Archive for December 2nd, 2009

McClatchy: All’s well with pension

Wednesday, December 2nd, 2009

Update: The Sacramento Bee, McClatchy’s flagship newspaper, says the firm expects its pension plan to lose $32 million in a fraud scheme and the losses “will not jeopardize the overall health of our pension plan.”

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The McClatchy Company is responding to blog posts at McClatchy Watch and picked up buy us about a $78 million loss in its pension fund because of investments with a company being investigated for fraud.

“While the stories are certainly alarming, it is important to understand that the potential loss associated with this fund in no way jeopardizes the health of the pension plan,” New & Observer Publisher Orage Quarles III said in an e-mail to his staff Wednesday. “The pension plan is more than able to withstand the losses associated with the Westridge investment.”

Quarles concludes by promising, “I will continue to keep you apprised of the situation as new developments arise. Again, I would like to reiterate that your pension plan is safe and there is no cause for alarm. Please let me know if you have any questions.”

He directed staff members to the McClatchy intranet site, which carries the following:

McClatchy Pension Plan Investment with Westridge

Dec. 1, 2009 – Various websites are reporting information about a McClatchy Company Retirement Plan investment that suffered losses as a result of a Wall Street scandal involving Westridge Capital Management. These posts suggest that the loss has somehow imperiled our pension plan. While it is true that our pension plan does have an investment in Westridge (an investment inherited as a result of the Knight Ridder acquisition in 2006), the amount is relatively small given the nearly $1 billion in assets held by our pension plan. In addition, we do expect to make a partial recovery of these funds through a legal process that is well under way. Any losses our pension plan may ultimately suffer as a result of this situation will not jeopardize the overall health of our pension plan, which is broadly diversified and generating healthy returns. Moreover, the anticipated loss and our expected recovery were previously and appropriately accounted for and publicly disclosed earlier this year.

Here are the facts related to The McClatchy Company Retirement Plan and its investment with Westridge:

>> As mentioned above, The McClatchy Company Retirement Plan inherited the investment in the Westridge fund, which was an S&P 500 enhanced index fund, with McClatchy’s 2006 acquisition of Knight Ridder and the Knight Ridder Pension Plan.

>> On Dec. 19, 2008 –- prior to any knowledge of potential problems or allegations of fraud –- McClatchy management decided to leave the fund and requested a full redemption of our pension plan’s investment. The redemption required a six-month notice period and, as a result, was not executed before discovery of the alleged fraud and the seizure of the Westridge fund by the Securities and Exchange Commission (SEC) and its ultimate turnover to a court-appointed receiver.

>> As of Jan. 31, 2009, The McClatchy Company Retirement Plan had $64.4 million invested with Westridge.

>> In February 2009, the FBI arrested two New York men, Paul Greenwood and Stephen Walsh, who were principals of the Westridge fund. The two have been charged with running a fraudulent trading and investment scheme through companies they controlled, including Westridge Capital Management. The two are accused of misappropriating hundreds of millions of dollars of investor funds to finance their lavish lifestyles.

>> Based on published reports, many other firms and institutions also had investments with Westridge, including Wells Fargo & Co., the Sacramento County Employees’ Retirement System, Carnegie Mellon University and the Iowa Public Employees’ Retirement System.

>> McClatchy publicly and appropriately disclosed and reported the misappropriation soon after we were informed of the issue in our 2008 Form 10-K, which was filed with the SEC in February 2009. At that time, based on the knowledge we had, we estimated our recovery of these investment funds to be only $15 million.

>> In the pension plan’s Form 5500 filed in October 2009 with the U.S. Department of Labor, we took the most conservative approach in reporting the total loss from this investment of about $77.8 million, which reflects the combination of market-related losses from the beginning of 2008 and fraud and dishonesty. However, based on our most recent communications with the court-appointed receiver about our potential recovery, as well the value of the investment on Jan. 31, 2009, McClatchy expects that loss to be closer to $32 million.

>> McClatchy’s pension plan investments earned healthy returns of 22.05 percent for the first nine months of 2009. Total assets in the retirement plan as of Sept. 30, 2009, were $970.5 million.

>> McClatchy is actively pursuing our pension plan’s claim through the legal process and court proceedings, and we now expect to recover a substantial portion of the plan’s investment. However, because this issue is still being litigated in both criminal and civil proceedings, the actual recovery remains uncertain and we are unable to comment further at this time.

Web sites rip off millions from U.S. newspapers

Wednesday, December 2nd, 2009

A month-long study of how news spreads across the Internet found that the average American newspaper story is copied 4.4 times in full or in part by unauthorized Web sites, The Financial Times says.

The Fair Syndication Consortium, a group of more than 1,500 newspaper publishers, is trying to figure out how to recoup the revenue publishers lose when their articles appear next to advertising that pays the sites using their materials instead of them. A different study last January estimated the loss at $250 million.

Though publishers can force sites to take unauthorized stories down, “the consortium …  is planning to allow the unauthorized stories to stay up, avoiding any disruption to bloggers and readers, but to push for a share of the sites’ revenues,” the Financial Times says.

“But rather than seeking small payments from each of the tens of thousands of sites involved, the publishers plan to lean on the handful of large advertising networks that account for most of the sites’ revenues. They plan to push the ad networks to divert revenue from the sale of ads alongside their stories back to the creators of that content.”

Google accounted for 53 percent of the advertising being run alongside unlicensed stories, while Yahoo accounted for 19 percent. Bloggers, often the primary target of publishers’ anger about how their stories are disseminated online, accounted for less than 10 percent of the unauthorized reuse.

The study apparently did not address how many readers click through unauthorized story links to spend time on the original publishers’ sites, thereby benefiting them and their advertisers.

At the tailend of its stories, FT.com says, “You may share using our article tools. Please don’t cut articles from FT.com and redistribute by e-mail or post to the Web.”