business decisions are made. His idea is that Postmedia owner/managers are responsible for allowing the company to fall into financial distress — as if no other news organization in the world has not faced similar crises.” Of course they have faced similar crises, but those not in the clutches of blood-sucking foreign hedge funds have not been starved of resources like Postmedia’s newspapers have in order to pay their New Jersey overlords more than $30 million a year in debt payments. That’s the whole point of my book. 

Corcoran calls my 2014 book Greatly Exaggerated: The Myth of the Death of Newspapers “a lengthy wrong-headed work that portrayed newspapers as triumphant over the new technologies sweeping the world. It is a work that is so wrong that one suspects Edge wrote his new book as a defensive move so he could blame newspaper owners for his own failure to understand the changing tech environment.” I don’t think the word “triumphant” describes the thesis of that book very well, as the ending of the story of newspapers’ struggle for survival had and has yet to be written. Most, however, seem to be making a successful transition to hybrid print/online publications, as I note in this update.  

Wrong, wrong, wrong. He keeps repeating that word to deride my “business ignorance, which holds that anything a company or its executives do to remain successful or even alive amounts to corporate malfeasance.” Wrong again, Corky. Not everything a company or its executives do to remain successful or even alive amounts to corporate malfeasance. Some things are dodgier than others, however, such as using 15 of a foreign country’s 21 largest dailies newspapers to shamelessly lobby for bailout after bailout. “Among his most laughable linkages is the proposition that the market-oriented Fraser Institute and the statist-oriented Public Policy Forum are kindred think tanks manipulated by Postmedia owners.” Nonsense. I describe the PPF as “a boutique shop for clients with policy needs congruent with the Liberal agenda.” That could never be said of the Fraser Institute, which is an entirely different animal that played no role in the story I tell. Its inclusion was merely by way of background. 

“His views are wrong, often inconsistent, and ultimately a threat to principles of press freedom,” Corcoran goes on, failing to mention how what I think could possibly be a threat to principles of press freedom. By then he is starting to splutter and probably froth at the mouth. I am disappointed that he would engage in such a crude bludgeoning, as he is usually much more surgical. One of my favorite parts of the book is Corcoran’s flaying of the PPF on attending its 2017 gala, which he delightfully characterized as “a night in the swamp.” And while I have never met the man, I was almost imagining we could be friends after he quoted recently from one of my columns for Canadian Dimension.  

I suspect he’s also sore over my recent column in the Globe and Mail, which called for Ottawa to let Postmedia go under rather than continually bailing it out because that might be the only way to get rid of the blood-sucking vultures. Even my old pal Terry Glavin was a bit choked about that, which he made abundantly clear in prefacing my first column in a series he hosted last week. 

I had to take to Twitter to make it clear to Terry and his readers that I don’t want Postmedia’s newspapers to stop publishing. In fact, I exhorted MPs to ensure they are preserved in the coming implosion of Postmedia, which I am told could be closer than anyone suspects. That way Terry wouldn’t be out of a job. As for Corky, I think it’s time he packed it in.

Excerpt: A perfect marriage

The only newspaper monopoly in Canada worse than Postmedia’s in the West was the Irving family’s in New Brunswick. Four generations of Irving industrialists monopolized that province’s media and used it to benefit their business empire, which grew to employ one in every twelve working New Brunswickers and extended across Atlantic Canada into New England. The Irving name was everywhere in the Maritimes, adorning 700 service stations and a fleet of tanker trucks that delivered oil and gas.

What started out as one gas station in 1924 turned into a web of more than 300 privately-held companies engaged in oil and gas, forestry, real estate, retailing, construction, shipping, trucking, shipbuilding, and other businesses. By 2008, the secretive family was the second richest in Canada, behind only the even more secretive Thomsons, who were perhaps not coincidentally also a newspaper family. By 2022, the Irvings owned all three of the province’s daily newspapers, eighteen of its 25 community newspapers, and four of its radio stations.

The family’s stranglehold on media in New Brunswick has been the target of government inquiries dating back to the 1970 Senate report on Mass Media, which described the province as a “journalistic disaster area.” The 1981 report of the Royal Commission on Newspapers recommended breaking up the family’s chain, along with other regional newspaper monopolies. The 2006 Senate report on News Media described the Irving empire as “an industrial-media complex that dominates the province.”

Investigative reporter Bruce Livesey noted in 2016 that “the Irvings’ media monopoly has been a source of frustration for decades in New Brunswick, largely over concerns about what their newspapers omit – specifically any critical coverage of the Irvings and their companies.” Mount Allison University professor Erin Steuter, a long-time Irving critic, noted in a study that the family’s newspapers “routinely publish their own press releases as news stories.” 

A study in the Canadian Journal of Communication found that the family used its “considerable editorial and advertising clout to lobby the government, and to advocate for particular policies and regulations that support both its short and long-term business interests [which] include changes to regulations impacting energy markets as well as rules impacting the forestry industry.” One “hardy perennial of the editorial pages of the Brunswick News papers,” it noted, was “the importance of maintaining low power rates for large industrial users. Indeed, few issues have received more frequent mention in recent years. More troublingly, none of these editorials carried any disclaimer about the fact that the owner of the papers was . . . the single largest electricity user in the province.” 

The fact that oil baron K.C. Irving had been gobbling up the province’s most influential news media was actually kept a closely-guarded secret for a quarter century. After Irving bought the Saint John Telegraph-Journal, its Evening Times-Globe sister paper, and local radio station CHSJ in 1944, he retained their management and made no announcement of his purchase. Irving repeated the manoeuvre a few years later when he bought both Moncton dailies, the morning Times and the evening Transcript. A biography noted that Irving’s newspapers “shied away from any meaningful investigation of industrial pollution in New Brunswick” while maintaining a “long-standing conspiracy of silence about Irving’s business dealings,” including “secrecy about its own ownership.” Irving’s picture was never to appear in the newspapers, noted journalist Jacques Poitras, and if an oil spill or similar mishap involved Irving Oil, it was to be referred to as simply “a local oil company.” 

Irving quietly bought a minority interest in the province’s only other daily, the Fredericton Gleaner, in 1957 and again secretly took it over in 1968. This time, however, the purchase was dramatically revealed by New Brunswick Senator Charles McElman in a speech from the floor. Senator Keith Davey soon formed a Special Senate Committee on Mass Media to investigate it and the ever-tightening ownership of the rest of Canada’s media. It held hearings across Canada for five months and called 125 witnesses. It found that Irving controlled 92.7 percent of New Brunswick’s English-language daily newspaper circulation, which Davey’s 1970 report called “about as flagrant an example of abusing the public interest as you're likely to find in Canada.” 

The Combines Investigation Branch raided the offices of Irving’s newspapers the following year, along with his home and those of several of his executives, seizing almost 4,000 documents. Irving was charged with monopoly in 1972 by the Restrictive Trade Practices Commission, but he moved to Bermuda for tax purposes before his trial started, so the judge, prosecutor, and a stenographer had to fly there to take his testimony. Prior to his departure, Irving restructured his companies and transferred their control to his three sons. Irving was convicted at trial, fined $150,000, and ordered to sell both Moncton dailies within a year, but the conviction was overturned on appeal in a case that went all the way to the Supreme Court of Canada in 1976. 

The Irvings merged their two Moncton dailies in 1983 as the Times-Transcript, and after their father died in 1992, his sons closed the Saint John Evening Times-Globe in 2001. The family’s holdings were restructured in 2005 to give control of their four radio stations to son Jack, and by 2020 his Acadia Broadcasting had added another five in Nova Scotia and six more in Northern Ontario. The newspapers went to son J.K., who also headed the family’s forestry and transportation companies. Brunswick News had embarked on an expansion at the millennium, acquiring a dozen New Brunswick weeklies, half of which were published in French. Son Arthur headed Irving Oil. 

One thing the Irvings apparently could not stand was competition, judging by the cutthroat tactics they used to eliminate it. After Mark Leger quit the Telegraph-Journal to found the Saint John alt-weekly here in 2001, then expanded to Moncton in 2004, Brunswick News launched a similar newspaper called Metro Marquee that offered discounted or even free advertising. This predatory pricing forced Leger to sell out to Brunswick News, which closed Metro Marquee and expanded here into Fredericton. Despite promising not to, it watered down the alt-weekly’s critical content and demolished the wall it had kept between advertising and editorial. “The new owners exercised their editorial control immediately by cancelling the sex column,” noted Steuter, “and not long after the new editor was fired for running a cover story on breast feeding.”

That was nothing compared with what happened to Ken Langdon after he quit as publisher of the twice-weekly Woodstock Bugle-Observer in 2007 to start his own newspaper, the Carleton Free Press. Brunswick News secretly went to court and got a rare civil search warrant which allowed private investigators and forensic accountants to raid Langdon’s home in search of any company documents he may have taken with him. The searchers even examined the lingerie belonging to Langdon's wife, noted the New York Times. A court order that blocked Langdon from contacting Bugle-Observer advertisers, writers, readers, and distributors was lifted after a judge ruled that “Brunswick News Inc. cannot claim a monopoly over advertisers or its customers.” 

The first issue of the Carleton Free Press carried more than 15 pages of advertising, which soon grew to 20. The Canadian Association of Journalists awarded Langdon its 2008 President’s Award for contributions to journalism. Six months after it started, the Carleton Free Press had almost as many readers as the Bugle-Observer, which began to discount its advertising rates and slash its subscription prices “to try to drive the Carleton Free Press out of business,” noted the Toronto Sun. 

Langdon filed a complaint with the Competition Bureau alleging anti-competitive business practices and “abuse of dominance” by Brunswick News. “It’s hard for an advertiser to give you $500 for an ad when they can buy it for $200 from your competition,” he told the Canadian Press. The Competition Bureau looked into Langdon’s complaint but quickly dismissed it, saying it could not conclude that Brunswick News had “been engaged in the practice of anti-competitive acts or that there has been a substantial lessening or prevention of competition.” 

Predatory pricing could only be demonstrated, it added, if the dominant firm was pricing below its “average avoidable costs,” and it did not have such evidence. “Given that BNI is able to share resources such as printing, between several publications, their avoidable costs would be minimal.” While the Competition Bureau could not show that BNI’s behaviour constituted predatory pricing, its “need to focus our investigative efforts where they can be most effective in contributing to the prosperity of Canadians requires us to discontinue our investigation on this matter.” With an economic downturn starting, the Carleton Free Press ceased publication in October 2008 after not quite a year in print. A copy of its unpublished final front-page story, which chronicled its own demise, was obtained by the CBC. “Concentration of ownership and big money,” it said, “finally wore us down.” 

Many in New Brunswick rejoiced in early 2022 when the shock announcement was made that Postmedia was buying Brunswick News for $16.1 million. The Irving family was finally quitting the media business, Jim Irving announced in a news release, saying that the sale “represents an exit from the media business by J.D. Irving, Ltd.” Then it was pointed out that, under ownership by Postmedia, New Brunswick newspapers were likely going from bad to worse. St. Thomas University professor Michael Camp, a former Irving journalist, doubted that Postmedia would maintain all of its newly-acquired publications. “I regret very much that we're losing this local news presence,” he told the CBC. “I also feel badly for the people who will be displaced from their jobs. And I wonder about the future of journalism in New Brunswick.”

The one thing everybody missed, however, was that less than half of the purchase price was paid in cash, with the rest coming in the form of Postmedia shares. The more than 4 million shares the Irvings received put them among the company’s largest Canadian shareholders. It wasn’t so much a purchase as a merger, which was amply demonstrated when a second shock announcement was made a few months later that fourth-generation Jamie Irving would be named executive chairman of Postmedia’s board of directors when Paul Godfrey stepped down at the end of the year. 

That wasn’t even the final plot twist, as the 83-year-old Godfrey wasn’t really going anywhere either. A major shareholder himself from all of the stock options he had received while CEO, Godfrey would be staying on as a paid special adviser to the board and CEO Andrew MacLeod, which could include advocacy work with government. “I’m going to be there doing a lot of the same things that I’ve done in the past,” Godfrey told the Globe and Mail. “I realize a lot of people are going to think this is a retirement. I’m not retiring.” 

So Postmedia got New Brunswick, Canadians from coast to coast got an Irving to head their largest newspaper chain, and Godfrey got to stick around and steer home the third leg of his Postmedia rescue plan. There was certainly more work to be done. Despite the Liberal promise to introduce Australian-style legislation within 100 days to force Google and Facebook to bail out the country’s newspapers, the government was having trouble getting its planned Internet controls passed, so it was by no means a slam dunk. It had forced the Online Streaming Act through Parliament in 2021 by invoking closure to cut off debate, but members of the Senate, where the bill died with an election call, were more skeptical and in no hurry to pass it.

Excerpt: Project Ice

The last week of November 2017 should have been a fruitful one for John Hammill, with Christmas advertising pouring in to fill the pages of the newspapers for which he sold ads in the small Ontario communities of Orillia, Barrie, Collingwood, Bradford, and Innisfil. Hammill had just started his second year as regional advertising director for Postmedia’s six daily and eight weekly newspapers in its Northern Ontario region, having been promoted from publisher of its daily Orillia Packet & Times. 

Hammill’s workweek ended abruptly that Monday morning, however, after he heard the announcement that Postmedia and Torstar had traded 41 newspapers and were closing 36 of them. Within 10 minutes, he received a letter from Postmedia’s Human Resources department informing him that the company had sold the newspapers he worked for, and that the new owner would “not require your services.” Hammill deduced that the companies had co-ordinated the closures, since he had been fired by Postmedia although Torstar was the new owner. “I didn’t actually have too much of a problem with the swap then,” he later told the Vancouver-based website The Tyee. “I understand business.” 

At 147, the Packet & Times was almost as old as Orillia. “A bust of its founder stands in the library,” noted the Globe and Mail. The newspaper was closed “with a snap of the fingers,” added the Globe, and then one final insult was added. “The Packet didn't get a chance to put out a final issue bidding farewell to the community it served for all those years.” Hammill understood the transaction was just business and felt no need to go public with his doubts until he saw Godfrey’s interview on BNNBloomberg, in which the CEO claimed he had no idea that Torstar would close the newspapers it acquired from Postmedia. “That’s when I spoke up,” Hammill told The Tyee. “I must have seen the interview a dozen times.” 

Hammill contacted the Competition Bureau and contradicted what Godfrey claimed about all the closed newspapers losing money, revealing that they were instead making money. The closed Collingwood Enterprise Bulletin was doing “really good,” he said, while the Barrie Examiner was “doing okay,” and he was surprised they had been closed. Hammill wasn’t about to wait for the bureaucrats in Ottawa to bail him out, however, as he had a family to support. He had enough experience in the newspaper business to know that there was still a market for advertising in small communities such as his. Maybe it wouldn’t be in print newspapers, but he knew that he could sell ads. 

Hammill got in touch with Sault Ste. Marie-based Village Media, which published a string of online publications including SooToday.com, GuelphToday.com, BarrieToday.com and TimminsToday.com. Together with several other laid-off Packet & Times workers, Hammill and Village Media founded OrilliaMatters.com, which went live in early 2018, not six weeks after their newspaper was closed. 

Few held out hope that the Competition Bureau would step in to halt the trade between Postmedia and Torstar or the newspaper closures that followed. After all, it had taken no action when similar dealings went down a few years earlier in B.C., where the regional chains Black Press and Glacier Media had traded and closed dozens of titles, which accounted for a majority of the newspaper closures in Canada between 2010 and 2016. Of the thirteen paid dailies that were closed, merged, or changed publication frequency during that period, including the Nanaimo Daily News, nine were published in B.C. and owned by Black Press (six) or Glacier Media (three). 

The two chains also closed numerous long-publishing community newspapers they acquired from each other, with Black Press accumulating titles on Vancouver Island, where it soon owned them all, and Glacier Media adding newspapers in the Vancouver suburbs. “It is by now a familiar script,” noted B.C. Business magazine in 2015. “Through horse-trading, Glacier Media or Black Press . . . become the sole owners of a community’s weeklies. And then one of those papers shuts down.” When Glacier closed the weekly Westender community newspaper in Vancouver at the end of 2017, which it had acquired from Black Press in a city where it already owned the thrice-weekly Courier, it brought to 24 the number of newspapers lost to closure or merger following their exchange of 33 titles. 

The Competition Bureau had also taken no action after Postmedia acquired Sun Media in 2014, effectively merging the country’s two largest newspaper chains. Its ruling in that case was a watershed moment for newspaper competition in Canada. The deal itself was unprecedented. “This doesn’t just alter Canada’s print-media landscape,” observed the Globe and Mail, “it takes a bulldozer to it.” Postmedia, it added, had “thrown down the gauntlet to Canadian regulators, and forced the country to have a conversation that it has long avoided: How much are we willing to compromise the principles of a diverse and competitive press in the name of keeping it alive?” 

The Toronto Star noted that Postmedia’s sudden newspaper dominance wasn’t raising the concern it should have. “If the deal is approved by the federal Competition Bureau, one company will own almost all the significant daily papers in English Canada — with the exceptions of the Star, the Globe and Mail, Winnipeg Free Press and Halifax Chronicle Herald,” it pointed out. “In most cities, the choice for newspaper readers will be between Postmedia – and Postmedia.” 

The Bureau investigated the transaction for five months and somehow concluded that the Sun newspapers Postmedia acquired in Calgary, Edmonton, Ottawa, and Toronto didn’t compete with its broadsheets in those markets. “Extensive documentary and empirical evidence demonstrated that the parties are not close rivals from the perspective of readers,” its ruling noted, “a finding that was supported by the views of market participants and by an analysis of the demographic characteristics of the parties’ respective audiences.” 

Besides, Godfrey had assured all concerned that Postmedia would keep the newspapers, and their newsrooms, separate. “We intend to keep Sun Media’s large daily newspapers in those markets where we overlap,” he told the Toronto Sun when the deal was announced in 2014. “Their readers and their advertisers in many cases are different from those of Postmedia.” The Sun reporter paraphrased Godfrey’s promise. “Sun Media will continue to operate independently with its own newsrooms and opinions, he said.” 

Part of the problem was that the Competition Bureau was empowered to examine only economic factors, which in the case of newspapers meant advertising and not news. Its governing Competition Act was “not intended nor designed to deal with the important question of ‘diversity of voices,’” the Bureau noted in a 2003 summary of its work in media industries prepared for a Senate inquiry into news media. 

The inquiry’s subsequent report was harshly critical of both the Competition Bureau and, in broadcasting, the Canadian Radio-television and Telecommunications Commission for what it called their “neglect” of news media. “One challenge is the complete absence of a review mechanism to consider the public interest in news media mergers,” it noted. “The result has been extremely high levels of news media concentration in particular cities or regions.” 

Another problem with the Competition Act was that it required the Bureau to allow any merger or acquisition which provided efficiencies of operation that outweighed any detriment to the public. “Even where there is a finding that a merger would likely substantially lessen or prevent competition,” noted the Bureau in its 2003 review, “the Competition Act specifically directs that the merger be allowed to proceed if it would also likely result in gains in efficiency that are greater than and offset the effects of the lessening or preventing of competition.”  

The relevant section of the Competition Act had lain dormant for almost 30 years, however, until a Supreme Court of Canada ruling came down in 2015 just as the Competition Bureau was investigating the Sun Media takeover by Postmedia. The ruling in the case of a hazardous waste merger in northern B.C. provided an ill-timed precedent that disempowered the Competition Bureau. This spotty record of anti-trust enforcement in the newspaper industry did not inspire much hope that the Competition Bureau would intervene in the Postmedia-Torstar trade and closures, but it could not ignore the whistleblower evidence provided by Hammill. 

The Competition Bureau soon pursued search warrants, describing in court documents how lawyers for both companies had been working on Competition Bureau official Pierre-Yves Guay to call the investigation off. “A lawyer for Torstar e-mailed Mr. Guay to request a phone call with both companies’ lawyers,” according the documents. “Mr. Guay replied by e-mail that this would be ‘highly inappropriate’ and scheduled separate calls instead the next day.” The Competition Bureau claimed that Hammill’s evidence indicated “prior negotiation, agreement or arrangement” between the companies related to the closings. 

As a result, its investigators said they believed the companies had “entered into a conspiracy” because their agreement specified which employees would be terminated when the transaction closed. The court documents also pointed to press statements made by Postmedia executives that both companies were unaware of the other’s plans to close the papers as “inconsistent with actions taken by Postmedia and Torstar and with the terms and conditions set out in the transaction documents.” 

After search warrants were granted, Competition Bureau officers raided the offices of both Torstar and Postmedia in mid-March, along with those of Torstar’s Metroland chain in Mississauga and its Hamilton Spectator. The search of Metroland’s headquarters found documents which referred to the deal as Project Lebron, presumably after the basketball star, but on Postmedia’s end it was code-named Project Ice.

“Given the pattern of facts laid out by the Competition Bureau,” the Globe and Mail concluded, “the best course of action may have seemed to be: Do one thing, say another, and bet that no one ever found out.” 

The news wasn’t all bad for Postmedia in 2018, however. In his annual economic statement that November, Finance Minister Bill Morneau announced $595 million to subsidize reporting, subscriptions to digital news services, and charitable tax deductions to non-profit news media. The bailout brought jubilation from the newspaper lobby, especially from Godfrey, who called it “a turning point in the plight of newspapers in Canada” so significant that it even warranted the donning of track shoes. “I tip my hat to the prime minister and the finance minister,” he said. “They deserve a lot of credit. Everyone in journalism should be doing a victory lap around their building right now.” 

Less than a week later, Postmedia released information to shareholders in advance of its annual general meeting which showed that Godfrey’s annual compensation for the fiscal year topped $5 million. In addition to his $1.2 million salary as CEO, Godfrey was awarded $1.2 million in bonuses, $2.4 million in stock options, and other compensation that brought his total remuneration to $5.04 million. Andrew MacLeod, who had been promoted a year earlier to president and chief operating officer, received $2.2 million, or more than double his compensation the previous year, while the total for Postmedia’s top five executives came to more than $10 million. 

Postmedia announced early in 2019 that Godfrey, who was about to turn 80, would step back from management and serve out the remaining two years of his contract as executive chair of its board. As expected, it named MacLeod to replace him as CEO. The bailout did not mean total victory for Godfrey’s leadership of Postmedia, however, as some unfinished business still hung over its head in the form of the Competition Bureau investigation. “We remain confident that this will ultimately result in an exoneration,” MacLeod said.

Read Excerpt 4

Excerpt: The bailout campaign

It was perhaps fitting that Edward Greenspon would head the Public Policy Forum think tank. After all, he had won its Hyman Solomon Award for Excellence in Public Policy Journalism in 2002, following which he was immediately appointed editor of the Globe and Mail. The PPF had been founded “to develop ideas for making government work better” by former career public servant Arthur Kroeger, who retired in 1992 after having run six government departments during a 34-year career in Ottawa. 

National Post columnist Terence Corcoran attended its 30^th annual awards dinner in 2017, which he calculated produced “at least $1 million in new funds the PPF can use to generate endless papers and reports providing ideological backing for Trudeau-style economic interventionism.” That year’s gala was the first presided over by Greenspon, who quickly passed the baton to Prime Minister Justin Trudeau, who served as master of ceremonies. “In others words,” noted Corcoran, “welcome to Canada's undrained national policy swamp.” The kicker came when Trudeau presented an award to Canadian-born but London-based Dominic Barton, a managing partner at McKinsey & Company. The global management consulting firm was notorious for the tactics it counselled companies on, most notably downsizing and offshoring. According to a 2013 history of the secretive firm, it may have been “the single greatest legitimizer of mass layoffs than anyone, anywhere, at any time in modern history.”

Greenspon‘s first major project for the PPF began in mid-2016, shortly after he assumed its leadership. The Heritage committee then holding hearings into media and local communities was supposed to tour Canada that fall to hear from Canadians first-hand about the state of local news provision, but sufficient funds were not available in its budget. That function was instead farmed out to the PPF. “We’re not, if you will, hired by the government,” said Greenspon. “But we’re doing this in co-operation with the government.” 

The PPF’s review, according to the Canadian Press, revolved around three questions: “Does the deteriorating state of traditional media put at risk the civic function of journalism and thus the health of democracy? If so, are new digitally based news media filling the gap? If not, is there a role for public policy to help maintain a healthy flow of news and information, and how could it be done least intrusively?” A half-dozen roundtables with “invited experts” were planned, as was polling designed to determine “how Canadians view the news media and its role in democratic society.” A concluding symposium was scheduled for the fall.

The PPF’s report The Shattered Mirror was thus eagerly anticipated when it was released in early 2017. Its dozen recommendations for improving news provision included extending to digital media the tax rules that favoured other Canadian media when it came to advertising, and taxing foreign ad sales to Canadians. It urged that Canada’s charitable giving laws be changed to allow news media to become non-profit entities and thus receive tax deductible donations. It proposed federal funding of $100 million to start a Future of Journalism and Democracy Fund, with continuing funding of $300 to $400 million a year coming from a sales tax on foreign media selling digital subscriptions in Canada and from removing tax deductions on foreign digital advertising. 

The Shattered Mirror warned that with bad news for the industry piling up, the news media’s “march to the precipice appears to be picking up speed. This slide may not produce the kind of crisis point that stops policymakers in their tracks, as the implosion of the auto industry in 2008-09 did, but the pace is unrelenting and the downward slope ever steeper.” Newspaper industry association News Media Canada “quickly distanced itself from the report,” noted the Globe and Mail, stating that its recommendations would not do much to help build sustainable new business models. “What I don’t see is the money going to news outlets that are currently covering their communities, building out digital platforms and adapting to the new business realities,” said NMC chair Bob Cox, publisher of the Winnipeg Free Press, who had been night editor at the Globe and Mail under Greenspon. 

Reaction to The Shattered Mirror was otherwise mixed, noted iPolitics, with the Canadian Association of Journalists supporting several of its proposals but taking “no immediate position” on the rest. The media union CWA Canada similarly welcomed the report’s call for non-profit news media to qualify for charitable status “in order to encourage local, non-profit ownership of newspapers rather than the destructive, predatory hedge fund disaster that is Postmedia.” 

Out on the west coast, however, retired talk show host and provincial cabinet minister Rafe Mair smelled horse manure. “It’s clear that The Shattered Mirror has nothing to do with democracy and good journalism and everything to do with bailing out an industry that’s facing obsolescence,” he wrote in his book Politically Incorrect, which was published shortly after his 2017 death. National Post columnist Andrew Coyne called the report “irreproachably responsible, admirably high-minded, and profoundly wrong” in arguing for nature to instead take its course. “This is not a case of market failure, but of industry failure,” he wrote. “Most of the industry’s problems are self-inflicted, a series of bad choices in response to admittedly massive changes. But even if that were not the case, there is nothing whatever to prevent readers from paying for what we produce, if they so chose. They are simply choosing not to do so.” 

Scholars who studied media economics in Canada found that The Shattered Mirror exaggerated the plight of newspapers and the threat of foreign Internet giants with selective data, exaggeration, and glaring omissions. It also glossed over some fundamental problems afflicting the newspaper industry, they pointed out, preferring to blame its woes instead on Google and Facebook. One critic called it “the funhouse mirror” for its exaggerations and found the report notable for what it didn’t include. “The PPF report is silent on the problem of U.S. hedge funds owning Canada’s largest newspaper company,” he wrote, and promoted “the Big Lie that has surrounded newspapers for years – that they are losing money and thus dying.” 

Dwayne Winseck of Carleton University was another scholar who took issue with data presented in The Shattered Mirror. He called it “badly flawed,” because it “cherry-picks evidence and gooses the numbers” to make its case. “The case that the authors of The Shattered Mirror make about the severity of the crisis of journalism is impressive at first blush,” wrote Winseck in an 11,000-word blog entry. “Ultimately, however, it is neither convincing nor credible.” The Shattered Mirror’s claim that between 12,000 and 14,000 journalism jobs had been lost since the 1990s, noted Winseck, was flawed because it relied on headlines and union data that “do a great job chronicling jobs lost but a poor one at keeping track of those gained.” Statistics Canada data, he pointed out, “depicts a wholly different picture,” showing that the number of full-time journalists in Canada actually increased from 10,000 in 1987 to 11,631 in 2015. “Once again consistent with a pattern, the authors ignore this data completely.” 

Winseck saw in The Shattered Mirror a “willful refusal” to deal with media industry structures, which were “wholly ignored” in the report. “These examples are not innocent,” he charged. “They are part of a process of ‘threat inflation’ with the aim of buttressing the case for the policy recommendations on offer.” While exaggerating some threats, such as the online advertising dominance of digital giants Facebook and Google, the report downplayed one major problem, noted Winseck. “The Shattered Mirror also gives short shrift to the idea that media concentration and the structure of the communication and media industries might be a significant factor giving rise to the woes besetting the news media.” 

The Shattered Mirror at least earned Greenspon a new client, one with more media clout than he could have ever dreamed of. He was soon part of the newspaper lobby, which hoped to reap a government bailout. A draft version of NMC’s $1.375-billion bailout proposal that went out to stakeholders for comment in 2017 was printed on PPF letterhead and carried its logo at the top alongside that of NMC, but the final version oddly made no mention of Greenspon’s group. Perhaps it wouldn’t have looked good if the PPF were seen to be promoting an issue on which it had so recently produced a government-funded and supposedly independent report. 

NMC was careful, however, to acknowledge in the press release announcing its proposed Canadian Journalism Fund that the PPF had “brought together the industry, unions and digital only publications in both French and English to forge this proposal.” The bailout proposal’s rejection by the federal government a few months later wasn’t the end of the matter. It only meant more work for Greenspon. 

The coalition was hardly a secret, having been noted on the website iPolitics in mid-2017 by Carleton University journalism professor Paul Adams, a former CBC and Globe and Mail journalist. “Since the report came out, PPF has maintained a working group, including representatives from big media chains, media unions and luminaries like former CBC vice-president Richard Stursberg.” The newspaper lobby even announced itself in a Globe and Mail op-ed published that September. “The Public Policy Forum brought together about 40 news organizations and unions to propose solutions that would support employment of reporters and investment in innovation without sacrificing media independence or shutting out new competitors.” 

Soon the pages of Canada’s largest dailies, and even some of its smallest weeklies, would be filled with columns and editorials urging government assistance for the press, many of them authored by the newspaper lobby’s founding members.

Read Excerpt 3 

Chapter 1 – A question of control

Paul Godfrey seated himself to testify. The wiry 77-year-old newspaper company executive had been called to account by the federal government for the latest devastation his chain had wreaked on Canada’s news media. Hearings in Ottawa had convened quickly in 2016 after the company Godfrey headed, which owned most of the country’s largest newspapers, merged its newsrooms in four of Canada’s six largest cities where it published both dailies, despite promising not to.

Godfrey’s promise had been spread across all political levels, from mayors right up to new federal Liberal leader Justin Trudeau, after Postmedia bought 175 newspapers in 2014 from Sun Media, the country’s second-largest chain. The resulting double coverage in Vancouver, Calgary, Edmonton, and Ottawa had been controversial from the outset, but Godfrey quickly allayed fears over the increased concentration of media ownership. “I attended two of his private dinners in fine Alberta restaurants where he vowed to keep the newsrooms separate,” recalled Margo Goodhand, who was then editor of Postmedia’s Edmonton Journal. “We might even have to reinvest in the Sun newsrooms, he mused aloud in Calgary. . . . They’d be competitive, distinct, and entirely independent, he said.”

The 2016 merger of newsrooms and the layoff of 90 journalists by Postmedia Network was just the latest disaster in the slow-moving train wreck that was the newspaper crisis. Following years of layoffs and a few closures following the 2008-09 recession, local journalism in Canada had taken a beating. The cutbacks to news reporting were worst at Postmedia newspapers, however, because it was 92 percent owned by U.S. hedge funds that were skimming off most of its earnings as interest payments on the massive debt they also held. MPs wanted to know what was going on.

Dressed in a blue suit and wearing reading glasses under his deeply-furrowed brow and combed-back, graying hair, Godfrey audaciously started with a sales pitch to the Heritage committee in his opening statement. “Come back and advertise in our newspapers and on our websites,” he exhorted them. “Ad budgets have been cut, and the cuts from the Government of Canada have disproportionally been to newspapers.” Television’s share of the federal ad spend, he noted, had increased from 48 percent to 54 percent, while that devoted to online media, much of which was foreign-owned, had almost doubled. Print advertising had been cut in half to only 8.5 percent. The Heritage ministry was the worst offender, he told its standing committee, as while it had spent $6 million on advertising that year, none went to print. “If you're going to advertise, then you should give some consideration to Canadian publications.”

Liberal MP Adam Vaughan then began to grill Godfrey. They had crossed swords a few years earlier, when Vaughan was a Toronto city councillor and Godfrey was chair of the Ontario Lottery and Gaming Corporation with grandiose plans for a mega-casino on the downtown waterfront. Vaughan had won that encounter, as Godfrey was fired by incoming premier Kathleen Wynne.

“Postmedia’s largest shareholder is a U.S. hedge fund named GoldenTree Asset Management,” Vaughan pointed out to Godfrey. “Why would we fund a failing business model that’s owned by U.S. interests?”

“Your facts aren’t correct,” Godfey shot back. “The fact is that this company is controlled by Canadians.” It was a convenient fiction that Godfrey relied on, enabled by a loophole that lawyers had found in Canada’s 25-percent limit on foreign ownership of newspapers. To accept the separation of ownership and control as meaningful, however, required an almost complete suspension of corporate disbelief.  The Globe and Mail had already reported in 2014 that Godfrey conferred with Postmedia’s foreign owners frequently and that the hedge funds had pushed for the acquisition of Sun Media. “Paul doesn’t make major moves without calling them first,” it quoted an anonymous source close to the company as saying.

Vaughan attempted a weak comeback, having obviously not done his homework. “That being said, why would we bail out a U.S.-indebted company?” Godfrey used a bit of poetic licence to evade that one. “You’re not bailing out a U.S. company,” he replied. “You can be critical of GoldenTree Asset Management, but I'll tell you that you’re barking up the wrong tree.”

Then Godfrey went on the offensive again, pointing out the recent closures of the Guelph Mercury and Nanaimo Daily News as proof of the newspaper industry’s decline. “If it continues to follow the trend it’s on, you won't be sitting here and talking about whether there should be subsidies or not,” he told Vaughan. “You’ll be talking about how we are going to continue to create a group of journalists producing content for Canadians. . . . If you think that's not going to happen within the next three years, you’re going to find that there will be a lot more closings.”

Godfrey repeated his threat later in the hearing. “I’m not trying to paint an overly bleak picture,” he insisted in response to MP questions. “I’m painting the picture that’s out there.”

I will tell you that within three years, there’ll be many more closures in some of your own communities because of the state of the newspapers. You’re our elected representatives. I commend you for even having this meeting. If you decide to do nothing, that’s your call. I'm not trying to paint an uglier picture than what it is. It’s ugly and will get uglier, based on the trends that exist today.”

Little could observers have known just how ugly things would get when Godfrey and the newspaper lobby he assembled didn’t get the bailout they wanted, and it wouldn’t take three years. It would only take half that long for things to get very ugly indeed in Canada’s newspaper industry. More pressing to Godfrey, however, was a time bomb that was ticking inside Postmedia’s finances. To defuse it would take some fancy footwork that would raise the company’s foreign ownership even higher.

Few realized just how close Postmedia was to imploding. Standard & Poor’s had downgraded its credit rating to triple-C-plus from single-B-minus in late 2015, calling its capital structure “unsustainable” and warning that the company could struggle to refinance its high-interest debt. Making things worse was the fact that most of Postmedia’s debt was in U.S. dollars, and a falling loonie meant that payments on the bonds that Postmedia had issued in 2011 had since risen in Canadian dollars by more than 30 percent. “With the Canadian dollar falling the way it’s falling,” Godfrey told the Canadian Press, “that’s almost like a noose around your neck.”

GoldenTree was also unhappy, having watched Postmedia’s advertising revenues continue to drop and the price of its shares fall to only 6 cents, which made its 58 percent stake in the company worth only about $9 million. The hedge fund had hired an investment bank to drum up interest in its ownership of Postmedia, the Globe and Mail had reported that March, and it had approached a half dozen potential buyers.

The Globe’s incisive Streetwise business column didn’t like the hedge fund’s chances of offloading its investment in Postmedia, however, mostly due to its ticking debt bomb, a restructuring of which risked wiping out much of GoldenTree’s investment. Its reporters pressed Godfrey on whether the company could continue to meet its interest obligations. “So far, we haven't missed a payment,” he replied. “Hopefully we won't miss a payment.” Streetwise saw little hope for Postmedia, contacting several potential investors who said they had been approached but were not interested. “Postmedia appears to have little value to salvage,” it added, “and what does exist will take a lot of heavy lifting to unearth, sources said.”

Created from bankruptcy

The newspaper crisis had literally created Postmedia, which in 2010 rose from the ashes of bankrupt Canwest Global Communications after it was caught holding the bag when the 2008-09 recession dropped advertising revenues sharply worldwide. The bag held $4 billion in debt on which Canwest could no longer make the payments. GoldenTree was actually betting on it going bankrupt, as it had been buying up Canwest debt on the bond market at pennies on the dollar, and it acquired more than enough to take the company over.

Canwest and its owning Asper family of Winnipeg had bought the historic Southam newspaper chain in 2000 as part of the brief but disastrous enthusiasm for “convergence” of media ownership between print and TV. To get in on the trend that swept the country’s media at the millennium, Canwest went deeply into debt to add newspapers to the Global Television network it had owned since the mid-1970s. The Aspers quickly went from riding high at the millennium to being out of business less than a decade later.

The newly-formed Postmedia Network took over its newspapers and began to make massive layoffs, for which hedge fund owners were notorious. It cut most of the editing positions at its newspapers across the country by centralizing their production at a strip mall in Hamilton. Postmedia then paid $316 million in 2014 for Sun Media, which was Canada’s second-largest newspaper chain. That gave it the tabloid Edmonton Sun in addition to the broadsheet Journal it already owned in Alberta’s capital, along with a Sun just to the south in Calgary, where it also published the dominant Herald. In Ottawa, a Sun similarly shone in the shadow of the Citizen. Postmedia’s plan in those cities, Godfrey had assured all concerned, was strictly a mechanical combination similar to that operating for decades at its dailies in Vancouver, seeking $6-10 million a year in cost savings through efficiencies in administration and production, but keeping separate newsrooms.

The only problem was that the federal Competition Bureau had neglected to make the promise a condition of allowing the purchase. Soon Postmedia’s required savings grew to $50 million as its advertising revenues continued to fall. Now the same stories and bylines were appearing in both local newspapers while scores more journalists were laid off to cut costs.

The little chain that grew

The Sun tabloids were near and dear to Godfrey, who had piloted the growing Sun chain for most of the 1990s. He broke into the newspaper business in 1984 as publisher of its flagship Toronto Sun straight from a career in local politics, where he served as a North York alderman for almost a decade starting in 1964 before going on to serve five terms as chairman of the now-defunct Metro Toronto conurbation.

He quickly rose through the corporate ranks, becoming president and chief operating officer of Toronto Sun Publishing Group in 1991, which was then owned by Rogers Communications, and CEO a year later. “By 1999, he had led a management buyout of the Sun's newspaper assets, taken that company public and arranged its sale to Quebecor,” noted the Globe and Mail. “The end result essentially tripled the company’s value and put an estimated $28-million into Mr. Godfrey’s pocket.”

The “little newspaper that grew” proved that colourful tabloids could find an audience in cities dominated by a larger broadsheet. Competing dailies had been folding for decades across North America as mass media alternatives exploded, but in Canada the success of tabloid Suns bucked that trend. In Vancouver, there was already a Sun and it was a broadsheet, but its Province partner converted to tabloid format in 1983 to keep the Sun chain out, and the makeover proved wildly successful, making it especially popular with younger readers. Both Vancouver dailies were already owned by Postmedia, and had been operating since 1957 in a partnership that was ruled an illegal monopoly but allowed to continue on the basis of “economic necessity.”

Foreign ownership

GoldenTree Asset Management’s majority ownership of Postmedia should not have been allowed under Canadian law, which limited foreign ownership in this culturally-sensitive industry to 25 percent, but decades of legal challenge to such limits had badly eroded them. Sharp lawyers found a loophole that did an end run around the law by forming a publicly-traded company with two classes of shares. Foreign owners were given stock that varied in voting power, which supposedly kept their “control” of the company under the allowable limit, even though their ownership well exceeded it.

GoldenTree reached out to Godfrey, who had headed a rival bid to acquire the newspaper chain out of bankruptcy, to run its new Canadian operation. It needed someone with not only some serious newspaper acumen, but also plenty of friends in high places, and Godfrey was without doubt the best possible candidate. Torontoist described him in 2015 as “a consummate networker and backroom operator, especially in local Conservative circles,” but added that “his track record has sometimes raised questions regarding whose interests he works for.” Phil Lind, a Rogers executive who helped hire Godfrey to run the Toronto Blue Jays baseball team it owned, wrote in his 2018 memoirs that “few are better political operatives than Paul.” 

The Globe and Mail described Godfrey as a “consummate strategist” in a 2014 profile. “Mr. Godfrey begins planning his next moves early each day during solitary walks along Toronto’s Bay Street. His Labrador retriever nudges him awake around 5:30 a.m. and they set out from his home at the Four Seasons Private Residences.”

He had left the newspaper business in 2000 after brokering the $983-million sale of Sun Media to Quebecor, which gutted it with 300 layoffs. He was chair of the Ontario Lottery and Gaming Corporation when Canwest lured him back as president and CEO of its flagship National Post in 2009. Godfrey was already 71 by the time GoldenTree came calling the following year, asking him to head the whole chain, but he couldn’t say no. Not with what they offered him.

“I’ve been a workaholic all my life, and I’m not slowing down,” he told Toronto Life when he was 73. “I work out three times a week, which keeps me energized. . . . I start by running six kilometres, then I’ll do lateral lifts with 12-pound weights while standing on one foot on a Bosu ball. I’m stronger now than I was in my 40s.”

Competition Bureau failure

Postmedia’s 2014 purchase of Sun Media raised concentration of newspaper ownership in Canada to among the highest in the free world. The Competition Bureau had been a huge failure in preventing it, seemingly waving the white flag at every opportunity to enforce the country’s anti-trust laws. Its gyrations in allowing Postmedia’s acquisition of Sun Media, however, proved the height of absurdity.

Its economic analysis laughably concluded that the tabloids acquired from Sun Media didn’t compete for advertising with the company’s broadsheets. It cited one paper by an economist which concluded that newspaper monopolies in Canada didn’t result in higher prices despite decades of studies worldwide which showed they did. That had all gone down on Stephen Harper’s watch as Conservative prime minister, however, as had Postmedia’s foreign ownership. Many hoped the new Liberal government elected in late 2015 would do something to clean up the mess that Americans were making of our news media.

Long-time Vancouver Centre MP Hedy Fry was doing her best to try. She had been outraged by the merging of newsrooms in her town. Fry quickly convened hearings in Ottawa that February of the Standing Committee she chaired of the Department of Canadian Heritage. “I know that our government has a strong will to deal with this now,” said Fry, then 74. “The thing about politics is that the time comes one day when stuff is facing you so hard that you have to do something about it. That time has come.”

The hearings would eventually result in a report that recommended changes to media regulation in Canada in order to bring ownership concentration under control. Unbeknownst to most, however, a parallel process was already underway which would ensure that another narrative dominated. The Heritage committee was supposed to tour the country that summer to hear from Canadians, but after the money proved unavailable in its budget, the field work had been contracted out to a so-called “think tank” in a study funded partly by Heritage and partly with corporate money.

Postmedia “a cancer”

The Toronto Star was Postmedia’s – and Godfrey’s – harshest critic for their decimation of Canada’s largest dailies. It had blasted Postmedia earlier in 2016 as nothing less than “a cancer on Canadian journalism.” The malignancy was created by “quick-buck hedge funds in the U.S.,” railed the Star. The acquisition of Sun Media was a “thinly disguised foreign takeover” that resulted in “a far greater concentration of news media ownership than exists in any other major economy.”

From what Star business reporter David Olive could tell, there couldn’t be much life left in Postmedia, which was fortunate. “As long as the biggest newspaper publisher in the country clings to life,” he quipped, “it is a blight on all the communities it underserves.” Postmedia was in “such wretched condition,” he insisted, that it was surely “not long for this world.” Postmedia was “flirting with insolvency,” according to Olive, since its earnings continued to plummet in lockstep with its advertising, which was increasingly migrating to the Internet.

The company had been so laden with debt held by its hedge fund owners that it couldn’t possibly keep up the payments much longer due to its falling revenues, according to Olive. “Postmedia has installed a time bomb on its balance sheet of $672 million in debt owed to the U.S. hedge funds,” he pointed out, and much of the debt had to be paid in mere months. “It's very difficult to see where Postmedia will get the money to do this,” Olive continued. “The interest payments have become downright asphyxiating.”

Of the $82 million in operating earnings that Postmedia would generate that fiscal year, fully $72 million would go to servicing its debt, meaning that its profits went mostly to its bondholders rather than its shareholders.

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SEC clips wings of American vulture fund feeding off Canada’s largest newspaper chain

New Jersey hedge fund Chatham Asset Management, which owns most of Canada’s largest newspapers, paid US$19.3 million recently to settle charges of improper trading brought by the U.S. Securities and Exchange Commission. The dodgy dealings are chronicled in my new book The Postmedia Effect, but their outcome was only announced as it was rolling off the presses earlier this month. The charges provide a glimpse into the kind of questionable tactics often engaged in by hedge funds like Chatham, which is attached like a leech to Postmedia Network. It owns two-thirds of Postmedia’s shares despite a supposed 25-percent limit on foreign ownership in this culturally sensitive industry, but more central to Chatham’s business model, it is bleeding the company dry through interest payments on the massive amount of its bonds which it also holds. 

Postmedia is just one of several newspaper chains owned by Chatham, which was founded in 2003 by junk bond trader Michael Melchiorre. In 2020, it acquired out of bankruptcy the U.S. chain McClatchy, owner of major dailies such as the Miami Herald, Kansas City Star, and Sacramento Bee, by buying up its distressed debt on the bond market for pennies on the dollar. It already owned American Media Inc., publisher of the National Enquirer and magazines such as Men’s Journal and Us Weekly, which it took over in a similar way. 

Alleged manipulation of bond prices is what got Chatham in hot water with the SEC. “Trading in AMI bonds had the effect of increasing the prices of those generally illiquid securities in a way that was disconnected from economic reality,” noted an SEC spokesperson. It alleged that Chatham advised its clients to buy and sell AMI bonds back and forth at prices it proposed, which raised their value significantly from 2016 to 2018. Chatham and Melchiorre consented to the SEC's findings without admitting or denying them and agreed to pay US$11 million in compensation, $3.3 million in interest, and US$5 million in civil penalties. Similar suspicions have been raised about manipulation by Chatham of Postmedia’s bond prices, according to Fortune magazine. “The strong price of the debt is difficult to explain, traders say.” 

Its bonds rarely change hands. Yet its junior bonds offer yields comparable to more senior securities. The notes don’t pay regular interest in cash, a sign of their inherent riskiness. At least five other traders who’ve looked at the bonds say their prices seem too good to be true. 

Chatham sold the National Enquirer in 2019 after a scandal erupted over its “catch and kill” tactics used to aid the election of Donald Trump as U.S. president in 2016. Trump’s lawyer Michael Cohen was sentenced to three years in prison in 2018 on charges including campaign finance violations, tax fraud, and bank fraud over hush money paid to porn star Stormy Daniels and Playboy model Karen McDougal to cover up affairs with the presidential candidate. Trump himself now faces 34 felony charges of falsifying business records to conceal the payments. McDougal was paid $150,000 for her story by National Enquirer publisher David Pecker, who supported Trump’s election, but it was never published. Pecker, who was then a Chatham appointee to Postmedia’s board of directors, was granted immunity from prosecution in exchange for providing information about the payments. He resigned from Postmedia’s board shortly after the scandal broke.

Chatham took over Postmedia in 2016 from GoldenTree Asset Management, a New York hedge fund which had acquired it out of the 2010 bankruptcy of Canwest Global Communications by similarly buying up its distressed bonds. Canwest was deeply in debt when the 2008-09 recession dropped its advertising revenues sharply, so it issued new bonds at interest rates as high as 12.5 percent in a desperate attempt to stay afloat. GoldenTree bought many of the bonds for as little as 10 cents on the dollar, then kept the debt on the company’s books to ensure that it was paid first every month. “All it had to do was to keep the company alive long enough to collect on its loans,” as I note in The Postmedia Effect. “A bond paying 12.5 percent interest bought for 10 cents on the dollar, after all, provided a return of 125 percent a year.” 

Under GoldenTree, Postmedia bought Sun Media, Canada’s second-largest newspaper chain in 2014, giving it 15 of the country’s 21 largest dailies at last count, including the National Post, Ottawa Citizen, Vancouver Sun and Montreal Gazette. It sold out to Chatham two years later in a change of ownership that “happened so quietly,” according to the New York Times, “that Postmedia’s own financial news site described it as a debt restructuring in a report that included a single mention of Chatham as ‘one of the investors.’” Under Chatham’s ownership, the Times noted, 1,600 employees or 38 percent of its workforce were laid off over the next four years as Postmedia “centralized editorial operations in a way that has made parts of its 106 newspapers into clones of one another.” 

A former high school football star from Chicago, Melchiorre gained a reputation for playing tough while head of Morgan Stanley’s junk-bond trading group in New York. “Although not physically imposing, Melchiorre could be foul-mouthed and loud," noted Fortune, "and would berate fellow traders as he bopped around the trading floor in his stocking feet.” Chatham soon built a “formidable reputation” under Melchiorre. “Playing tough is the Chatham way,” it noted, adding that the firm and its founder had developed “a reputation for hard-edged business.” Postmedia recently closed 12 newspapers in Alberta and announced that another 11 percent of its workforce would soon be axed. It is also selling real estate as its advertising revenues continue to fall, putting it under water on its debt payments and thus facing bankruptcy soon, according to The Postmedia Effect.