CalPERS Still Owns Toxic National Enquirer Via Hedge Fund Chatham; CEO Marcie Frost Falsely Says It Was Sold; Columbia Journalism Review Depicts Pending Sale as a Sham

When is a sale not a sale?

1. When it hasn’t closed

2. When the sale is so heavily subsidized as to be questionable

Both look applicable with the still-not-consummated “sale” of the National Enquirer, as confirmed in a well-reported story, Bad Romance, at the Columbia Journalism Review, which went live in late November. As we’ll recount in more detail, author Simon van Zuylen-Wood not only confirms that the National Enquirer sale still hasn’t closed, but questions not only whether it will ever close but if it can even be considered a sale. He revives the New York Post’s charge that the sale is a “parked transaction” by describing in detail how it looks to be a financial and managerial sham.

Note that this state of affairs is utterly at odds to the claims of CalPERS CEO Marcie Frost, who is apparently embarrassed by CalPERS’ 34% ownership of National Enquirer parent American Media Inc. and has been falsely maintaining since at least June that the sale has been completed when that hasn’t happened.

The tabloid went from occupying a useful niche of peddling celebrity gossip and occasionally breaking serious news stories to tainted by virtue of going all in for Donald Trump. Trump is a friend and short-lived business partner of David Pecker, the CEO of the National Enquirer’s parent, American Media Inc. (AMI).

The National Enquirer’s favors for Trump include shifting its editorial mix to being much more political, with regular attacks on Trump opponents, and entering into a “catch and kill” deal with Playboy model Karen McDougal so as to keep her story about their affair under wraps while Trump was campaigning. Pecker was also a go-between for the hush money Trump attorney Michael Cohen paid to Stormy Daniels. The National Enquirer dug its hole even deeper by threatening Trump nemesis Jeff Bezos with the publication of his notorious penis-focused selfies. From 2016 to present, the Enquirer’s newsstand circulation fell by more than half, making it the worst performer of all AMI publications.

The National Enquirer has become an embarrassment for CalPERS, which continues to hold an interest in the Enquirer. Yet CEO Marcie Frost has tried to mislead important audiences like her own board into believing that CalPERS has ended its politically awkward relationship with the publication.

In February, the Los Angeles Times broke the story that CalPERS held the biggest stake in AMI and therefore the Enquirer, roughly 34%, through a CalPERS sole-investor hedge fund called Eureka, managed by Chatham Asset Management.

Even though CalPERS shook the investment world in 2014 by announcing it was exiting all hedge funds, as of the end of its last reported fiscal year, it still held stakes in six, with the remaining value of the Chatham position far and away the largest.

Needless to say, CalPERS’ ownership of the Enquirer became national news by putting the virtue-signalling-obsessed pension fund on the outs with all goodthinking and therefore Trump-loathing Californians.1

We have to confess to not being able to get worked up about the bad optics; we thought CalPERS beneficiaries ought to be more upset about CalPERS spending money on a big loser. As we wrote:

It gave the money to a hedge fund manager, Chatham Asset Management, that acted at least some of the time like a private equity fund and invested in private-equity type things like private companies. And maybe because it was a private equity wannabe rather than the real thing, this American Media private-equity-type investment was a dog on top of becoming a PR nightmare…which is making it even more of a dog, if such a thing were possible….

CalPERS was in what was effectively a dedicated fund, which the article calls a “fund of one,” when CalPERS invested $600 million in the so-called Chatham Eureka fund. The article suggests that CalPERS had a 99% stake and Chatham had a 1% participation.

Chatham invested in American Media in 2014 when it came out of a 2010 bankruptcy. As of 2016, four Chatham funds together owned 78%, with the Eureka fund the biggest holder at 34%.

Ironically, 2014 was the year when CalPERS decided to exit hedge funds entirely…CalPERS apparently didn’t attempt to speed up the departure by selling its position to another investor. So one of the reasons CalPERS has been burned is due to its failure to be sufficiently bloody-minded about its decision to get out of hedge funds entirely.

Fast forward to April of this year. The Washington Post and others reported that AMI is selling the Enquirer. CEO Marcie Frost went into fabrication overdrive, even contradicting her more factually-minded staff, as this example shows.

You’ll see Frost showing her true colors as a Trumpian bullshitter, by first falsely saying in an extended email exchange with board member Margaret Brown, who was rightly skeptical, that Chatham had sold AMI. Frost then shifted her mispresentation, touting a dated story in the Washington Post as if it were more accurate than a conflicting, fresh account by CalPERS employees who have direct access to Chatham. Read this thread from the bottom e-mail up:

From: “Frost, Marcie”
Date: July 5, 2019 at 3:45:02 PM PDT
To: “Brown, Margaret”
Subject: Re: CalPERS ownership of American Media, Inc.


The Washington Post article ran on April 18.


On Jul 5, 2019, at 3:12 PM, Brown, Margaret wrote:


Did a sale of the Enquirer by American Media close in the last couple of weeks?

The reason I ask is that American Media owned the National Enquirer a few weeks ago according to Wayne Davis, but you said in your first email that they sold it months ago. I just need some clarification. I don’t want to be providing beneficiaries the wrong information.



From: Frost, Marcie
Sent: Monday, June 24, 2019 3:28 PM
To: Brown, Margaret
Subject: RE: CalPERS ownership of American Media, Inc.


Hope this helps…American Media sold the National Enquirer. Chatham still owns American Media and CalPERS is still an investor in Chatham.

From: Brown, Margaret
Sent: Monday, June 24, 2019 3:26 PM
To: Frost, Marcie
Subject: RE: CalPERS ownership of American Media, Inc.


I’m a little confused.

In this Bloomberg article from 2 weeks ago, Wayne Davis is quoted acknowledging that Chatham still owned American Media and encouraging Chatham to sell it:

And the story is pretty clear that, as of that date, American Media owned the National Enquirer and the deal to sell hadn’t gone through as of two weeks ago. In my research I have seen other stories suggesting that it might not close.

So something doesn’t seem right to me when you say that Chatham sold American Media “some months back.” I’m just trying to get it right before speaking to stakeholders.



From: Frost, Marcie
Sent: Monday, June 24, 2019 1:26 PM
To: Brown, Margaret
Subject: Re: CalPERS ownership of American Media, Inc.

Chatham sold American media.

The CJR story is simply deadly in terms of confirming the now-troublingly-unclosed status of the deal and undermining the idea that the Enquirer will ever be sold in the normal sense of the word.

AMI is supposedly selling the Enquirer for an implausible-sounding $110 million, but this transaction isn’t remotely arm’s length. The buyer, Jimmy Cohen, owns Hudson News. He was first reported by the Washington Post as planning to buy the Enquirer. This sounded bizarre given that AMI was hemorrhaging cash and the Enquirer has gone into serious decline.2 As we wrote in August:

AMI is a garbage barge, and not just in terms of its content. As we wrote in February:

It is taking CalPERS an awfully long time to get out of Eureka, and that suggests whatever is left in the fund is overvalued, because if Chatham could get out at its reported value or higher, it would have done so by now…

CalPERS’ holding in Chatham, the fund that owned the American Media stake, was down to $261 million at the end of June 2016, $235 million as of June 2017, and according to the Los Angeles Times story, “over $200 million” in 2018. That means the eventual writedown could be big enough to be hard to hide and lead to another round of bad press.

American Media is still a financial mess, From Bloomberg:

The closely held American Media Inc. — led by the president’s longtime friend, David Pecker — recorded a $31.5 million loss in the six months that ended Sept. 30, according to documents reviewed by Bloomberg. That marked an improvement over the previous year, but nonetheless brought the company’s total losses over the last 5 1/2 fiscal years to $256 million. AMI owed about $203 million more than its assets were worth.

So whatever of that >$200 million value that CalPERS is still apparently claiming for Eureka that is attributable to the American Media investment should be written down to zero…

A Bloomberg report this June had a Chatham source saying that CalPERS had rejected bids for its AMI stake above where its assets were valued. Given AMI’s negative net worth and its lack of earning prospects and vanity value, we were skeptical of the notion that anyone would pay real money for it and wondered what CalPERS was smoking to be rejecting bids that would leave it supposedly reporting a profit on its investment.

But the New York Post made it all make sense, starting with its headline, Hedge fund could bid for Hudson News wholesale operation:

Could Anthony Melchiorre’s Chatham Asset Management be readying a bid to buy out Jimmy Cohen’s Hudson News magazine wholesale distribution business?…

And more than one industry veteran thinks the Enquirer has all the earmarks of “parked transaction,” with Cohen the newsstand king helping out an old pal, David Pecker, the CEO of AMI, who guided the embattled National Enquirer and other celebrity magazines from Us Weekly to OK!

Chatham barked at the New York Post, and then us, to remove the “parked transaction” bit, since in publicly-traded securities, which these are not, a “parked transaction” would be a securities law violation. The Post surgically revised its piece while we added a note to the top of our post.

However, you can see why industry insiders are raising eyebrows. Cohen’s Hudson announces it’s going to buy the Enquirer for what everyone, including most recently the CJR’s van Zuylen-Wood, sees as an awfully rich price. But if Chatham shortly thereafter buys Hudson, any overpayment would come out in the wash.

CJR author van Zuylen-Wood is thus quite deliberately poking a stick in Chatham’s eye by reviving the “parked transaction” charge and explaining what he means by that.

Van Zuylen-Wood describes how AMI has contended with contraction in the tabloid market through ruthless consolidation: acquiring even more titles, presumably at knocked-down prices, stripping out costs, and sharing staff and even stories across publications. From his account:

The consolidation is why, if you pick up AMI’s celebrity glossies for any given week, you’ll start noticing repeated items. In September, for instance, Robertson sent a reporter to Korea to get a quote from Maddox Jolie-Pitt, who was attending college there. “We got the first quotes of him talking about Brad Pitt,” Robertson told me, a few days after the party. “We made a spread in In Touch, a spread in the Enquirer, a gossip item in OK! magazine, and rolled it out on digital.” That’s par for the course at AMI, whose celebrity publications all share a newsroom, on the second floor of a building in Lower Manhattan.

You can imagine that the resource sharing is just as extensive on the business side.

This means that if the National Enquirer were sold, it would have serious negative synergies. It would need to have its own editorial management and writers. It would also lose the advantage of reporters sitting together and sharing gossip and leads.

And so accordingly, the proposed sale wouldn’t extricate the Enquirer from AMI. AMI would continue to provide serious subsidies in terms of office space, staff, and Lord only knows what else. Pray tell, how much of the purported $110 million purchase price is being laundered back via annual cost subsidies from AMI? Again from the CJR story:

Shortly after the deal was reported, Keith Kelly, who as the media reporter for the New York Post has been monitoring Pecker for years, wrote that it looked like a “parked transaction”—that is, a BS agreement in which AMI would quietly reclaim control or back the investment itself. As the summer dragged on, the deal hadn’t closed, and no one at the Enquirer so much as moved desks; that hypothesis gained traction…

But here’s what you really need to know: Cohen does not plan to change editorial personnel, move offices, or alter the print product in any way. The Enquirer will continue to share resources, staff, and tips with all of the existing AMI titles. “It would certainly be more efficient if it were in its current location,” Cohen said. “The main reason the Enquirer is still so profitable is because it’s in a weekly shop that does weeklies.” Officially, David Pecker and AMI no longer run the National Enquirer. Actually, nothing is changing

So unless something changes from the Chatham end, CalPERS would still own its share of AMI, and still be subsidizing the expenses of the National Enquirer. The idea that this ever-pending deal will free CalPERS of this dumpster fire is all a big charade.


1 This humble blog is no fan of Hair Furore, but it’s possible to think Trump is a bad President and yet also recognize the existence of Trump Derangement Syndrome.

2 Van Zuylen-Wood says an AMI source asserted that the Enquirer is profitable and makes $25 million a year. Van Zuylen-Wood did a revenue estimate and contended that was possible. However, his own reporting on AMI’s extreme overhead sharing and cost-fixation suggests otherwise, that any appearance of profit is an artifact of expense accounting. It’s hard to imagine that a pro-forma of a free-standing Enquirer, with independent staffing and management and its own office space, would be in the black.

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  1. Watt4Bob

    It makes sense that Donald has a friend named Pecker.

    It does not make sense that Marcie Frost is still employed.

  2. flora

    Wow. So many moving parts. It’s hard to know where to start. I’ll ramble on a bit.

    I’m familiar – arm’s length – with sham business sales. One instance I know of was a medium sized manufacturing company A “selling” products by heavily subsidizing the sales of the products to another company B. Looked great on company A’s year end profit statements; worked (for a while) to fool the SEC and the IRS. Didn’t work in the long run. Company A wasn’t really selling anything, not at a profit. They were buying better looking company books. (for a while) That said…

    If Chatham PE doesn’t want to sell a company at a big loss because that will hurt it’s image and it’s books, that makes sense. I guess.

    If Chatham PE feels pressure to sell a company for political/image reasons, that also makes sense, I guess. Whether or not I agree with that approach to investing is another story. ( T isn’t exactly SAfrica circa 1975.)

    If CalPERS is embarrassed to still be invested in PE only because the PE owns a politically embarrassing company instead of for financial reasons, what kind of financial thinking, if any, goes into CalPERS investment decisions? If CalPERS is embarrassed to be invested in PE because the publicity calls out their misstatements about their PE investments, that’s also understandable. CalPERS adding more fibs its already long list of fibs won’t fix that problem.

    If Chatham is lying to CalPERS and CalPERS is lying to the public and beneficiaries…

    So many moving parts, more than I can sort out. CalPERS seems to spend an inordinate amount of time lately trying to publish better … uh… PR for bad decisions it makes instead of making better decisions. Frost seems more child-like, not in a good way, with every new episode.

    Thanks for your continued reporting on CalPERS, PE, and pensions.

  3. Tom Stone

    Flora, don’t worry.
    Attorney General Becerra is gonna be all over this.
    The man is an absolute Bullfrog when it comes to the rule of law!

    1. tegnost

      He can be the first partner of dewey chatham and howe…
      another great post in the series, maybe someday marcie will get a perp walk,
      one can always dream…
      enquiring minds want to know!

  4. The Rev Kev

    When is a sale not a sale? When it’s a Schrödinger’s Sale. The trouble is that an organization as big as CalPERS would have to have a database of all their assets. And it is not like they can hide the under-performing assets as the numbers have to add up. Numbers are sharp things and when you try to juggle them you can cut yourself badly. And I would assume that any Board member in the execution of their duties can get to look over this database or registry of investments. Certainly that was a frosty exchange of emails between Brown and Marcie as to the status of this investment when asked.

    But when you get down to it, yes the National Enquirer is a sleazy operation and you only have to read their Wikipedia history or that “Bad Romance” article to understand that. But they tend to create misery only for the people that come under their purview. Oh, and the people that have the misfortune to work there in the first place, going by that “Bad Romance” article. But at least they do not push for mass deaths like other publications do – like the New York Times and the Washington Post. So there is that to be said for them. But the question remains – when did CaLPERS ever think that investing in them via Chatham was ever a good idea? Enquiring minds want to know.

    The trouble with having parked investments too is that you can never be sure if the person on the other side might decide to get into that financial vehicle and drive off with them. The whole thing could go into bankruptcy tomorrow which would lead to a loss by Chatham and hence CalPERS & their beneficiaries. It is a dying publication and the only moves that they are making is cutbacks to stave this off which is usually a sign of desperation. As far as I am concerned, there was a golden chance to get rid of Frost and that was to get her to stand for the 2020 Presidential candidacy. She would have looked well standing beside Kamala Harris and both would know what would be expected of them, quid pro quo and all.

  5. tegnost

    I begin to see pension funds as the herring in the baby bottle, and wall st as the octopus.They consider it their money, they just haven’t quite figured out how to get it out, yet…

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