Media company has trust issues
Secrets of one of the largest privately held media companies in America, the fabled Hearst Corp., could become open to the public thanks — ironically — to the woman responsible for putting them under lock and key.
Three decades after the will and probate file of newspaper titan William Randolph Hearst was sealed, Patricia Hearst is filing a motion in Los Angeles Superior Court today seeking to unseal the massive document and 18 boxes of related legal proceedings.
Last week the Hearst board of trustees filed a motion opposing her request.
Hearst’s reason for wanting to open the files grows out of the unique ownership structure of the corporation. Under terms of W.R. Hearst’s will, control of the company — estimated value $18 billion — is held by a trust governed by a board of trustees consisting of five family members and eight company executives. Because company execs control the board, some family members feel they’re not getting adequate financial information.
“I call it the Hearst family secret, not the Hearst Family Trust,” Patty Hearst told Daily Variety.
Secrecy has always been the modus operandi at Hearst, even under the leadership of former Hearst CEO Frank A. Bennack Jr., who retired in 2002. He led the company as it morphed from an old-fashioned newspaper and magazine publishing company into a mixed-media conglom with interests in television, cable, radio and the Internet. By all accounts he was more considerate of Hearst family members than preceding CEOs had been.
Bennack was succeeded by Victor F. Ganzi, who is said to be less open about company affairs with the Hearst family.
Although Hearst boasts valuable stakes in the ESPN, A&E and Lifetime cable channels and publishes the successful women’s magazine Cosmo, the company also has less-sterling properties.
The San Francisco Chronicle, acquired by Hearst in 2000, has lost money. And Hearst’s Internet ventures did not live up to expectations.
Patricia Hearst’s motion to unseal her grandfather’s will comes on the heels of a petition filed last week by her cousin William Randolph Hearst II. In that proceeding, Hearst asked if he would be disinherited if he sought to obtain more access to company information.
Legal action by Hearst heirs has to be navigated very carefully due to an “in terrorem” clause in the Hearst will providing that any heir who challenges the document will be disinherited.
William Hearst II has previously filed similar requests that have been largely thwarted by this clause. This time he’s interested in knowing the value of the Hearst Corp., as well as how beneficiaries’ dividends are determined.
No ruling has yet been made.
Although Patricia Hearst has contemplated taking action to unseal her grandfather’s will for years, she said her cousin’s action convinced her to finally act.
“I think we have a right to know the true valuation of the company,” she said. “Trustees have to be more responsive to the beneficiaries’ requests for information about the trust. They can’t say, ‘You can’t know this.’ ”
Joining Hearst in the motion are her sisters Catherine Hearst Hill and Victoria Hearst and her daughters Gillian and Lydia Hearst-Shaw.
Hearst was further upset by the trustees’ response to William’s petition.
“They said that they don’t have to respond to beneficiaries at all unless we’re complaining about (their) gross negligence or fraudulent misconduct,” she said. “The in terrorem clause is used like a sledgehammer. If you ask any substantial question they don’t want to answer, they say, ‘In terrorem clause.'”
The trustees’ lawyer, Andy Garb of law firm Loeb & Loeb, would not comment on his clients’ position.
A spokesman from the Hearst Corp. did not return a phone call.
Although the Hearst family members are beneficiaries of the trust and hence are owners of the corporation, they won’t control it until the trust is dissolved — which, according to W.R. Hearst’s will, happens after the last grandchild who was alive at the time of his death in 1951 dies. That will probably be another 35 or 40 years or so.
When Patricia Hearst was kidnapped by the Symbionese Liberation Army in 1974, the Hearst trustees moved quickly to get a judge to seal the will and probate file, claiming the documents provided a roadmap for other terrorists who might target Hearst heirs.
Then 19, Hearst was held for ransom by the SLA and, seemingly, converted to the cause. Photographs of her wielding a machine gun became an iconic image. Hearst was captured in 1975 and convicted of bank robbery. President Jimmy Carter granted her clemency in February 1979.
Although the probate file seal was intended to be temporary, three decades later it remains, hiding details of the Hearst Corp. not just from the public but from members of the Hearst family.
“I feel very uncomfortable with this seal, partly because of the kidnapping, as though this is my fault,” Hearst said. “I feel like these are public records. Why shouldn’t they be made public? It’s a huge, multibillion-dollar company. There’s no reason why (the will) should be sealed except for the sake of secrecy.”
Hearst Corp. observers believe another reason the trustees moved to seal the will was that coincidentally, at the time of the kidnapping, the company was in the middle of restructuring. It was buying its own stock back from two charitable foundations that owned the bulk of Hearst Corp. assets in the form of nonvoting stock. Information about how much money the corporation was paying for its stock was something the trustees preferred to keep quiet.
Keeping his family somewhat in the dark was always the intent of William Randolph Hearst. It was he who decided that only five family members should sit in the board of trustees and that an in terrorem clause should be used to keep the family from interferring with business.
“It’s a pretty sweeping document giving a lot of power to the trustees, but it doesn’t give them the freewheeling power to squander the assets or steal, or just short of that,” Patricia Hearst said.
In an age when free and easily accessible information is more than ever the norm, the thick veil surrounding Hearst seems almost quaint.
Although the company was built on newspapers 118 years ago, Hearst is today also highly visible in cable and television. Hearst has a 20% stake in ESPN, 50% in Lifetime and 38% in A&E. It also has partial ownership of the Biography and History channels.
In 1997 Hearst merged its TV stations with Argyle, forming Hearst-Argyle Television, which has 28 TV stations that reach 18% of U.S. households.
While Hearst’s magazine business is not as large as competitors such as Time Inc., the $4 billion division publishes 18 titles in the U.S., including O: The Oprah Magazine and Cosmo, which have circulations of 2.15 million and 3 million, respectively.
Two recent misfires were Tina Brown’s Talk, in which Hearst had a 50% stake with Miramax — Hearst pulled the plug after losing $20 million — and Lifetime, based on the successful cable channel. The mag ceased publication after one year.
Hearst’s dozen daily newspapers include the San Francisco Chronicle, the Houston Chronicle and the San Antonio Express-News.
In 2003, headquarters for many of these disparate entities were established in the $800 million, Norman Foster-designed Hearst building near Gotham’s Columbus Circle.
Patricia Hearst says that no more than two Hearst family members were present at the groundbreaking and that she was not invited to the topping-off party. When her husband, Bernard Shaw, VP of corporate security at Hearst (and her former bodyguard), asked if he could bring his wife, he was told no plus-one.
Hearst, now 51, lives in Connecticut with Shaw, with whom she has two daughters, aged 20 and 23. She’s dabbled in acting and recently appeared in the John Waters film “A Dirty Shame.”
Not all Hearsts are crying injustice over corporate politics, however.
“There’s some yelling, and I get phone calls from some family, saying, ‘How could you do this to us, woe is me,’ ” Patricia said. “They say, ‘There’s a higher moral high ground here. We like our privacy.’ I think the higher moral ground is the First Amendment of the Constitution.”