JUSTICE

Rifts in a press empire

MALCOLM GRAY March 9 1987
JUSTICE

Rifts in a press empire

MALCOLM GRAY March 9 1987

Rifts in a press empire

JUSTICE

They are money-making bastions of free enterprise, 29 mainly small-town newspapers across the United States in a highly profitable family-owned chain. But the Freedom Newspapers Inc. chain, based south of Los Angeles in Irvine, Calif., has been rocked by a highly visible ownership struggle between two factions of a family which normally shuns publicity. Indeed, the newspaper group is threatened with dissolution because 70-year-old Freedom director Harry Hoiles is seeking separate control over several newspapers in order to spread the conservative philosophy of his father—and Freedom founder —Raymond Hoiles.

Hoiles currently controls one-third of the company’s shares and in a suit filed in 1982 he contends that those holdings entitle him to an equivalent portion of the corporation’s assets or their fair market value—a stake that may be worth more than $400 million. But the two other family groups who hold the remainder of the shares reject that claim. They also deny Hoiles’s assertion that they promised to install him as Freedom’s chief executive officer, succeeding his brother, Clarence, who died in 1981. Instead they argue that shares and assets are not directly interchangeable.

A long-delayed trial to settle those issues is expected to begin in Santa Ana next week before California Superior Court Judge Leonard Goldstein. In a final effort to reach an out-of-court settlement, lawyers from the opposing groups last week held closed negotiating sessions orchestrated by the judge. But they failed to attain their objective: an agreement that would have increased Hoiles’s power without splitting up the company. Hoiles and his opponents—the families of his brother Clarence and of his sister Mary Jane Hoiles Hardie—had also soüght a compromise in order to prevent disclosure of the $1.3-billion privately held company’s business operations in open court. Declared Robert Hardie, who is Freedom’s chairman and Hoiles’s brother-in-law: “It is very painful for us to air our family relationships in public.”

Freedom executives have carefully guarded details of sales and earnings, but documents filed with the court indicate that the company controls some of the most profitable media outlets in the country. Among them are The Playground Daily News in Fort Wal-

ton Beach, Fla., and The Valley Star in Harlingen, Tex. They and other Freedom dailies use small editorial staffs and extensive amounts of wire-service copy to keep down operating costs and bring high returns on daily paid circulation figures of between 10,000 and

A painful family feud over ownership of the $1.3billion Freedom Newspapers chain in the United States

30,000 copies. Declared J. Kendrick Noble Jr., a media analyst with the stockbroking firm, Paine Webber Inc. in New York City: “Profit margins are usually significantly higher for smallcity newspapers. It is not unusual to see margins of 30 per cent in operations such as Freedom’s.”

All the Freedom newspapers figure in the family feud for control but the

prize is a thriving daily located only two km from the courthouse—the company’s flagship newspaper, The Orange County Register. According to many analysts, more than half of Freedom’s 1986 revenues of $425 million came from the Register. Indeed, with an average paid daily circulation of almost

308.000 copies, the Santa Ana newspaper is winning a bitter struggle for readers with the Orange County edition of the giant Los Angeles Times. That edition has a circulation of

200.000 copies.

The Register, and the development of the Freedom group into the 14thlargest newspaper chain in the United States, emerged from a family feud. Raymond Hoiles founded the company during the 1930s after quarrelling with his brother, Frank, over the use of union help in their three small Ohio newspapers. Raymond, a bitter opponent of organized labor, moved to California after the partnership dissolved and bought the Register in 1935. Now Harry Hoiles, who shares his father’s belief that the best government would be no government at all, is determined to continue spreading that philosophy-even though it means using the state courts to do so.

-MALCOLM GRAY with ANNE GREGOR in

Los Angeles

ANNE GREGOR