News deserts, hedge funds, social networks and Russian interests erode confidence in local news outlets.

Alden Global & Fortress Group: Russian ties to America’s local news

Over the last 15 years, almost 1,800 US newspapers have closed. There are now at least 1,300 US communities with no local news coverage and another 1,450 with only one newspaper. Over that time, investment firms bought almost 700 hometown newspapers.

One of those firms is Alden Global Capital. It owns Digital First Media (DFM), which currently runs 800 multi-platform products including 57 daily newspapers and more than 100 non-daily publications in 11 states.

In 2011, the Journal Register Company and MediaNews Group combined to become DFM, the third largest U.S. newspaper company with 158 newspapers. A year later, the Journal Register Company filed for bankruptcy.

DFM’s big dailies include the St. Paul Pioneer Press, the Boston Herald, The Mercury News of San Jose, the East Bay Times and The Orange County Register. It maintains 187 Web sites and used to own four radio stations in Texas and a CBS affiliate in Anchorage, Ak. It sold that in 2012 to General Communication Inc. (GCI).

Two years later, GCI accepted a $75 million investment from Eric Zinterhofer’s Searchlight Capital Partners. Zinterhofer is married to Aerin Lauder, the daughter of billionaire Ron Lauder. Ron is the son of Estée Lauder. He’s also the Republican President of World Jewish Congress who’s known Donald Trump since they were teenagers.

In 2004, Estée Lauder Companies and Trump signed a multi-year deal naming Trump as the spokesperson for a new men’s fragrance called “Donald Trump, The Fragrance.”

Lauder is a big fan of Putin.

“(He’s) Very, very smart. Very much involved with Russia. And doing everything he can to make Russia once again a power. President Putin is a true patriot for his country, a true leader,” said Lauder.

Since 2015, DFM has imposed budget cuts and layoffs at twice the avg. rate of U.S. newspapers. Its shut down or consolidated 21 newspapers in the last four years. The cuts have continued despite DFM earning $939 million in revenue in 2017 on an operating budget of only $159 million.

Alden Capital was started in 2007 by Randall D. Smith. It manages $2.1 billion in assets for 10 unnamed clients. Smith, a former Bear Sterns partner who started its convertible arbitrage department, is known as the “grandfather of vulture investing.”

He started his own Wall Street investment firm, R. D. Smith & Company, in 1985 and ran it for six years. Through his early investments in debt-ridden companies, he developed a reputation for profiting off of the misfortune of other businesses.

His firm was restructuring community newspaper debt deals as far back as 1990. It was also investing in Russia.

After the fall of the USSR, Boris Yeltsin lead the new Russian Federation in the creation of a market-based economy. State entities were privatized, an “economic infrastructure” was implemented, commercial banks were created.

Mafia crime bosses also started partnering with ex-KGB agents to run the various state agencies. In Moscow, an economic oligarchy, composed of the Mafia and Putin friends—politicians, heads of banks, businesses, security forces and city agencies—controlled Russia’s financial assets. A foreign investor could not function in the country without paying for bribes and protection money. It became a Mafia state.

In 1997, Alexander Nikolaev was hired by Smith to invest for his Moscow Management firm, a Cyprus registered shell company that administered the firm’s $150 million Global Russia Fund. It invested heavily in Russia real estate, businesses and Moscow government bonds.

A year later, after the Russian government and its Central Bank devalued the ruble and defaulted on its debt, Nikolaev lost more than $100 million of Smith’s money. He was called to New York for a “serious discussion.” It was decided that, instead of pulling out, Smith would invest another $10 million. He eventually purchased more than 15% of Russia’s government bonds.

International oil prices increased rapidly over the next few years and by the end of 2000, Russia was running a large trade surplus.

“They were well aware that the right time to invest in emerging markets could increase their investments by several times. They also had the resources and courage,” said Nikolaev.

Nikolaev is also the current managing director of Russia’s Valartis Group CIS operations. Valartis is an international finance group with offices in Moscow and St. Petersburg.

It holds 63% of the investment company ENR Russia Invest SA (ENR), which invests in “private equity, listed shares, real estate and fixed-income instruments of Russian companies and companies of other states of the Commonwealth of Independent States and the Baltic States.”

It manages $7 billion in client assets, some of which are alleged to belong to Russian oligarchs.

In 2016, Valartis Bank, based in Lichtenstein, was sold to a Chinese investment group whose majority shareholder is Citychamp Watch & Jewellery (CWJ), a Hong Kong-based jewelry group chaired by Hon Kwok Lung. The Lung family is worth more than $1 billion and is tied to a number of offshore shell companies.

That same year, the bank was hacked by criminals who stole the customer account information of politicians, actors and “high net worth individuals.” The hackers demanded 10% of the account balances or it would release their account details to finance authorities and the media.

Since 2003, Nikolaev has done most of his main real estate investments through the Eastern Property Holdings (EPH), which runs Valartis. He’s responsible for “execution of the company’s projects and acquisitions, as well as management of the Moscow-based project management and property operations team.”

Fortress Investment Group is another large investor in U.S. newspapers. It owns News Media which does business as GateHouse Media and is the largest newspaper publisher in the country. It publishes 145 daily newspapers, 325 community publications and more than 555 local market websites in 37 states.

Last year, it paid $156 million for the Oklahoman in Oklahoma City, the Akron, Ohio, Beacon Journal; the Austin, Texas, American-Statesman; the Gardner, Massachusetts, News; the Eugene, Oregon, Register-Guard; the Holden, Massachusetts, Landmark Corp; and the Palm Beach, Florida, Post and Daily News. It’s closed on $275 million in acquisitions over the last 12 years.

It also has various ties to Trump, billionaire GOP financiers and Russian officials.

Fortress Group was the investment group that pooled the $130 million mezzanine loan for Trump Tower Chicago. It’s done several deals with Kushner Cos. like providing it with $57 million in necessary capital for its troubled N.J. Towers investment. It loaned the Kushners another $150 million to build a Brooklyn high rise.

The firm has invested with Yuri Milner’s Digital Sky Technology Group (DST), Peter Thiel’s Founders Fund and Joshua Kushner’s Thrive Capital in Nubank, a Sal Paulo fintech startup that provides a digital credit card for smart phones. It’s currently valued at $4 billion after Tencent invested $180 million last year.

Fortress Group runs the Drawbridge Special Opportunities Fund L.P. It owns Penn National Gaming, which operates casinos and horse racing venues. In 2014, Drawbridge helped finance the purchase of 25% of available real estate and hospitality properties in downtown Las Vegas.

Las Vegas is also where GateHouse Media bought the Las Vegas Review Journal (LVRJ) in 2015. Ten months later, it curiously sold it to the News + Media Capital Group (NMCG) for $140 million—three times its market value. NMCG is backed by billionaire casino owner Sheldon Adelson. As part of the deal, Gatehouse Media continues to manage the newspaper’s day-to-day operations.

Adelson used the newspaper’s reporters to monitor three judges in cases he was involved in. The staff was warned against writing negative stories about Adelson. Columnist, John L. Smith resigned after being told he’d be fired if he wrote anymore about Adelson.

Adelson has been a major supporter of the GOP having donated more than $120 million to Republican candidates and PACs last year.

GateHouse has made a number of interesting partnerships as its swallowed up local news outlets.

In 2012, it announced casual gaming company Arkadium would provide interactive puzzles and games on its nearly 400 websites (now 450). Arkadium provides similar content to some of the world’s largest news and software providers including USA Today, CNN, Comcast, The Telegraph, the Washington Post, the Chicago Tribune and the Los Angeles Times, ESPN, ABC, Lifetime and Discovery.

It also announced a “strategic partnership” with Microsoft Studios to publish games for Windows Phone and Windows 8.

It was founded in 2000 by husband and wife Kenny Rosenblatt and Jessica Rovello. As the story goes, the couple knew they had a good idea but couldn’t afford to hire developers. So they moved to Simferopol, a city in southern Ukraine, where they eventually took on six developers from an American business man who moved back to the US. The staff increased to about 100 over seven years.

Putin’s 2014 invasion of Crimea and the eventual U.S. sanctions forced their Ukrainian developers to choose between staying in Crimea with their families, or moving with Arkadium to their new office in Krasnodar Russia. The company lost half of its employees and currently employs around 50 developers and other tech workers in Russia.

Eventually Rosenblatt and Rovello moved back to New York City where they were mentored by Strauss Zelnick, founder of Zelnick Media & Communications (ZMC) and Chairman and CEO of Take-Two Interactive, the publisher of games like “Grand Theft Auto” and “NBA2K”.

Take-Two owns nearly 1,000 different video games and is the largest gaming company in the world. Strauss was an initial investor in the Arkadium and continues to have an advisory relationship with the company.

In August 2016, Arkadium CEO Rovello wrote in Forbes, “…Washington/Moscow relations cannot and should not be substituted for U.S./Russia relations. What these stories miss is the positive experience of thousands of U.S./Russian cultural institutions and businesses like mine that link our countries every day.”

She goes on to reference: Sergei Millian, president of the Russian-American Chamber of Commerce; Dan Russell, president of the U.S.-Russia Business Council; and the Russian American Foundation which supports the Bolshoi Ballet Academy classes in the U.S. this summer…”

Jared Kushner, Josh Kushner and Zelnick Strauss attend FOUNDERS CLUB New York in 2008.

Zelnick has been friends with the Kushner family for more than a decade. He’s a long-time friend of Jared’s and considers him to be a man who possesses “polite elegance” and “In an exceedingly polite way…is as tough as anyone is in New York City real estate.”

Zelnick was an advisor to Josh’s Thrive Capital in 2010 when it invested in 12 NY City startups. Another advisor was Twitter’s Jack Dorsey. At the time, Josh was also the co-founder of Vostu, a South American social gaming company. Jared was owner of the New York Observer.

Zelnick, who replaced Richard Parsons as the chairman of the CBS Corp. Board of Directors last October, is the former CEO of BMG Entertainment and President and COO of 20th Century Fox.

He’s also the son-in-law of Samuel Belzberg, the former Canadian billionaire corporate raider whose other daughter, Lisa, was married to Matthew Bronfman, son of Canadian billionaire Edgar Bronfman Sr. Sara Bronfman, Matthew’s sister, is currently under federal investigation for her role in funding sex trafficking through NXVIM.

Arkadium has agreements with numerous publishers to use its patent-pending InHabit technology. It utilizes artificial intelligence to read and interpret content on a page while combining millions of data points from thousands of verified sources to deliver personalized interactive content. It recently announced a partnership with the Associated Press to use the dynamic publishing software for its content.

In 2016, GateHouse collaborated with Genesis Media, a real-time analytics platform, to boost its publications’ video ad serving capabilities for political campaigns.

“This alliance creates a massive advantage for advertisers during crucial moments in time — like the election season — where historically there has been a shortage of premium inventory in key local markets, making it difficult to reach users online in key battleground states,” said Mark Yackanich, CEO of Genesis Media.

Gatehouse was cutting editorial staff at various newspapers across the country while it was investing million$ to attract political clients.

In 2018, GateHouse Media and MySpace were involved in a scam to artificially boost video ad impressions.

MySpace launched trendingvideos.myspace.com in May 2017. Within four months, it gained 9.7 million visits that generated more than 450 million pageviews. That was five times its average page views. The scheme was used on video pages hosted on roughly 150 of its websites.

The fake traffic was triggered through automatic redirects and page refreshes to show massive amounts of video ad impressions. The scam was estimated to have brought in the publishers at least $3 million a day. Both companies denied any involvement and blamed “audience vendors, video platform partners and external malicious actors” for any fraud that occurred.

MySpace was purchased by Rupert Murdoch for $580 million in 2005 and then sold to Specific Media in 2011 for $35 million. Specific Media’s parent company is Viant Technology, which was bought by Time Inc. in January 2016.

Time Inc. was bought by the Meredith Corporation for $2.8 billion in November 2017. It had accepted a $650 million investment from the Koch Brothers, which allowed it to make the purchase. A year later it announced it would be selling off Time magazine, Sports Illustrated, Fortune and Money. Time Magazine was sold for $190 Million to Salesforce Founder Mark Benioff.

Meredith said it was immediately laying off around 200 employees and would eliminate about 1,000 more positions in the next year.” The company was working to cut up to $500 million in costs.

In April 2017, Fortress Group was bought by SoftBank for $3.3 billion. Softbank CEO Masayoshi Son was one of the first chief executives to meet w/ Trump at Trump Tower after he was “elected” president. He promised $50 billion in U.S. investment with a potential creation of 50,000 new jobs.

Softbank is a longtime investor with Milner’s DST Group in gaming and social websites. DST is backed by Russian oligarch Alisher Usmanov. The firms have invested hundred$ of million$ in Zynga, the maker of games like FarmVille, Zynga Poker, Words With Friends and Hit it Rich! Slots. His most profitable deal was with Alibaba Group Holding. He invested $20 million in 2000 and it’s now worth $100+ billion.

Softbank recently hired Facebook’s Kirthiga Reddy to manage its $100 billion Vision Fund, created to be the largest fund to invest in Finance tech startups. In 2016, Son cut a deal with Mohammed bin Salman (MbS) for an investment of $45 billion in the Vision Fund.

Son didn’t attend the kingdom’s annual investment conference but has been criticized for his friendship with the person many hold accountable for the murder of Washington Post Journalist Jamal Khashoggi.

Last July, it was revealed through Special Council Mueller’s indictment, that GRU agents who operated the Internet Research Agency (IRA) had created 48 Twitter accounts of previously closed local newspapers. Starting in 2014, the they tweeted real local news to build trust and readership in the years leading up to the 2016 presidential election. It’s believed that the IRA intended to eventually use those accounts to spread disinformation in support of Donald Trump for president.

Two of the 13 Russian nationals charged in the indictment allegedly visited Colorado in June 2014 as “part of an effort to gather intelligence and target so-called purple states that decide presidential elections.”

The Denver Post, which DFM took ownership of in 2010, reviewed 200,000 of the tweets and found that hundreds of thousands of Colorado voters were exposed to “misinformation and propaganda through media outlets and social networks.”

Experts suggest one reason the IRA targeted local newspapers was because it understood the trust society placed in its local media. According to a 2016 Pew survey, 82% of Americans have “some” or “a lot” of confidence in local news organizations.

Citizen Journalist

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