The U.S. Department of Justice is investigating the sale of the Tucson Citizen by querying potential buyers about contact with the broker handling the sale.
Two of those potential buyers contacted the Citizen last week and said broker Robert Broadwater would not reveal specifics of the sale without the interested parties first supplying proof of their financial viability.
Broadwater did, however, say one condition the Citizen’s owner had placed on the sale was that a buyer would have to continue producing a printed newspaper.
Gannett Co. Inc. announced Jan. 16 it was selling the Citizen archives, Internet domain name and subscriber list, but not its 50 percent interest in the joint operating agreement it has with the owner of the Arizona Daily Star. That agreement covers non-news functions of the two papers, including printing and distribution.
The former chief of the Litigation III section of the Department of Justice Antitrust Division said inquiries to potential buyers are “standard procedure” in the sale of newspapers involved in JOAs, but it would be “highly unusual” for the government to impose specific conditions requiring the production and sale of a printed version of the paper.
“The alternative explanation is that the seller is imposing that condition,” said James R. Wade, now a partner in the Washington, D.C., office of Haynes and Boone LLP.
Mike Hamila, owner of UNIsystems MS LLC in Phoenix, told the Citizen on Feb. 23 that he had been contacted by Justin Dempsey of the Justice Department’s Antitrust Division. Dempsey wanted details of Hamila’s conversations with Broadwater.
Hamila said he told Dempsey that Broadwater was not cooperative because he wouldn’t give complete details of what was for sale – called an offerings memorandum – before Hamila proved financial capability.
“It’s like you’re going to buy a house and the real estate agent won’t tell you if the house is on fire, does the house have a roof,” he said. “I’ve been in business a long time and do business with major companies and I know when people want to do business and when they don’t. I don’t think Broadwater does.”
Hamila said that he was only interested in producing an online paper and that he had plans to “young it up” with new hires from the University of Arizona.
Arthur Jacobson, a retired freelance journalist and former stockbroker, told the Citizen on Friday that Dempsey had contacted him as well with the same inquiry about his conversations with Broadwater.
In an interview Sunday, Jacobson elaborated, saying he told Dempsey that Broadwater refused to give the offerings memorandum without Jacobson providing his “financials.”
“So I asked (Broadwater) what a nonfrivolous bid might be,” said Jacobson, who thinks the Citizen would only be viable as an online publication. “He said you’d have to have very deep pockets and that the buyer would have to agree to print a paper.”
Jacobson said Broadwater said that requirement was “vetted by the Justice Department, but when I told Mr. Dempsey that, he acted surprised.”
Tara Connell, spokeswoman for Gannett, responded to a phone call seeking comment about the conditions of the sale with an e-mail saying, “Sorry, but we are not going to comment on this.”
Repeated calls to Dempsey and Broadwater from Feb. 23 to March 3 were not returned.
Mark Fitzgerald, editor at large of the newspaper trade publication Editor & Publisher, said in the current economic climate it “might be the new normal” to ask for proof of financial viability before revealing an offerings memorandum, but the requirement of a print product seemed “very unusual.”
Though Hamila said Tuesday that he was working on a bid, he would not comment further, citing a confidentiality agreement he signed Monday as part of the bidding process.