The Deal from Hell (16 page)

Madigan wasn't the first
Chicago Tribune
loyalist to leave Cuba disappointed. Almost fifty years earlier to the day, Jules Dubois, the
Chicago Tribune
's infamous Latin American correspondent, had been expelled from the island for his critical coverage of Castro, whom he had once portrayed as a young rebel commander and hero who ousted
from power the cruel and corrupt dictator, Fulgencio Batista. On the surface, Madigan bore little resemblance to Dubois, a husky, blue-eyed correspondent who had braved pistol-whipping and violence to get his stories, once reputedly filed by carrier pigeon. But each man symbolized the ambition of the
Chicago Tribune
as more than just another local paper on the prairies of the Midwest. Dubois, a legendary correspondent, epitomized the
Tribune
's commitment to foreign reporting by a free press in the 1950s and helped found the Inter American Press Association, an organization that the
Tribune
continued to support for decades. A half-century later, Madigan would assume his place in Tribune lore when he bet the future of the company on the largest newspaper merger in American history.

John Madigan was not the kind of man who wore his feelings on his sleeve. One got a clue to his thinking through a fleeting comment or a slip of the tongue similar to his “not big enough” comment on the bus. His cautious demeanor was no accident. Ever since he had been passed over for the CEO job in favor of Brumback, Madigan had labored in Brumback's shadow, a treacherous arena reserved for men with something to prove. And Brumback made sure that Madigan had his work cut out for him.

To anyone schooled in reading the tea leaves at Tribune, Brumback became the CEO in waiting late in 1988, when Cook named him president and COO of Tribune Company, a promotion that relegated Madigan to runner up. True to form, Brumback hit the ground running, seizing control of Tribune Company and shaking it to its core much as he had done with the company's flagship newspaper.

In his day, the Colonel had built a sizable and successful Canadian newsprint operation to ensure that his papers would always have an adequate, cheap supply of paper, a crucial commodity to a newspaper's future. But paper mills consumed a lot of capital and produced pulp, a commodity. As Brumback assumed his new duties with Tribune Company in early 1989, he concluded that the Tribune Company shouldn't be in the commodity business anymore. Canada's political system bothered the rock-ribbed Republican, too. Brumback believed
Canada's “socialist tendencies” challenged the possibility of earning a fair return. So, over the next five years, he spun off the newsprint operation, eventually selling the whole operation to Donahue Paper Corp. of Canada.

Even more daring, Brumback, fresh from his victory over unions in Chicago, stuck his thumb in the eye of organized labor at the
Daily News
, the New York tabloid that had been founded by the Colonel's cousin, Joseph Patterson, and had become a significant drain on the company's bottom line. At the time, the
Daily News
was run by James Hoge, the
Chicago Sun-Times
editor who had quit his job across the street when Rupert Murdoch bought the paper in 1983. Cook had quickly hired Hoge to run the
Daily News
, a paper that had long been at odds with its unions. Hoge devised a phased plan in which the company would make some long-term strategic investments the New York unions sought in return for union concessions the company wanted. When Brumback came along in 1989, though, he rejected the phased approach, preferring to take on the unions directly as he had successfully done in Chicago. Hoge, who had grown up in New York but had spent much of his career in Chicago, tried to warn Brumback about the stark differences between unions and politics in Chicago and New York, where the mafia had much deeper penetration of the unions with which he had to deal. But Brumback would have none of it. He soon hired Robert Ballow, a notorious union-busting lawyer from the King & Ballow law firm in Tennessee, and by 1990 the Tribune found itself embroiled in the longest newspaper strike in New York City's history.

Brumback's in-your-face tactics and naïveté about Big Apple politics led to a walkout marked by torched newsstands and even more tortured politics. At one point, Brumback's mandate to fix the
Daily News
, sell it, or “shut it down” had Mayor David Dinkins, Governor Mario Cuomo, and John Joseph Cardinal O'Connor in the streets backing a union boycott of the newspaper. After losing some $250 million over eleven years, Tribune paid British press lord Robert Maxwell $60 million to assume the paper's debts and take off its hands one of
the nation's largest newspapers in one of America's greatest markets. Maxwell entered New York with much fanfare, but it soon became apparent he needed the $60 million badly; he was broke. Shortly thereafter, he fell off his yacht and drowned in an accident that many speculated was suicide, sending the financially strapped
Daily News
into the hands of Mort Zuckerman, the real estate developer.

When he picked his fight with the unions, Brumback didn't think he'd have to walk away from the
Daily News
, but at the end of the day, he emerged as the darling of Wall Street. Despite the problems caused by the strike and its embarrassing headlines, Brumback's decision to dump the
Daily News
extricated Tribune from a financial morass in New York, freeing the company to build a powerful multimedia corporation and sending its stock into the stratosphere. The company's stock price jumped 1 percent on the news of the
Daily News
sales and continued to rise. In August 1990, Brumback became CEO of Tribune Company. He was named Chairman in January 1993.

In Chicago, Madigan had won a crown jewel as a consolation prize for losing out to Brumback—CEO of Chicago Tribune Company and publisher of the
Chicago Tribune
, the job that ambitious executives had always used to catapult themselves into the CEO's chair. Tribune Company CEOs rarely had ever reached the top job without a tour in the
Tribune
publisher's office. But Madigan also faced a daunting challenge: He had to emerge from Brumback's shadow to demonstrate he had the competence, decisiveness, and ability to lead the parent company. Since everyone at Tribune Tower credited Brumback with turning the
Chicago Tribune
into a well-oiled cash register, Madigan had a hard act to follow, particularly after Brumback ordered the newly minted
Tribune
publisher to ship his top local talent to New York to help him fight the unions. Meanwhile, Brumback openly expressed doubts about Madigan's ability to succeed him. At one point late in his tenure, Brumback stunned
Chicago Tribune
media reporter Tim Jones, during an on-the-record interview, when he said he wouldn't completely relinquish his leadership role in Tribune Company because he wanted to see if Madigan had the chops to run the company.

But Madigan had three things going for him that many readers of the tea leaves didn't appreciate. One was his age. By the time he became CEO, Brumback was sixty; to appease Wall Street, Tribune Company had to start succession planning from the day he got the job. Secondly, Madigan's only credible rival, Jim Dowdle, was a television executive at Tribune, a newspaper company at heart and one that rarely went outside its ranks for top jobs. Finally, Madigan's biggest advantage was that he was a savvy corporate politician and knew how to play the game, far better, in fact, than almost anyone would suspect.

Taciturn, conservative, and aloof, Madigan grew up on Chicago's North Shore, a tony strip of land adjacent to Lake Michigan populated by country clubs, wide lawns, and stately homes that scream, “A Republican Lives Here.” W. Clement Stone, the eccentric insurance tycoon who helped bankroll Richard Nixon, had a mansion on the lake. Donald Rumsfeld, the controversial U.S Defense Secretary, graduated from New Trier, the area's well-known high school, four years before Madigan.

The son of a corporate lawyer and big University of Michigan booster, Madigan towered over almost everyone in a room, but people tended to underestimate him, probably because of his meat-and-potatoes midwestern demeanor. His buttoned-down countenance obscured a huge ego and a fierce ambitious streak that rarely surfaced in public. Don Haider, a Northwestern University professor who grew up on the North Shore and was a friend of Madigan's sister, recalled how confident Madigan was, even as a teenager. “Griff Williams,” Haider explained, “was a high-society band leader who had three beautiful daughters. They lived in a house on Forest Avenue [near Lake Michigan] with a broad, sprawling porch. You would always see boys on the front porch; everyone wanted to date the Williams girls, especially Holly.” The competitors for Holly's hand didn't consider Madigan a big threat. “He was cautious, easy to underestimate,” Haider said. A handsome, clean-cut young man, Madigan wore a plaid bow tie and a houndstooth jacket in his high school yearbook photo, but he was otherwise relatively undistinguished. When the time came for
Holly to make a choice, she picked Madigan. “He was either lucky or determined,” Haider surmised.

After graduating from University of Michigan with an MBA, Madigan joined Duff & Phelps, a small, midwestern investment banking firm, where he learned the newspaper business basics helping Lee Enterprises, a minor newspaper chain, sell its stock to the public. Next was a tour at Arthur Andersen, at the time, a blue-chip accounting firm based in Chicago. But Madigan's real break came when he landed a job at the Chicago office of Salomon Brothers, led at the time by Ira Harris, a consummate wheeler-dealer whose struggles with an expansive waistline made as many headlines as his legendary deals. Harris knew Madigan from their days at the University of Michigan, and, although they hadn't been close friends, the flashy deal maker needed someone adept at corporate finance for the investment banking division he was building at Salomon. Madigan, he soon determined, was his man. Although Harris never grafted his pizzazz onto his new student, he gave Madigan an opportunity to see investment banking through the eyes of one of its masters, and Madigan took notes. When Tribune CEO Cook sought Harris' advice on the proper strategic direction for Tribune, a company then in private hands, Harris became a matchmaker of sorts. He put Madigan on the case to help determine whether Tribune should remain private or sell its stock to the public. Cook recalled:

After an exhaustive review of the company, Salomon determined that it was in Tribune Company's best interest to go public. During the evaluative process, Cook liked what he saw in the tall, presentable Madigan, and when Tribune needed a chief financial officer, Cook floated the idea by Harris. On the first day of the year in 1975, Madigan joined the Tribune as its new CFO. Madigan later recalled:

He installed a system of procedures and accounts that allowed the company to accurately measure its results, dismantling antiquated financial yardsticks that fostered the gridlock, infighting, and misinformation that had plagued the company. Cook and Madigan shelved Kirkpatrick's journalistic expansion plans to make the Tribune a midwestern powerhouse and shifted the company's emphasis to improving productivity.

Companies convert to stockholder-owned institutions for lots of reasons. Over the years, Madigan would often talk about the importance of remaining an independent company, one controlled by local people rather than a faraway board of directors. Properly run, a newspaper is a strong instrument of local power, one that sets the agenda in a community, focuses public attention on crucial issues, and gives a
community its voice. When owners know the local community and encounter the subjects of stories they publish at the local grocery store or bank, the newspaper shows it has a stake in the community and gains credibility. Cook and Madigan both felt strongly that going public would actually help Tribune remain locally controlled and independent. “Several of the private companies [had] imploded,” Madigan noted, “when big shareholders wanted [to cash in their stock holdings] it would force sales like in Louisville,” where descendants of the Bingham family sold the
Louisville Courier-Journal
, a respected state paper, to Allen Neuharth's Gannett Corporation. “We had [these] big shareholders around, the descendants of the original investors in the company [the Medills, the McCormicks, the Cowles family, the Lloyds of Chicago], and some of them wanted out.... We were afraid if we didn't provide them liquidity [or cash for their stock], they would force a sale,” a posture that would inevitably mean a loss of independence and control by Cook and his team.

Becoming a publicly held company also creates stock certificates, stock options, and lucrative benefits for corporate officers and for underwriters like Salomon Brothers, who make a bundle helping a company ready itself for sale. In his days putting together deals, Madigan had learned how to make people like Cook, Brumback, and big shareholders, including him, incredibly wealthy. By the time Cook stepped down as chairman of the company in 1993, his reported stock holdings were worth about $47 million. Madigan's were worth about $25 million, and he had learned the game well by the time Cook moved him into the publisher's office at the
Chicago Tribune
.