Exclusive — Fake News Industry: How McClatchy Uses False Stories to Attract Investment amid Financial Woes
It pays to lie.
McClatchy, the newspaper chain and media conglomerate, has been caught deliberately printing easy-to-prove-false fake news regarding a key GOP congressman at the center of the hoax investigations Democrats are using to target President Donald Trump, then turning around and using said false reports to financially boost the company amid serious concerns about the company’s falling stock price.
McClatchy has seen a significant drop in stock price over the past several years, especially this year. According to investment analyst service Morning Star, it is down to $2.78 per share at the close of business on Wednesday afternoon. McClatchy’s stock opened the year in the mid-$7 per share range but has slowly but surely slid down now near its all-time-low—it was trading at a slightly lower-per-share amount back in May than it is now.
Poynter wrote in a 2018 piece about the newspaper company’s woes:
For more than a decade, the McClatchy family has resolutely kept the newspaper company bearing its name afloat and independent despite a crushing debt load. The tough financial hand McClatchy’s board and executives have been dealt is getting even tougher with a terrible year for the industry unfolding and another expected in 2019. McClatchy stock has lost almost all its value to investors. Its market capitalization (the number of shares multiplied by share price) sits at $69 million, lowest of the seven public newspaper companies. At the same time, refinancing of the company’s $794 million debt earlier this year consolidated more lending control in the hands of a longtime creditor, the private Chatham Asset Management hedge fund.
It’s only gotten worse for McClatchy since that piece a little over a year ago in Poynter. McClatchy’s financial outlook is now so bad that the company received a warning in September of this year from the New York Stock Exchange (NYSE) that it will be delisted if it does not get its act together financially, with the NYSE giving McClatchy 18 months to come into compliance with its standards, otherwise it will lose its listing.
As the company races to raise revenues to save its 29 daily newspapers in 14 states, including perhaps most notably the Fresno Bee in California, the company has shifted business strategy to incorporating nonprofit and foundation funding of issues-based coverage into its model. A Digiday report noted that despite an increase in digital subscribers in the last quarter, McClatchy reported astonishing losses of $17.5 million in one quarter—against revenues of just $178.7 million.
Lauren Gustus, a McClatchy editor in the western part of the United States intricately involved in the process, describes the effort the Fresno Bee is at the center—in quotes to Digiday as designed to create financial sustainability for McClatchy amid the company’s hard times.
“It’s no secret that most legacy news organizations have been challenged,” Gustus said. “If fact-based journalism is in peril, which I believe it is, we have to think pretty radically about how we serve our communities.”
“This is meant to be a bridge to sustainability and not necessarily the establishment of a nonprofit news operation,” Gustus added in a later quote.
This is where things get interesting. In a separate interview with Nieman Labs, a Harvard-connected media blog, Gustus says that the Fresno Bee’s coverage of Rep. Devin Nunes (R-CA)—the ranking member of the House Permanent Select Committee on Intelligence (HPSCI)—has driven interest to this gambit that Gustus has described as one designed to financially save McClatchy as a company. She also says that the newspaper’s recent coverage of Nunes “reframes our relationship with the community.”
“There are many people who read about The Fresno Bee’s coverage of Devin Nunes and wanted to help,” Gustus said in the Nieman Labs interview. “Previously we didn’t have an outlet for those people. Now we do. That’s big — it reframes our relationship with the community.”
According to that Nieman Labs report published on Oct. 1 where Gustus is quoted saying that the Fresno Bee’s coverage of Nunes has driven investment into the newspaper chain’s new financial initiatives, the newspaper has already raised $246,000 of its $600,000 goal to get the pilot program off the ground. “The Bee has already raised $246,000, from the Central Valley Community Foundation, Fresno State, the California Endowment, and various wealthy Fresno folks,” Nieman Labs wrote.
Nunes has had a longstanding battle with the Fresno Bee—he is actively suing the newspaper—something somewhat abnormal for a congressman and his local newspaper. Members of Congress tend to have at least somewhat chummy relationships with the local press, but the Fresno Bee has decided to spend most of its energy attacking Nunes—and has, through the parent company McClatchy, dispatched the organization’s congressional correspondent Kate Irby to write an extraordinary amount of pieces about him.
Irby has written, since Aug. 1, a total of 35 articles. Seventeen of them, nearly half of the work she has done in the past couple months, have been about Nunes.
One piece she printed in the wake of the first HPSCI hearing after the Democrats in Washington officially opened their “impeachment inquiry” of Trump was about Nunes’s opening statement in that hearing, when Nunes ribbed the committee’s chairman Rep. Adam Schiff (D-CA) for having been pranked by Russian shock jocks pretending to be a Ukrainian government official with dirt—specifically nude photos—of President Trump.
“And of course, Democrats on this very committee negotiated with people who they thought were Ukrainians in order to obtain nude pictures of Trump,” Nunes said in his opening statement, referencing the widely-reported incident where Schiff was pranked by Russians pretending to be Ukrainians with nude pictures of Trump.
The recording of the phone call where Schiff was pranked was so widely-reported when it first was reported in 2018, and again this year after Nunes brought this up at the hearing—President Trump even tweeted about it after the hearing—that is obvious to what and to whom Nunes was referring. After The Atlanticbroke the story on it, it has been covered by, of course, Breitbart News, but also RealClearPolitics, Roll Call, the Daily Mail, the Washington Examiner, the New York Post, International Business Times, the Daily Wire, Town Hall, Fox News, PJ Media, Rush Limbaugh, IJR, The Week, the Washington Post, the Washington Times, among countless other media outlets.
In other words, this is an easy one given how widely covered Schiff’s call was: McClatchy could have easily figured this out, and should have. But the headline of Irby’s story implied this was some kind of new, explosive charge: “Devin Nunes says House Democrats are seeking ‘nude pictures of Trump.’”
But in her piece, Irby suggests this was some kind of mystery, writing that Nunes “did not identify who he believes attempted to obtain nude photos of the president.”
She even suggested later in her copy that it came, somehow, from the infamous “Steele Dossier.”
Nunes’ allegation that Democrats sought nude photos of Trump is likely related to claims contained in the so-called dossier compiled by former British spy Christopher Steele as opposition research against Trump for the 2016 presidential election.
Irby’s inaccurate story is not the only one the Fresno Bee ran making these false claims against Nunes. The newspaper actually ran an unsigned editorial by its “McClatchy California Opinion Editors” that furthers the false smear against the congressman.
In it, McClatchy’s editors again falsely state about Nunes: “He alleged, without evidence, that Democrats on the House Intelligence Committee had sought nude photos of Trump.”
Of course, the ample evidence of Schiff’s phone call in the public sphere—a recording of it is available for the listening of the newspaper’s staff if they so chose to attempt to accurately report on this, and anyone else in the world who wants to listen to it—is somehow not enough for the Fresno Bee.
What’s more, the newspaper’s unsigned editorial also falsely includes Rep. Tom McClintock (R-CA)—another GOP congressman from California—in its attacks on Nunes, falsely claiming that McClintock was a member of the House Intelligence Committee. McClintock is not on the House Intelligence Committee. But that did not stop the Fresno Bee from inaccurately claiming he does sit on the committee and was at the hearing with Director of National Intelligence (DNI) Joseph Maguire.
“During a House hearing into the whistle-blower complaint against President Donald Trump, Rep. Tom McClintock and Rep. Devin Nunes displayed a stunning lack of honesty, and a non-existent grasp of reality, in their attempts to protect Trump from his self-inflicted Ukraine scandal,” the Fresno Bee’s unsigned editorial reads.
A quick check of the HPSCI membership list available on the congressional committee’s website would have confirmed that McClintock is not a member of the House Intelligence Committee.
Confronted with these clear inaccuracies and the above proof and evidence that the statements the Fresno Bee ran were inaccurate—the one in Irby’s piece and in the unsigned editorial about Nunes’ opening statement, and the one in the unsigned editorial about McClintock somehow serving on the House Intelligence Committee and attending the Maguire hearing when he is not and did not—McClatchy told Breitbart News it has decided not to correct the fake news it printed.
“McClatchy stands behind the accuracy of The Fresno Bee’s reporting on Representative Devin Nunes,” the statement from McClatchy spokeswoman Jeanne Segal reads. “Holding those in power to account is the role of a free press and a cornerstone of our democracy. We are dedicated to bringing unparalleled local journalism to our communities backed up by irrefutable facts, as we have for more than 160 years. We will continue to report the facts and tell the stories that are essential to our readers and our communities.”
Segal did not answer detailed questions about the editorial processes, including which company officials at McClatchy were involved in printing the inaccuracies.
Segal also refused to answer any questions regarding the company’s financial picture, or provide any details about how the Fresno Bee’s coverage of Nunes has factored into the company’s future financial planning as Gustus admitted to in the Nieman Labs interview.
She did, however, provide the company’s already public press release about the NYSE threatening to delist McClatchy because it has fallen out of compliance the stock exchange’s standards.
The Sept. 13 press release includes a company announcement that back on Sept. 9, McClatchy “received a notice from NYSE American LLC” that revealed “that the Company is not currently in compliance with certain listing standards, and as noted below, has approximately 18 months to become compliant under a plan that is subject to approval by NYSE American.”
McClatchy is below compliance with Sections 1003(a)(i) and 1003(a)(ii) of the NYSE American continued listing standards since it reported stockholders’ deficit of $372.5 million as of June 30, 2019 and net losses in each of the four most recent fiscal years ended December 30, 2018. However, NYSE American will not normally consider suspending dealings in, or removing from the list, the securities of an issuer which is below the continued listing standards set forth in Sections 1003(a)(i)-(iii) if the issuer meets certain other criteria, including, among others, total assets and revenues of $50 million in the last fiscal year or in two of the last three fiscal years, and a market value of publicly held shares (as defined by NYSE American) of at least $15 million.
The release said McClatchy intends to submit a plan to the NYSE by Wednesday of this week—the plan should have been submitted by the time of the publication of this article—“advising how the Company plans to regain compliance with the continued listing standards by March 9, 2021.”
“If NYSE American does not accept the plan or the Company is not in compliance with the continued listing standards as of March 9, 2021, or does not make progress consistent with the plan, NYSE American may initiate delisting procedures,” McClatchy noted.
If the NYSE removes McClatchy’s listing, it would be another significant financial blow to the once-great newspaper company. That gets back to the broader question as to whether the McClatchy family—which still has control over the news organization—will have to sell the company, as the Graham family had to sell the Washington Post to Amazon founder Jeff Bezos. The Poynter article from September 2018 explores this question.
The McClatchy family got into the newspaper business with The Bee of Sacramento in 1857. The family maintains control of the company because it has two classes of stock; their B shares would override what public A shareholders might want should there be a conflict. Four family members sit on the board, otherwise largely made up of tech executives. This is the same arrangement that gives the Sulzberger family control of The New York Times Co. Their hold on the 150-year-old Times was tested in the sharp 2008-2009 downturn and required a high-interest loan and investment from Mexican billionaire Carlos Slim Helu to get through. Lately, with robust digital subscription growth and a stream of new products, the Times is back on a healthy financial track. Conversely, I and other analysts thought that the Graham family had a forever commitment to keeping The Washington Post. But five years ago, CEO Don Graham and his niece, publisher Katharine Weymouth, decided they did not have a strong strategy or the capital to finance a next wave of growth. So they sold to Jeff Bezos. If the McClatchys can’t outrun the math, that day could come for them, too.
Interestingly, as Breitbart News was asking McClatchy about this past round of fake news regarding Nunes from the Maguire hearing, the Fresno Bee went and ran another column on Wednesday which contains more blatant inaccuracies about Nunes. The column, from Marek Warszawski, falsely claims that at a July HPSCI hearing with Special Counsel Robert Mueller testifying Nunes attempted to change the subject to the Uranium One scandal with failed 2016 Democrat presidential nominee Hillary Rodham Clinton.
Warszawski wrote, misspelling Mueller’s name:
Remember the Robert Muller hearing, called by congressional leaders in July to try and get to the bottom of whether Trump benefited from Russian interference in the 2016 election?” Warszawski wrote, misspelling Mueller’s name. “Well, our favorite congressman was having none of that. Instead, Nunes peddled an alternative theory: That it was the Obama administration, including Hillary Clinton and the Clinton Foundation, which conspired with Russia to give the Russians a stake in U.S. uranium production and make the Clintons filthy rich.
The problem with Warszawski’s claim is that as a hearing transcript and the text of Nunes’ opening statement would easily show, Nunes never brought up the Uranium One scandal during the July Mueller hearing before HPSCI.
In other words, McClatchy’s response to getting caught printing fake news in order to artificially inflate its revenues amid sliding stock prices is to just turn around and print more of the same fake news–while not correcting any of the mistakes it made.
Segal, unsurprisingly, has not replied to a follow-up request for comment on the Fresno Bee’s latest fake column from Warszawski.