Inquirer Ownership Battle: “Darling … Eliminate the Daily News

As warring co-owners go to court Monday to argue about dissolving their company, a new email leak provides an insider’s view of the mess at the Inquirer, Daily News and

Lewis Katz (center) walks to court in November. Photo | AP / Matt Rourke.

Lewis Katz (center) walks to court in November. Photo | AP / Matt Rourke.

According to an email leaked to Philadelphia magazine, Nancy Phillips, as her long-time companion Lewis Katz was contemplating purchasing a controlling interest in the city’s biggest media company, made sweeping recommendations about strategies for turning around the Inquirer, Daily News and, including specific executive firings and the possible elimination of the Daily News.

“Darling,” the March 17, 2012 email, from Phillips to Katz, begins.

“Company needs a new publisher,” she writes.

“Paper needs a new editor.

“ needs a new leader.

Daily News has to be seriously evaluated with a view toward possible elimination or curtailment as in a move to the website with pared down staff and a paper product one day a week if at all.”

At the time, Phillips worked in the newsroom of the Inquirer as a reporter. And in roughly two weeks, George Norcross III would close a deal with Katz, her boyfriend, to acquire her workplace. In this sense, Phillips’s letter seems part business advice, a “honey do” list, and the fantasy of any working stiff made manifest.

In 10 paragraphs, Phillips advised Katz to fire or demote and replace her boss, editor Stan Wischnowski (for him, she advises, there is a “role… in this company” as he is “good, honorable and hard-working.”); publisher Greg Osberg; chief Wendy Warren; and the COO, the CFO, and the head of the advertising department. She also alerted Katz to Mark Block, “the lovely PR guy,” because she’d just noticed he held a VP title and probably made too much dough. “Feels like a waste of money to me,” she wrote.

After Philadelphia contacted Phillips for an interview, Lewis Katz’s spokesman sent a statement that began: “First and foremost, this email has been altered and is not in its original form.”

I contacted Katz’s spokesman, Jay Devine, to inquire about any specific alterations between the original email and the one received by Philadelphia. He declined to cite any specific example of discrepancies between the two. I had, originally, cut and pasted the “Phillips” email into a separate email for Devine. But after receiving this statement, I hand-delivered a hard copy of the email. The next day, Devine sent over a revised statement, which no longer included any assertion that the email had been altered.

“This email is a private, confidential communication between two people using their personal email accounts. It was written at a time when the potential owners were weighing whether to invest in the company and contains a candid, dispassionate assessment of certain aspects of the company’s operations. It was never intended to be disseminated to others or made public, as that would have been hurtful to several people. It is deplorable that others have now made it public.”

The dispute between warring ownership factions—with Katz the main player on one side, and democratic power broker and insurance executive George Norcross III, his chief opponent, on the other—has included days of court testimony and a small pile of leaked emails.

This new leak provides a window into the odd shape of the new media company’s ownership structure, which included a reporter suddenly elevated into a position of first lady to the co-owner.

Phillips is a highly respected reporter, logging 20 years of blue-collar effort. She obtained a confession in the infamous murder of rabbi Fred Neulander’s wife. She is also winning plaudits in her new role as city editor, working late hours and peppering her charges with emails congratulating them on their good work. In short, she’s a good boss. And while, through Katz, a billionaire, she has access to the resources to be anywhere she chooses, she chooses to be in a big-city newsroom.

Looking back at this now nearly two-year-old email, some of what she called for came to pass: Most notably, Wischnowski is still in the company, but was replaced as editor by Bill Marimow, who mentored Phillips early in her career. But the most charged portion of this email, from the perspective of the average citizen, involves her suggestion that the Daily News might need to be closed entirely or shifted online with a one day per week print product. The Daily News has long been targeted for elimination, dating back to the ’90s, but remains open. So clearly, Phillips’s suggestion never gained terminal momentum. But it’s worth wondering if the revelation of Phillips’s take, even if it is a couple of years old, will cause support for Katz in the current ownership struggle to wane. If Norcross comes to be seen as the guy who would keep the Daily News open, and Katz as the guy who would close it, might that cause some groundswell of support to emerge for the oft-criticized Norcross?

I asked Devine, by email, if Katz had any intention of closing the Daily News, to which he replied: “There is nothing new at the Daily News and it will continue to operate.”

The new owners have been at odds almost since the moment the company formed. But the dispute went public over the firing of Inquirer editor Bill Marimow. A judge subsequently ordered Marimow reinstated but the papers remain in an untenable position: guided by an operating agreement in which Katz and Norcross, as co-managers, must agree on every major business decision yet no longer seem able to get along.

At the moment, the two sides are busy filing legal paperwork. Most recently, Katz petitioned the court to order that the entire business be made subject to a public auction. On Friday, Judge Patricia McInerney, ordered attorneys from both sides to appear in court at 10 a.m. today, to explain why she should not dissolve their ownership and approve a public auction. McInerney had earlier ruled in Katz’s favor to reinstate Marimow.

This latest order means Norcross’s attorneys must have spent a long weekend preparing arguments as to why a public auction should not be allowed. They have argued earlier, on behalf of Norcross, that the media company should be subject to a closed auction, restricted to bidding from the existing pool of co-owners.

The dispute has turned personal and while both sides have vowed to bid to retain the papers, Katz’s call for a public auction seems an attempt, on his part, to make it less likely his rival, Norcross, can win them.

Norcross’s attorneys have also argued that a third-party bidder might not be committed to maintaining the operations of all three properties, the Inquirer, Daily News and

They might try to use the Phillips email to suggest Katz himself is not committed to all three properties.

Longtime Daily News columnist Stu Bykofsky says the email doesn’t concern him: “I am surprised at Nancy’s analysis,” he says. “I respect her… but I think it’s wrong-headed. I think it reflects the always existing, shall we say, ‘tension’ between the two newsrooms. It’s no secret that the Daily News has a deficit of respect from the Inquirer and it’s a burden that we’ve managed to live with and hopefully will continue to live with.”

Bykofsky also relates a conversation he had with Katz, directly, about a year after the current ownership group had taken over. Katz was standing in the Daily News newsroom with Inquirer editor Bill Marimow, when the new co-owner told both men he had begun reading the Daily News regularly. “I like it better than the Inquirer,” he said, and added that the cost of publishing the Daily News is actually very low.

The upshot, of course, is that Katz, like Bykofsky, might have read Phillips’s March 2012 assessment and found it, simply, wrong.

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