Opinion: Will Iowa community newspapers be the next victims of predatory hostile hedge fund Alden Global Capital?

·3 min read

Iowans across the state should be alarmed about hedge fund Alden Global Capital’s proposed acquisition of Lee Enterprises.

Lee Enterprises publishes the leading local newspapers in 10 Iowa communities, including Council Bluffs, Davenport, Mason City, Muscatine, Sioux City, and Waterloo-Cedar Falls. These papers each provide important local community, business, and political coverage, showcase local artistic and athletic talent, and provide a forum for a wide range of opinions. They ae typically our best, perhaps only, source of objective reporting on local government enabling voters to make informed decisions at the polls.

More: Hedge fund Alden makes offer to buy big Iowa-owned newspaper chain

The lead article in the November issue of The Atlantic, “The Men Who Are Killing America’s Newspapers,” focuses on Alden’s purchase of the Chicago Tribune, which was finalized in May of this year. Within days of taking control, Alden leveled the reporting staff. The Tribune no longer maintains a reporter in Springfield to cover state government, so it provided no coverage of a powerful state legislator enmeshed in a major bribery scandal. The Tribune did not maintain a night shift and was unable to provide current reporting during Chicago’s summer crime wave.

As a hedge fund, Alden Global Capital is subject to almost no rules or oversight. A hedge fund’s managing general partners attract investment funds from high-net-worth individuals and institutions. These investors, whose identities are secret, are assumed to be so sophisticated that they do not need the protection of disclosure of the hedge fund’s investments and operations, which typical investments sold to the general public must provide. The managing partners of these secretive entities are very generously compensated; they typically receive annual fees of 2% of total assets plus performance fees of 20% of their investors’ gains. The managing partners’ earnings are made even juicier through a unique tax break on the 20% performance fees they earn on their investors’ gains. The performance fees are taxed as capital gains rather than ordinary income, resulting in a 46% tax reduction; this is the carried interest loophole.

(By comparison, a real estate developer who buys a tract of bare land, plats it, and installs streets and utilities is taxed at full ordinary income tax rates on the profit he makes when selling lots. And, he is risking his own capital.) It should not be surprising that hedge fund managing partners are ready and willing to engage in predatory hostile takeovers that destroy businesses and jobs. The potential incentive we offer them is powerful.

Want more opinions? Read other perspectives with our free newsletter, follow us on Facebook or visit us at DesMoinesRegister.com/Opinion. Respond to any opinion by submitting a Letter to the Editor at DesMoinesRegister.com/Letters.

Iowa’s senators and representatives need to give close scrutiny to Alden Global Capital’s proposed takeover of Lee Enterprises. Alden already controls more than 200 newspapers, including a number which were at one time among America’s most influential like the Baltimore Sun and the New York Daily News as well as the Chicago Tribune. It is possible the acquisition of Lee Enterprises, which has a nationwide footprint, could give Alden a large enough share of the national newspaper market that it could be subject to anti-trust regulations. At the very least it is long past time to do away with the carried interest loophole that encourages predatory hostile takeovers.

It is both absurd and unfair to make middle-class Iowa taxpayers provide a tax incentive to billionaire hedge fund managers to destroy our community newspapers and throw our neighbors out of their jobs.

Al Charlson
Al Charlson

Al Charlson of Waverly is a life-long Iowan, a longtime newspaper subscriber and reader, and a retired bank trust officer.

This article originally appeared on Des Moines Register: Opinion: Don't let Alden predators take over Iowa's Lee newspapers

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting