Two stories have my attention today.
The first is that Rod Blagojevich, the Governor of Illinois, may be dumber than he is corrupt, and he’s really corrupt. He follows in a somewhat disappointing state tradition – 3 of the last 5 elected Governors of Illinois have been charged with some type of wrongdoing; two did time (including Blagojevich’s predecessor, George Ryan, who still inhabits federal housing).
Follow the link for the sordid details, but what has most people shocked is how unbelievably dumb Blagojevich had to be to pursue his various scams while under incredible scrutiny. Think of Bill Pullman in Ruthless People, robbing a ransom drop that’s surrounded by cops. “This might very well be the stupidest person on the face of the Earth,” says Clarence Felder, playing Lieutenant Walters, in response, and then asks if he should shoot him.
He doesn’t. But Blagojevich is up against Pat Fitzgerald, who got Scooter Libby and the previous Illinois Governor convicted. I’d say he’s in a deep hole.
The second story is this: Tribune declared bankruptcy yesterday. This is the same Tribune company that Blagojevich pressured to fire certain editors in order for help in selling Wrigley field, and whose flagship, the Chicago Tribune, held a story on the Blagojevich investigation so as not to compromise it.
For this you can thank Chicago real estate magnate Sam Zell. Harold Meyerson has the details:
Sam Zell never really had much skin in the game. Last year, when he purchased the Tribune Company, which filed for bankruptcy today, he put up $315 million of his own money and paid the balance of the purchase price, $8.2 billion, with the employee stock ownership plan – a move in which Tribune employees had no say whatever. But that actually overstates the amount of Zell’s investment. Of the $315 million he sunk into the company, it turns out that $225 million was simply a promissory note. Due to the vagaries of bankruptcy law, writes business analyst Mark Lacter on laobserved.com, that means that Zell has better protection for his stake than all his employees. Trib’s ESOP holds 100 percent of the company common equity – and it’s the holders of common stock who usually take a bath, or get wiped out altogether, in the debt restructuring that goes on under Chapter 11.
In his memo to his employees this morning, Zell wrote, “in general, the existing benefits in the pension and cash balance plans are also unaffected by the filing.” To quote Lacter one more time: “In general?”
….When the Tribune company’s former owners elected to sell the company to Zell, they bypassed some other potential buyers, either of the company or its constituent papers, who were actually willing to put up their own money to make their purchases. In Los Angeles, David Geffen, Eli Broad and Ron Burkle all tried to buy the Times, but the Trib board wanted to sell to a fellow Chicagoan, even if he had no regard for journalism. In the end, not only has Zell lowered the quality of some great and good papers, but he structured a deal so laden with debt that he’s plunged his company into bankruptcy, too. Even if – an operator, that Zell – he’ll come out of it a whole lot better than the employees whose ESOP he dragooned.
POSTSCRIPT: The Tribune internal Q&A website on today’s bankruptcy filing states that “all ongoing severance payments have been discontinued.” So if you’re one of the large number of reporters, editors and other staffers at the L.A. Times, the Chicago Trib or other papers who got sacked and didn’t get your severance in one lump sum, you have a real problem.
The LA Times is my hometown paper, so I take this a bit personally. And, by the way, I’d like to buy a house with 1.1% down, but I haven’t worked that out – especially the part about the gardeners being on the hook for my mortgage if the market tanks.
If there were justice, Zell would be stripped of all his holdings and forced to live in a Chicago tenement delivering papers for a living. Sadly, neither the Gods nor the United States Penal Code are likely to make that wish come true.
I have two more realistic wishes that I’ll hope for instead.
First, lets stop worshiping at the altar of CEOs simply because they’re CEOs, or rich people simply because they’re rich. If we’ve learned nothing in the past year, its that a lot of incredibly well-compensated individuals didn’t have a fucking clue what they were doing, and all of us are paying the price.
Second, while I think all of George Bush’s U.S Attorneys should resign, Barack Obama ought to rehire the one from Chicago. Pat Fitzgerald is the truth.