REGIONAL— The publishers of the Cook News Herald and the Tower News have filed a lawsuit against the competing Timberjay Newspapers and the Timberjay’s majority owners, that asks a court in Virginia to, among other things, dismantle the award-winning newspaper.
The lawsuit makes a wide range of general allegations, accusing Timberjay Publisher Marshall Helmberger and general manager Jodi Summit of fraud, illegal activity, failure to provide financial information, and squandering corporate assets. The complaint offers few specifics and the Albertsons’ attorney, John Colosimo, has acknowledged in writing that the Albertsons have no documents to support their allegations of wrongdoing, although he hopes that further discovery might uncover something to support their claims.
The Cook News Herald and Tower News publishers Gary and Edna Albertson, bought a minority interest in the Timberjay nearly 20 years, without asking Helmberger or Summit about their investment or what plans or expectations the majority owners might have for the company. The Albertsons have frequently threatened legal action against the Timberjay’s majority owners ever since, based on their perceived rights as minority shareholders, although they’ve never taken any of their complaints to court, until now.
Helmberger called the lawsuit “baseless and pathetic,” and said it’s an obvious effort by the Albertsons to undermine a competitor by forcing the company to spend tens of thousands of dollars defending against a meritless suit, at a time when most small publishers in the region are not generating significant profits. The Albertsons, who own several small newspapers in northeastern Minnesota, announced just last week that they would cease publishing their newspaper based in Biwabik, due to lack of profitability. They have sought to sell their newspapers, according to informed sources in the industry, but have announced no interested buyers. Gary Albertson, the publisher of the Cook News Herald and the Tower News, is 75.
The Albertsons’ newspapers attract relatively little business advertising and rely heavily on legal publishing and printing by local governments, and particularly by the St. Louis County School District, which appears to provide one of their largest sources of revenue.
The Albertson’s lawsuit relies on a state law that gives courts the authority, under certain circumstances, to order a buyout of a shareholder or to dissolve a business. The law requires a finding of fraud, illegal activity, squandering of assets, or actions that are “unfairly prejudicial” to certain shareholders in order for a court to take such an extraordinary step.
Helmberger said the Albertsons’ suit simply alleges all of the above, citing few specifics. “It’s a ‘throw everything at the wall and hope something sticks approach,” said Helmberger.
“Unfortunately for them, there’s no truth to any of it. We’ve run this corporation by the book. That’s just the way we do things, although we certainly recognized that it was more important to do so when you have a hostile competitor as a minority shareholder.”
While Helmberger predicts that the company will prevail against the Albertsons’ complaint, he said their real objective may be to force the Timberjay into bankruptcy through legal fees, since eliminating competition would make their competing newspapers more attractive to a potential buyer. “They haven’t been able to compete against us very well in the marketplace, so now it appears they’re trying to use the courts,” said Helmberger. “It’s an act of desperation and it reeks of bad faith.”
Helmberger and Jodi Summit have announced the formation of a legal defense fund to help cover the legal expenses the suit is generating. A link to an online donation site for the fund can be found here: https://www.fundedjustice.com/en/projects/32940-Timberjay-Legal-Defense-Fund. The site just went live Friday morning, Aug. 26.
The timing of the lawsuit is troubling, according to Helmberger. Attorney Colosimo served the complaint back in December 2015, six months after a decision by the Office of Administrative Hearings that found that the St. Louis County School District had failed to report tens of thousands of dollars in campaign expenditures stemming from an effort to promote passage of a 2009 bond referendum. The OAH subsequently fined the district and ordered it to produce a new campaign finance report.
Colosimo represented the school district in that complaint, which was filed after Colosimo had advised the school district to ignore the requests by Helmberger and others to amend the district’s campaign report to include the full amount of its spending. Colosimo made it clear during proceedings in that case that he blamed Helmberger for instigating the complaint, which exposed Colosimo’s questionable legal advice to the district.
“While the Albertsons may have other motives, it seems pretty clear to me that for Colosimo, this is simply retaliatory,” said Helmberger. “I might have been willing to overlook the timing, but when Colosimo deposed me in June, he spent a significant amount of his time questioning me about the school district lawsuit, the Timberjay’s lawsuit against Johnson Controls, and even about my involvement with founding our charter school. None of this had any legitimate connection to their supposed claims, but seemed more like discovery for the school district. It was really inappropriate.”
Earlier this month, St. Louis County School Superintendent Steve Sallee informed members of the school board that Colosimo had advised him not to answer routine questions submitted by the Timberjay as part of its normal reporting on the district’s activities. “When you start to connect the dots, the bias is pretty clear,” said Helmberger.
Suit appears to ignore evidence
While the suit is mostly vague and cites no evidence, it does offer a few specific allegations, including that Helmberger and Summit have taken salary and benefits above that approved by the board of directors, which is comprised of Helmberger and Summit. The complaint also contends that Helmberger and Summit held shareholder meetings without providing notice to the Albertsons.
“None of these claims are true, and we’ve provided the Albertsons’ attorney with all the documentation disproving their claims,” said Helmberger. Indeed, the discovery process has been underway for eight months and is well-advanced, said Helmberger, with the Timberjay having provided hundreds of pages of correspondence, corporate records, and even the personal joint tax returns of Helmberger and Summit, going back 20 years.
“We’ve provided everything they’ve sought in hopes that they would see their claims have no merit,” said Helmberger. Board minutes in combination with the tax returns clearly demonstrate that the couple has never taken salary above the amount they approved as board members back in 2001. “Unfortunately, the facts laid out in the record don’t seem to register with the Albertsons or with Colosimo,” said Helmberger. “It’s as if what’s true doesn’t matter to them.”
The Albertsons also complain they haven’t been provided notice of shareholder meetings, although they subsequently acknowledged in interrogatories that they had received several notices of meetings, but opted not to attend. Under the company’s bylaws, the Albertsons have the right to demand a shareholder meeting at any time, but have not done so since shortly after purchasing their minority stock from Madonna Ohse in 1997. Neither the company bylaws nor state law requires regular shareholder meetings and the company hasn’t held any in nearly 15 years. Helmberger said there was little point in continuing to hold them since the Albertsons never bothered to attend.
The Albertsons have also complained that they were denied the opportunity to sit on the Timberjay’s board of directors. But Helmberger noted that corporate board members have a fiduciary duty not to compete or have divided loyalties, which ethically bars the Albertsons, both direct competitors, from sitting on the board.
In addition, the Albertsons complain that they have never received any dividends from their investment for stock in the closely held, or close, corporation. Yet dividends “are rarely distributed in a close corporation,” according to the Court of Appeals in a prominent case in this area of the law. Typically, said the court, most shareholders in such companies actually work for the firm and derive their financial benefit from a salary or other such benefits. The Albertsons never worked for the Timberjay, nor sought such employment.
According to Helmberger, the company hasn’t issued any dividends, but instead reinvests its profits in business improvements. “I learned that you should invest in making your own product the best it can be. Then you don’t have to worry about the competition. Obviously that’s not how the Albertsons operate,” said Helmberger.
The Timberjay contacted the Albertsons and attorney Colosimo seeking comment for this story. They did not respond prior to presstime.