Enquirer sale expected as owner faces mounting pressure

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This article was published 14/04/2019 (2408 days ago), so information in it may no longer be current.

American Media Inc. is seeking to sell off the National Enquirer, according to three people familiar with the process who asked not to be named because they were not authorized to speak publicly.

The decision to sell came after the hedge-fund manager whose firm controls American Media became “disgusted” with the Enquirer’s reporting tactics, according to one of the three insiders.

American Media has been under intense pressure due to the Enquirer’s efforts to tilt the 2016 presidential election in favour of Donald Trump, who is a longtime friend of American Media’s president and CEO, David Pecker. Pecker and his supermarket tabloid have also been embroiled in recent months in an unusually public feud with Jeff Bezos, who also owns the Washington Post.

In August, just as American Media and two of its top officers were finalizing a non-prosecution agreement with federal investigators, the company’s board of directors started looking for ways to unload the tabloid business “because they didn’t want to deal with hassles like this anymore,” another person said.

The company was also facing financial difficulty as it sought to refinance more than US$400 million in debt earlier this year and as the Enquirer’s circulation continued to decline, along with broader newsstand trends. The paper sold an average of 516,000 copies per issue in 2014, but that number fell to 218,000 in December, according to data compiled by the Alliance for Audited Media.

American Media was “very, very leveraged” and repeatedly found itself “on the brink,” Pecker told the Toronto Star in 2016. Pecker managed the company’s financial straits by broadening American Media’s portfolio in recent years, buying magazines such as Us Weekly and In Touch.

He has also relied on the support of Anthony Melchiorre, who controls the US$4-billion hedge fund Chatham Asset Management, which holds an 80 per cent stake in the Enquirer’s parent company.

The decision to sell the tabloid resulted from pressure applied by Melchiorre, according to two of the people familiar with the discussions. He was motivated partly by the financial difficulties of the tabloid business, but also by his distaste for the Enquirer’s tactics. A representative from Chatham declined to comment, and Melchiorre did not respond to a call seeking comment.

The tabloid has long been known for its methods. In 1977, it published a photo of Elvis Presley’s corpse on its cover and sold close to seven million copies. In 2007, in possibly its highest journalistic achievement, it broke the news of then-presidential candidate John Edwards’ extramarital affair with Rielle Hunter, partly by having its reporters hide in the bushes to gather evidence.

“It doesn’t shock me that Pecker would unload the paper after he drove it into the ground,” said Paul Pope, son of the Enquirer’s longtime owner, Generoso Pope, who bought the New York Enquirer in 1952, changed its name, focused on celebrity gossip and started selling the paper in convenience stores.

“When my father was at the helm in the heyday, the Enquirer was selling up to six million copies a week. Pecker is very much attracted to wealth and power, and he politicized the paper in a way my father never would have.”

The Pope family sold the paper to Pecker in 1999. The tabloid represents a corner of the media landscape virtually ignored by coastal elites, and it has long provided fervently positive coverage of Trump, along with other celebrities known inside the Enquirer newsroom as “friends of Pecker.”

And Trump returned the praise. He once tweeted that Pecker should run Time magazine; he also said that the Enquirer deserved to win the Pulitzer Prize.

But the Enquirer’s political coverage of Trump during the 2016 election put the tabloid on much higher-profile footing and put it in legal jeopardy.

The imminent sale removes the Enquirer from Pecker’s control and puts some separation between the tabloid and recent scandals stemming, in part, from Pecker’s close relationship with Trump.

Last year, American Media acknowledged paying US$150,000 to former Playboy model Karen McDougal, who alleged an affair with Trump. The paper made the payment so it could prevent her allegation “from influencing the election.” The admission came as federal prosecutors announced that they would not prosecute the company for its role in the scheme to favour Trump in the presidential race.

In the agreement, American Media said it would co-operate with prosecutors. The agreement, which was struck in September, covered Pecker and the company’s chief content officer, Dylan Howard, according to people familiar with it.

Just as the non-prosecution agreements were being finalized in August, American Media’s board agreed to explore a sale.

Then, in January, the Enquirer devoted the cover and 12 pages of its Jan. 28 edition to an expose of Bezos’s affair with Lauren Sanchez, former host of So You Think You Can Dance.

Bezos later wrote a blog post accusing American Media of trying to blackmail him by threatening to publish explicit photos of the billionaire if he didn’t publicly state that he had no basis for suggesting that the Enquirer’s exposé was politically motivated. The Bezos story helped seal the Enquirer’s fate, said one person briefed on his thinking.

“The Trump thing was an issue, and (Melchiorre) was really disgusted by the Bezos reporting,” an insider source said.

The Bezos reporting also threatened to renew legal scrutiny on the company. Federal prosecutors reviewed accusations made by Bezos to determine if American Media may have violated the terms of a non-prosecution agreement, according to people familiar with the matter.

“Our board has been keenly focused on leveraging the popularity of our celebrity glossy, teen and active-lifestyle brands while developing new and robust platforms… that now deliver significant revenue streams,” Pecker said in a draft release of American Media’s announcement reviewed by the Washington Post.

“Because of this focus, we feel the future opportunities with the tabloids can be best exploited by a different ownership.”

American Media is also exploring the sale of two other tabloids, The Globe and National Examiner. But it is the Enquirer that has been the focus of the board and is the main title that has landed both American Media and Pecker in legal trouble.

Bezos’s security consultant, Gavin de Becker, alleged in an opinion piece on the Daily Beast website last month that American Media was “in league with a foreign nation that’s been actively trying to harm American citizens and companies, including the owner of the Washington Post.”

De Becker said his “investigators and several experts concluded with high confidence that the Saudis had access to Bezos’s phone, and gained private information.”

The security consultant said the Saudi government “has been intent on harming Jeff Bezos since last October, when the Post began its relentless coverage of” the slaying of its editorial contributor Jamal Khashoggi in Istanbul. De Becker accused the Enquirer of “trying to strong-arm an American citizen whom that country’s leadership wanted harmed, compromised and silenced.”

American Media has denied that any “third party” was involved in its reporting on Bezos. The company said its sole source for information about the extramarital affair was Michael Sanchez, Lauren’s brother.

A Saudi official said the government did not tap into Bezos’s phone and played no role in the Enquirer’s reporting on the Amazon founder.

The tangled web of allegations surrounding the Bezos story reaches into the Trump administration as well. De Becker alleged that the Enquirer “became an enforcement arm of the Trump presidential campaign and presidency” by, for example, paying McDougal and then not publishing her story.

One of the people familiar with the negotiations to sell the Enquirer said that American Media’s largest investors had become intensely uncomfortable with their investment in a tabloid that was involved in efforts to support the president’s administration and re-election bid.

“The president is buddies with Pecker and tries to help him, and Pecker does what he can to help the president,” the source said.

“It can be embarrassing.”

— Washington Post