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Omaha, NE 68124


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Fremont,  NE 68026

Tel: 402-721-3900

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  Media Clips



July 18, 2002


by Jon Segura

David Beeder, who had in January 1997 worked for the Omaha World-­Herald for nearly 26 years, retired after spending 12 years as the paper's Washington, D.C. bureau chief.

            During his tenure in Washington, Beeder covered the Reagan, Bush and Clinton administrations, and had reported on Nebraska and Iowa's con­gressional delegations. 


An obituary the newspaper ran after his 1999 death included warm comments from former Sens. Jim Exon and Bob Kerrey and from World -Herald Publisher John Gottschalk.

However, in the time between his retirement and when he died, Beeder spent time trying to figure out if, and why, his former employer might have cheated him out of hundreds of thou­sands of dollars when he cashed in his company stock.

What he found out, and what has been released as part of the documents in a federal lawsuit that was settled out of court July 14, three days before it was to go to trial, opens a unique win­dow into the hometown newspaper worth well over $100 million with all of its holdings.  It also sheds light on how the top management of an "employee-owned" company can face allegations of withholding information from other employees and shareholders.

In a sense, Beeder's lawsuit begins where a lawsuit filed by the Peter Kiewit Foundation against the Omaha World-Herald Company leaves off.  The story starts, however, with a budding construction magnate waiting to catch a flight.

Employee Owned

Peter Kiewit first discovered "out­siders" were looking to buy the World­-Herald on Oct. 12, 1962, during a flight layover in Denver.  Reading the Wall Street Journal, he noticed a story on page 4 that carried the headline: "Samuel Newhouse Says He Is Seeking to Buy Newspaper in Omaha."

Newhouse, president of the compa­ny that bears his name, owned 19 papers at the time, including the New Orleans Times-Picayune, which he had just purchased for $43 million.  Today, the company owns the Birmingham News, the Cleveland Plain Dealer, the Newark Star-Ledger and 17 other papers.

Since its inception in 1885, the World, and, later, the World-Herald, have been owned by Gilbert M. Hitchcock and his heirs, all of whom either stayed in or maintained ties to Omaha.  Newhouse's offer represented the first real chance of the paper's con­trol going to an out-of-state entity.

As the legend goes, Kiewit was troubled by the prospect, and began looking into ways to retain local ownership.  He had an ally in Martha Hitchcock, Gilbert Hitchcock's widow, second wife and substantial sharehold­er in the company, who also wanted to see control stay in Omaha.

Kiewit, who at the time was a mem­ber of Northern Natural Gas's execu­tive committee, discussed with board members the possibility of the utility buying the paper.  The utility ultimately decided against it, but Kiewit pur­sued the matter, unsuccessfully trying to finagle recent financial statements from members of the World-Herald board.

On Oct. 19, the World-Herald board voted 7-0 with one member abstaining to forward Newhouse's $40.1 million offer to shareholders with a recommendation to accept.  An Oct. 31 meeting of shareholders was scheduled to act on the board's recom­mendation.

Kiewit, meanwhile, had gotten copies of the paper's audited financial statements, and polled several of his company's directors on the prospect of buying the paper.  He got the greenlight, and pitched an offer for $185 per share, or about $40.5 million, on Oct. 30.  The World-Herald board voted 8-0 to forward the offer to shareholders, who the next day voted to sell to Peter Kiewit Sons', Inc.

When Peter Kiewit died in 1979, his stock was transferred to the Peter Kiewit Foundation, which still owns 20 percent of the voting stock of the com­pany and has the power to veto any deal that would sell off the paper or cause it to not be published by the Delaware-based Omaha World-Herald Company.

At the dawn of the 80s, employees of the paper owned 22.6 percent of equity stock.  That figure jumped to 82.6 percent by July of 1985, when 279 employees owned stock.  How many employees currently own stock is unknown, but according to court doc­uments, the company has "hundreds of shareholders and over 4 million shares outstanding."

           With over 1,000 employees at the newspaper alone, the flagship newspaper represented barely a fourth of the company's market value in 1997 (see sidebar).  While one estimate placed a market value of $200 million on the paper, the articles of incorporation dictate that in the case of a sale of the company, any amounts exceeding book value would need to be donated to local charities.

Click Picture Above to View Sidebar Document

All company stock is traded in-house, and must be sold back upon retirement or when an employee leaves the company.

According to current and former employees with knowledge of the stock purchase program, company stock is only offered to employees who receive the approval of Gottschalk.

Kiewit vs. Omaha World-Herald

            In mid-1997, Gottschalk proposed carving out the company's flagship paper from the company's stable of operating divisions.  The company had only recently announced the construc­tion of the $100 million Freedom Center - its new printing plant - and the move was widely considered as a measure to assist in its financing.

The Peter Kiewit Foundation sued in July 1997 to prevent the restructur­ing.  The foundation feared, according to court documents, the change would detract from the company's mission to "maintain predominantly local employ­ee ownership of the newspaper, and to serve the public and maintain editorial excellence" as envisioned by Peter Kiewit when he purchased the paper in 1962.

The foundation's financial interest in the company, $33 million as of June 30, 2001, according to Internal Revenue Service filings, is matched only by its control over how the busi­ness operates.  As sole owner of a special series of voting stock, the foundation has the power to prevent the shuttering, sale or reorganization of the company, according to the company's articles of incorporation.

Gottschalk and Peter Kiewit, Jr., negotiated a settlement before that suit went to trial.  According to court docu­ments, the Omaha World-Herald Company board ratified a proposed settlement agreement that, among other things, altered the formula used to determine employee stock value.

Prior to the settlement, stock val­ues were based on the book value of the company's assets.  The new stock valuation formula that was created as part of the settlement took into account the market value of the com­pany's non-newspaper assets.  The World-Herald Company board signed off on the settlement on Jan. 29, 1998, the day of the annual shareholders meeting.

Beeder vs. Omaha WorId-Herald

Beeder officially hung up his note­book on Jan. 30, 1998.

When Beeder returned to Omaha after his stint in Washington, he worked writing a weekly column on social security benefits for an editor "many years his junior," according to William Gast, an attorney representing Beeder's widow.  The assignment change and the new light duties were major factors in Beeder's decision to retire, Gast said early last year, after the case was filed.

As is company policy, Beeder had to sell back his stock when he retired.  He cashed in 69,483 of his 75,800 shares at $21.35 each.  The remaining shares, one-twelfth of his total, he would cash in the following January, and represented the one month he remained in the company during 1998.

In 1999, when Beeder received the check for the remainder of his stock, the 6,317 shares were sold at $31.74, or $10.39 more than the value a year prior -- a 48.9 percent increase.  It was at this point that Beeder began a string of phone conversations and letters with Gottschalk in an attempt to decipher the reasons behind the jump in stock value, and if the factors that led to the increase happened before he retired.

"If the events which led to the adjustment occurred subsequent to my retirement," Beeder wrote in an April 19, 1999, letter to Gottschalk, "and were not of a nature as might have been appropriately anticipated as part of the Jan. 1, 1998 valuation, I should imagine that my curiosity will be satis­fied.”

Beeder's curiosity, however, was not satisfied before he died of cancer in 1999.

Jane Beeder, David Beeder's widow, later sued the company, Gottschalk and James Koley.  Koley, a World-Herald Company board member and outside counsel for the company, spoke, corre­sponded and otherwise handled part of Beeder's information requests.  In her lawsuit, Beeder alleged Gottschalk knew as early as October 1997 the impact the Kiewit settlement would have on employees' stock, but he did not share this information with David Beeder prior to his retirement and stock buyback.

The court file, which is comprised of two thick gray file folders, a third half-full folder and a box of attach­ments, many of which are still seated by court orders, contains correspon­dence, transcripts and two crucial doc­uments prepared for the company board to reflect the change in the stock valuation method.

"The statements you just heard...would be incorrect "

In the letter to Gottschalk, Beeder requested access to company financial records detailing the events that led up to the valuation change.

"I am not suggesting, and certainly have no basis for suggesting, that the values were established with any moti­vation involving the redemption of stock from retiring employees, Beeder wrote.  "Such redemptions would be a very minor and incidental component of the process. However, this minor result does affect me and I feel it only fair to be able to receive information which would allow me to conclude my review in an expeditious and amicable manner."

Koley responded to Beeder's letter the next day, writing, "the Omaha World-Herald Company and its legal counsel will provide you whatever assis­tance you need to enable you to better understand why an increase in the per share value of the stock of this Corporation occurred this past year.  There was not an `adjustment' in per share value subsequent to your retire­ment as stated in your letter."

Some time after Koley's letter, Gottschalk called Beeder to discuss the matter.  Like a good reporter, Beeder recorded the phone conversation, a partial transcript of which is included in the court file:

JG:  Well, such is life.  I'm, I'm not very pleased about that.  Uh, Dave I got your letter.

DB:  Oh yeah.

JG:   and that's really what I wanted to call about.  Uh, you asked three real­ly important questions, uh one was about, are increases driven by the reas­signments of World-Herald assets?  We really didn't make any reassignment, uh, I'm not sure what you're referring to there.  We did, we did have, the pric­ing formula was changed in April.

DB:  Uh huh. (yes).

JG:   to allow for market-value pric­ing of non-newspaper stocks.

DB:  Uh huh (yes).

JG:   Uh, is that what you're talking about?

DB:  Well, that explains a good part of it, yeah.  You say such is life and uh I guess if I had uh hung around `till April I would've been uh, uh in posi­tion to have a much greater stake and uh much better in position financially, but uh.

JG:  Well let me walk through this with you okay?  Because I think uh you'll be maybe somewhat maybe relieved and not as uh put upon as it may first appear.  I was maybe asking about reassignment.  Is that what you're talking about?

DB:  Yes, right.  Mmm hmm, right.

JG:   Let me tell you what that status is.  Of the uh about uh $10.42 roughly.

DB:  Yeah.

JG:   Gain last year uh you asked (inaudible) ... $6.00 roughly uh was for exceptional business performance of ES&S.

DB:  Uh huh, yeah.

JG:   It was the Venezuela project uh which might the way we bet the entire company on that and it cost us proba­bly $12.00 a share.

DB:  Right, I know you did very well on that.

JG:   (inaudible) ... that outcome was in major question.  Anyhow, about 6 of that $10 was in there uh, about three and a half dol­lars was just good operating in our other, our newspapers value kinds of things.  About another dollar uh was uh in improved World Company's opera­tions, and about 84 cents of dividends and truth be known the market value issue, which I think you're referring to, the market value of non-newspaper assets actually declined $1.17."

            Exhibit 32 (see sidebar), an accounting sheet called "Fair Market Value as of December 27, 1997," shows the $17.5 million difference between two non-newspaper assets book and fair market values.  Most of the differ­ence - about $14.9 million - is the dif­ference in valuation of Election Systems & Software, a company of which the World-Herald Company owns 60 percent.

Click Picture Above to View Exhibit 32 Document

The leap from the companies' book values to fair market values - almost a 20 percent increase - is the information David Beeder did not know, but the lawsuit alleges he should have known, before he made the deci­sion to sell off his stock.

Though the board knew the stock price would jump, they did not know how much.  Prior to 1998, ES&S had been negotiating with the Venezuelan government to provide voting equip­ment and software for use in national elections.  That deal was inked in June 1998, and had a substantial effect on the stock price.

In December 1998, when employee stock was first figured using the new method, the new formula that com­bined the book value of newspaper assets with the market value of non-­newspaper assets pegged the price of stock at $31.74, or more than $10 high­er than its value a year prior.

In a later deposition with Gast and Gottschalk and his attorney, Michael Cox, Gottschalk admitted non-newspa­per assets increased substantially in value, and were major contributors to the stock price's increase.  A partial transcript of Gottschalk's deposition is also part of the court file:

JG:   Mr. Beeder has quoted me in this note as saying that the value of non-newspaper assets actually declined a dollar seventeen.  I don't' know if I said non-newspaper assets.  If I said the certain non-newspaper assets declined or many or most or a few or all togeth­er, I'm not sure exactly what I said.  So to answer your question, the reason I did not deny saying it is because I don't know precisely what I said to Mr. Beeder.  So I would not deny that.  On the other hand, I don't know - since I don't know exactly what I said, I can­not confirm that this is the case.

WG: Okay.  Let me ask it this way.  If you had said it exactly that way, word for word that we read there, that would be incorrect, wouldn't it?

JG:   If I would have said it exactly that way –

WG: Yes.

[The next question and answer are confusing, as it appears Gottschalk is answering his own question.  Presumably, the transcript excerpt was incorrectly copied into the court file – ed]

JG:   - I think it would.  I think it would ... If you said it exactly the way it reads, that is, market value issue, which is I think what you're referring to, the market value non-newspaper assets actually declined one dollar seventeen, you actually shouldn't have said that in those words, would you?

JG:   If I said it, I think that's correct.  I don't know what the basis for this is and what we're doing here for sure.

WG: Because if you had said it exactly that way, verbatim, that would be an incorrect statement.

Michael Cox (Gottschalk's attorney):  Object to the form of the ques­tion.  You can answer.

JG:   If I would have said it that way, this would have been an incorrect answer, I think it would...

JG:  Again, I believe you asked me if we applied the 1998 rules to 1997 –

WG: Right.

JG:   -and then we applied it the same, in both years, the same circum­stances, would it be incorrect to say -­ this is where I lost you.

WG: Per share value declined because of the change.

JG:   Declined because of the change.  No, I don't think it would be right to say it declined because of the change...

WG: If you had said that, that would be incorrect, wouldn't it?

JG:   The fact that the shareholder finally got the pricing change in April - yeah, I don't recall saying that.  This is pretty broad, the pricing change, but I believe it would be incorrect.

WG: Okay. And why is that again?

JG:   Well, because I'm not sure what Mr. Beeder means by the pricing change in April.  I assume in his note he's talking about the change in formula, I mean, the change to a formula of fair market and book.  And as we have discussed repeatedly, the fair market value component calculated stand alone, as you repeatedly asked this question was - was higher in year end '98 than it was in year end '97, according to exhibit 30.

WG: Okay.  So - and he's writing these notes, and we're just going by them, but if - if - if you said that exactly the way he wrote it, that would be essentially incorrect, wouldn't it?

JG:   If that's what I said, I think - yeah, it seems to me it would be.

WG: And indeed you should not have said it if you said it that way, should you?

JG:   If I said it that way, it appears it would have been incorrect...

WG: Your testimony remains the same that those statements said exactly as we listened to on the tape are incor­rect, sir?

JG:   That's correct.

WG: What I just said is correct?

JG:   What you just said is correct, the statements you just heard on the tape would be incorrect.

             In the approximately 20 months since the suit was filed, attorneys for both sides filed so many motions that, in one order, a judge wrote the court is "troubled" over the amount of judicial oversight needed for the case.

Attorneys for the World-Herald unsuccessfully attempted to hit Gast with sanctions in March 2001 after the Lincoln Journal-Star (the only media outlet other than the Omaha Weekly to report on the case) quoted him in a story about the suit.  The World-­Herald's attorneys argued Gast's com­ments that were printed in the Jan. 19, 2001, Journal-Star regarding statements Gottschalk made during his deposition, were in violation of a protection order that sealed Gottschalk's deposition.

The attorneys also argued the inclusion of documents from the Beeder case that were introduced in another case violated the protection order.

            Gast is also handling a separate case, filed on behalf of former World-­Herald employee Willis Smith, who was forced to resign in January 1998 after he was caught returning for cash at local retailers promotional CDs he received at work.  Smith owned 23,000 shares after 32 years.

That case is still pending, and may go to trial later this year.


The last exhibit in the Beeder case is a four-paragraph statement announcing the confidential settlement.

Gottschalk, much as he did in Beeder's obituary, praised the former reporter.

            "Dave was a valuable, principled and important contributor to this newspaper's success during his tenure," Gottschalk said in the statement.  "He was recognized by his peers, the World­-Herald, and his sources as a consum­mate professional.  We only have the highest respect for Dave."

Jane Beeder called the lawsuit "regrettable," but said she was glad it ended "amicably."

"Dave always admired the World­-Herald management team," Jane Beeder said in the statement," and his years in Washington were the happiest in his life.  We left many friends in the World-Herald family behind when Dave retired."

            Reprinted verbatim on page 2 of the July 16 Omaha World-Herald Business section, it's the only coverage the Omaha Weekly could find in Omaha's daily paper.  No other local media outlets have touched the story.






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