Sam Zell responded to yesterday's class-action lawsuit by Los Angeles Times employees — which was first reported here — in a Dear Partners note to the company. He calls the suit "maligning the company in public," a distraction and bad judgment. Of course, one could say the same about his earlier public maligning of the company.
We are about to release a statement on the lawsuit filed yesterday by a staffer at the LA Times and several former Times employees. I want to share it with you first, but I also want to stress that as we work to fix our company, we are all in this together.
As newspaper advertising revenues have declined severely over the last several months, we've had to take some tough steps. We're not alone, of course -- the entire publishing industry is trying to deal with the challenges posed by a tough advertising environment and an economy in turmoil. At Tribune, we're making tremendous progress -- reinventing our newspapers, expanding television news, growing WGN America, and developing a new Internet platform. We're being watched and imitated.
The overwhelming majority of our employees have risen to the occasion -- they are working extremely hard, innovating as never before, trying new things, pushing the envelope. They are using their own best judgment and questioning authority when they need to -- something employees at this company rarely did in the past.
But there is a difference between questioning authority or challenging the "business as usual attitude," and maligning the company in public. That's just bad judgment and does no one any good. It's a distraction that's unnecessary.
We are partners. We need to act like it.
In the company's official response, Zell says "The lawsuit filed yesterday is filled with frivolous and unfounded allegations, and I hope every partner in this company is as outraged as I am at having to spend the time and money required to defend ourselves against it." Via Romenesko
* Programming note: Dan Neil, the Times columnist who is one of the named plaintiffs, will talk about it on tonight's Which Way, L.A.? with Warren Olney on KCRW. That airs at 7 pm at 89.9 FM
** Plaintiffs respond: Statement from the plaintiffs' law office after the jump.
This statement is a standard Zell response: lacking in specifics and filled with vitriol. The complaint is detailed and the allegations are correct. The complaint asserts that the Tribune ESOP has not provided the rank and file employees with a detailed justification for the Zell acquisition. Ask Sam: where’s the detailed justification? The Tribune pension administrators have not provided the retired Tribune employees with an explanation as to why the pension plan was supposedly over funded by $400 million. This explanation is particularly necessary given the current downturn in the stock market. Ask Sam: where’s the explanation? The directors have established a conflict of interest policy for related party transactions. Ask Sam: explain how the conflict of interest policy has been followed with HIS relatives?
The current and former Tribune employees are not “all in this together” with Sam Zell. The rank and file employees have their jobs and their current and future retirement plans tied up by the machinations of Zell and his co-fiduciaries. Their salaries are low and they see many of their colleagues being let go on a monthly basis. On the other hand, Sam Zell has billions of dollars and does not have his livelihood at stake. For example, Zell’s upcoming birthday party will feature The Eagles. Ask Sam: how many of his “partners” are spending their birthdays in a similar fashion?
Speaking of “maligning the company in public,” we ask that journalists covering this story consider Sam Zell’s prior comments denigrating print journalism. Imagine if the Chairman of Procter & Gamble stated: “I don’t use Ivory Soap. I hate Ivory Soap.” Despite it all, these newspapers are continuing to produce great journalism.
Zell’s comments fail to acknowledge the billions of dollars in debt he caused the Tribune Company to incur, necessitating both the layoffs and the diminishing content of the Company’s newspapers. It is unfortunate that, in typical fashion, Sam Zell is ignoring the rights and neglecting the best interests of the hard-working Tribune employees, whom he cynically refers to as “partners.” Rather than working with his “partners,” he is tearing the company down, brick by brick, and selling it off, in an effort to pay down the massive debt he improperly encumbered the company with. We look forward to cutting through Zell’s self-serving, out of touch rhetoric and fighting for our clients – the Tribune’s real and rightful owners – in court.
In these turbulent times, fiduciaries must act in the best interests of their employees, particularly when they are the “owners” of the company. Zell and his co-fiduciaries have utterly failed to do so as more specifically described in the complaint.
Partners don’t treat partners like Zell treats the Tribune employees.