Year: 2007

A little after 11 this morning Par Ridder took the stand in his own defense. It would be an understatement to say he and his legal team have a ways to go to get back in the game. The battle is over him essentially waiving his own non-compete to leave St. Paul for Minneapolis and what on some level at least is a staggering amount of potentially critical, highly confidential financial he had a hand in transferring from the Pioneer Press to the Star Tribune. But their strategy became clear almost immediately.

In short, it comes down to this: It was all an innocent mistake. By “all” we mean that transfer and “migration” of confidential Pioneer Press financial data to Star Tribune computers anyway. (I had to leave before Ridder got into his explanation for the non-compete business.)

Ridder explained that what he did when arriving at the Star Tribune was exactly what he had done when arriving at the Pioneer Press from San Luis Obispo in 2004. He simply wanted his new paper’s financial data copied on to his “18 to 20” custom-built spreadsheets. Under his attorney’s gentle questioning Ridder explained that his laptop contained 10 years worth of sales and other financial data from every place he has worked.

The critical difference of course being that until he jumped to the Star Tribune he had only worked for one of his family’s newspapers and had never before slipped across town over a weekend to work for a direct competitor.

The prosecution team [excuse me, “attorneys for the plaintiff”], established yesterday that the names and contract specifics of 3890 Pioneer Press advertisers were on the files Ridder — or someone — downloaded from Pioneer Press hardware on or about March 6, 2007. In the early moments of Ridder’s testimony today he named only Star Tribune CFO, Mike Riggs and Sr. VP for Sales Mike LaBonia as people who had been given access to confidential Pioneer Press files, each with specific instructions from him, in e-mails, to “be careful” with the files.

Riggs was required to replicate the spread sheets Ridder preferred to use and LaBonia, apparently, to get an idea of how Ridder liked to break out advertisers by categories.

(For all you jargon lovers, Ridder described his “Three Bucket” delineation process. “Select” accounts for heavy-hitting customers like Macy’s and car dealers. “Key” accounts for middling clients, and “territory” accounts for small businesses in specific metro areas.)

During a mid-morning break I stopped MediaNews CEO Dean Singleton working his way back from the men’s room. I reminded him I was the guy who asked him yesterday if Avista had yet offered to settle this thing before a full and final public humiliation. “Yes, and I think I said I didn’t want to say anything about that.”

“Yeah, but my question really is whether a judgment against Par Ridder himself is enough. Would that alone satisfy you?”

“What do you mean?”

“I mean, in a barroom conversation yesterday I said a major businessman like you long ago learned to dial out emotion and to never let things like this get personal.”

“This isn’t personal. This is simply about what’s right and what’s wrong, and what was done here was wrong.”

“Right. But my question is is it enough to simply establish that, or, again, as a hard-nosed businessman isn’t the real vindication in the financial sting of a judgment in your favor?”

Singleton looked down, looked up, looked at the bank of elevators, and then said, “Look, I’ve been in newspapers since I was 15. Its really the only business I know. And all I’m really say here is that this wasn’t ethical, or right.”

“OK. Well, let me ask you this, are you surprised that Avista hasn’t separated itself from Ridder by now?”

“These are Wall Street people, investors. They are not newspaper people. I don’t think they understand the conflict of interest in this case.” He added, “In the case of Par I think some of the explanation [for his actions] lies in the fact that he had everything given to him. He felt he was entitled to act as he has.”

About this time Chris Harte, the lone newspaper person among the Avista hierarchy walked up. The two men clearly have known each other for some time and betray no animosity.

A small crowd began to gather and another reporter asked Singleton and Harte if they see “a floor” to the miserable state of the newspaper
industry.

“I hope so,” said Singleton with a rueful chuckle. He then launched into a familiar enough description of “the perfect storm” afflicting the industry today — cratering real estate listings, “migrating” employment listings and an automobile industry in worse shape than newspapers. To all this Harte nodded in agreement.

“Fine,” I said, “but isn’t another significant factor unrealistic profit expectations by companies like yours?” meaning both MediaNews and Avista.

“Well,” said Singleton, who has heard that one before, “a lot of people in this industry are fighting to make any profit at all.” He then mentioned the situation in Boston, and Harte reminded him of Seattle’s meltdown. Both the Pioneer Press and the Star Tribune, though, are currently profitable. Maybe not next year. But right now they’re making money.

As the recess ended I asked Harte, “Has Avista considered separating itself from Ridder?”

“Absolutely not,” Harte replied, shooting Singleton a quick glance, “not when we were threatened with a criminal suit.”

“But if you lose and it means making a large payment to Mr. Singleton would you then consider legal action against Mr. Ridder?”

Harte looked displeased with the question. His expression was of someone with a smelly sock stuffed under his nose. “No. Because I think what’s clear here, what the public will see, is that this,” meaning Singleton’s suit, “is an attempt to vilify someone for competitive advantage.”

Finally, the last prosecution witness before Ridder took the stand today was Karen Clary former VP of HR for the Pioneer Press. She reiterated that Ridder had originally asked to sign a non-compete like other members of the PiPress’ “Operating Committee”, or “Op-Com” as Clary called it in military command-speak.

She then said that Ridder personally instructed her to remove the non-competes from company files “sometime around December of 2005”. She said he told her, “he had decided to rescind the agreement”, because PiPress executives with long-term attachments to St. Paul would be left in a difficult situation after the sale of Knight-Ridder went down.

“Par asked if I was comfortable doing this,” she said, referring to pulling the files. “I said I was, but than I thought about it a bit and I went back to him and said I was not comfortable doing it without corporate approval.”

At this point she says Ridder told her he would talk to corporate, specifically Knight Ridder Sr. VP, Art Brisbane. Clary testified that Ridder got back to her, “a few days later and said he had talked to Brisbane and gotten the OK.” Brisbane’s videotaped deposition yesterday had him failing to “really recall” the conversation much less giving the “OK”. Either way, no written waiver exists.

Clary was asked about any concerns she had over the whole waiving of the non-competes business, and she replied that she did think it a bit odd, “that Mr. Ridder would be releasing himself” from a non-compete.

As I watched close to a dozen attorneys negotiate out the last few details before opening the temporary injunction hearing against Par Ridder in the Ramsey County Courthouse this morning, I couldn’t help but run numbers and wonder how many friendly telephone switchboard ladies you could buy for the amount of cash that was being hemorrhaged in just the first day of these proceedings.

I mean, in addition to Ridder, the embattled Star Tribune publisher in court to defend himself against charges of outrageous executive incompetence, perfidy or outright fraud, take your pick, the hearing brought an impressive gathering of some very well-compensated media executives. Everyone in sight was burning up hyper-compensated hours as Ridder faced legal music in public for the first time. That low roar we all heard as the courtroom filled? It was the combination of multiple billing meters spinning at very dangerous RPMs for the dozen or so $500 per hr. attorneys milling about, as well as the big-time executive overhead idling in their seats.

The assembled cast included, Par Ridder, who maintained a stiff, deer-in-the-headlights look throughout the first few hours, and who engaged in almost no collegial bonhomie with his Avista employers, OhSang Kwan and Chris Harte. In contrast, there was his/their adversary, Media News tycoon Dean Singleton, oozing confidence, cordially shaking hands with Kwan, who sat behind him, and joking with veteran newspaper biz analyst John Morton, (flown in to testify as an expert witness). For a time Harte, seated next to me in the back row, nodded rapidly, maybe even frantically at anything that sounded even vaguely exculpatory of his boy Par. But as the morning wore on and the damage piled up, first by Ridder’s own admissions and then from former Knight-Ridder Sr. VP Art Brisbane, Harte spent more time with his head down texting on his Blackberry.

The reasons for Singleton’s confidence didn’t take long to become evident. His attorneys opened with an hour-long, edited video of Ridder’s June 5-6 deposition. Lacking any real legal expertise beyond what I’ve seen on Law and Order and my half dozen trips to small claims court, (four wins, two losses), I’m no expert. But it is almost impossible to see how Ridder skates on this one. If it this opening round were a prize fight young Par would be in the ring alone and still losing by a knock out.

What Ridder personally concedes is rather amazing, if only for the fact that his family is so deeply steeped in the business of newspapers. By my assessment he seems to have broken just about all of the basic rules you’d assume the Ridders discussed around the breakfast table.

Here are the highlights from Day #1:

* Ridder signed a non-compete agreement with the St. Paul Pioneer Press on April 19, 2004, but says he never read it. He says he signed it because he was concerned, “What [other members of the Pioneer Press operating committee] might say behind my back if they found out I didn’t have a non-compete and they did.”

* He said, “I signed it so I was bound by it,” and adds, “if this document is valid, it is binding.”

* He says — and this is critical — the non-compete agreements applying to himself and as many as a dozen other Pioneer Press executives were invalidated in late 2005 in a phone call he had with Brisbane, one of a quartet of executives at the very top of the Knight Ridder corporation. (Brisbane and the others were reporting to Ridder’s father, Tony, the family and company patriarch.) Ridder says he requested the non-competes be waived and Brisbane said either, “Yes”, or “OK”, Ridder can’t recall which.

* Unfortunately for Ridder, no written record exists of Brisbane waiving the non-competes, nor does Brisbane “really recall” ever discussing such a waiver with Par. For that reason there was no discussion ever with the rest of the Knight-Ridder executive quartet, their in-house lawyers, or daddy Tony.

* Moreover, Brisbane, who also appeared in an edited video deposition, thinks it would have been highly unlikely he or anyone at Knight Ridder corporate would have agreed to such an extraordinary waiver in the last quarter of 2005, because that was the same period they were trying to lock in all their publishers, CEOs and top executives as they prepared to sell the company, which they did to McClatchy the following spring.

* On March 1 of this year Ridder disclosed to his secretary/assistant, Barb Cartalucca, that he is leaving to join the Star Tribune. He asked about the location of the actual non-compete documents, for himself and other Pioneer Press executives, and is surprised to learn that she has kept them in her desk. Cartalucca offered to retrieve them and go immediately home and shred them. (A legal question here: Assuming paper shredders were still in the Pioneer Press budget in 2007 — which is not a certainty — why couldn’t the non-competes have been shredded at the Pioneer Press? Was Ridder concerned that Singleton’s people would come in and paste the slivered strips back together a la the Iranian revolutionaries at the U.S. Embassy in Tehran? Somebody fill me in.)

* While Cartalucca gathered up the paperwork and headed for the parking ramp and her car, Ridder called … daddy. Tony Ridder advised his son that it’d be a far better idea to take personal possession of the non-competes. This sets up the amusing image, as Ridder described it, of him trying to figure out in which ramp Cartalucca had parked her car and “running”, (as Cartalucca described it), to overtake her in the garage elevator.

* “I told (Cartalucca) she shouldn’t be involved in this,” said Ridder, “and she handed the non-competes back to me.”

* Ridder says, “I don’t ever recall directing Cartalucca to destroy those documents.” Overall, his “I don’t recall” quota didn’t approach Alberto Gonzales, but considering the legal talent and fees preparing him for this deposition you’d think someone could have coached him in some less unfortunate verbiage.

* He did say that, “I was concerned those documents could impede my progress to the Star Tribune. I wanted those non-competes with me.”

* On Sept. 26, 2006, about the time he was drafting his still odd-to-mysterious good-bye/hello speech in expectation (?) of leaving St. Paul for Minneapolis, Ridder signed MediaNews’ Ethics Statement, which details what may and may not leave the building with you in the event of separation. Again, Ridder says he didn’t actually read the document.

* On Feb. 23, 2007 he makes a trip to New York City for a more-or-less final meeting with Avista’s main players. Ridder has prepared a list of 14 names of Strib executives and editors he would like to replace, including editorial editor, Susan Albright. Under questioning he concedes that he has tentatively inked in the names of 10 Pioneer Press executives to bring with him, eight of whom he knows have non-competes.

* On March 2 at 4 p.m. Ridder telephones MediaNews Executive VP and COO, Steve Rossi to tell him he is leaving and moving to the Star Tribune. He tells Rossi, “I will not be taking anyone with me.” Ridder then says in his deposition that what he meant was that he was not taking anyone with him, “as I left the building that day.”

* Ridder concedes virtually every accusation leveled at him with regards to the confidential, highly proprietary information he first took with him on Pioneer Press laptop(s) and a USB drive. This includes information about custom ad rates and other vital contractual information for 3890 separate customers, according to Mark Lanterman of Computer Forensics of Minnetonka, whose company, he said in his live testimony, has spent 2000 hours scanning 3300 files in 30 terabytes of data from all the Pioneer Press computers, jump drives and discs that fell into Star Tribune hands. Lanterman places the time of the “migration” of data from Ridder’s Pioneer Press laptop, etc. to his Star Tribune computer at about 8 pm on March 6th, or at least a full day after the Pioneer Press had asked for all that material to be returned.

* When asked by former Star Tribune reporter-turned-attorney, Dan Oberdorfer, how confident he was that he knew exactly how many Star Tribune executives received the Pioneer Press data Ridder e-mailed out, Lanterman replied that he had, “No confidence at all” that his company had yet identified everyone.

* Asked if his new bosses at Avista “admonished” him for violating so basic a tenet of corporate ethics as taking and distributing confidential financial records, Ridder paused for a moment in his deposition before asking, “Can you define ‘admonish’?”

* Cartalucca testified that Ridder told her, “I spoke to a lawyer and those non-competes are no longer valid.”

* In his videotaped testimony, OhSang Kwan says that Ridder assured them he could “represent” to them that he was not bound by any non-compete agreement.

* Another Avista partner, James Finkelstein, in his videotaped deposition, echoes Kwan, saying simply that since Ridder did “represent” that he was able to work for Avista, the question of non-competes never came up.

* Ridder concedes that one of the Pioneer Press executives he attempted to bring with him, Jennifer Parratt, continued to work at the Pioneer Press for a week after agreeing to terms at the Star Tribune, unbeknownst of course to MediaNews.

* Ridder admits that when the Pioneer Press asked for the USB drive back, the one with all the confidential, downloaded sales and advertising data, he sent over instead a new, still-in-the-box $40 jump drive, thinking it was the hardware they were concerned about.

As I say, I have no legal expertise whatsoever, but I would not like to put a happy face on this litany of incompetence, hubris or worse.

During a break midway through the proceedings, I stopped Dean Singleton in the hallway and asked, “Have these guys [referring to Avista] offered to settle this thing? Because based on what I’ve just seen I’d be astonished if they haven’t.”

Singleton, who walks with a cane, pivoted and looked at me. “I can’t say anything about that. But if you’re astonished you’d be right.”