War at the Wall Street Journal (7 page)

He had come that year to Sun Valley troubled by the fact that while JPMorgan had a leading relationship with almost every big media firm in the world, there was a glaring hole: News Corporation. As he looked through the conference schedule of speakers and their topics, he noted the mix of mogul and celebrity—Barry Diller, Edgar Bronfman Jr., Harvey Weinstein, Diane Sawyer, Tom Brokaw—and his eyes stopped and lingered on three names: Lachlan Murdoch, Rupert Murdoch, James Murdoch.

His opening to introduce himself to this dynasty came at the cocktail party by the resort pool Friday night, where Jimmy had arrived early. He grabbed himself a beer and amid the quietly gathering crowd, he noticed the three Murdochs, off by themselves, seemingly unaware of any alternative purpose to the night other than enjoying a beer in the evening sun. Murdoch was tanned from time on his yacht, the
Morning Glory,
where he worked as obsessively as he did in his office in midtown Manhattan. The only difference was that on the yacht Murdoch traded pinstripes for casual slacks and open-necked shirts.

The Murdoch sons were conspicuously young—in their late twenties and vulnerable after the shock of their father's separation from their mother a few months before, which they still thought might just be temporary. All their lives, the younger men had alternately sought or shunned their father's approval, but on that night, as the CEOs and founders hovered, the three Murdochs appeared relaxed and supremely comfortable with one another, despite the marital discord. Surrounded by his sons and his fellow robber barons, Murdoch was in his element.

As Jimmy Lee approached this triumvirate of casual ease and staggering wealth, he saw generations of business before him. Happy-go-lucky Lachlan was the deputy chief operating officer of News Corporation, running the company's thirty-five TV stations, its Australian newspapers, the
New York Post,
and HarperCollins. As the elder son, he was the heir apparent (temporarily, as it played out) to all his father had created. Murdoch said at the time that the children had reached a "consensus" that Lachlan would take over for him. "The children selected him," he said. "It was their vote." James was fifteen months younger than Lachlan. He had yet to rise to the role of his brother's challenger. Lachlan was still seen as the Murdoch most like his father. He had started out working as an apprentice with the printers in the pressroom of Murdoch's Adelaide paper, the one from which Murdoch had grown his empire. He was also, at least at this time, the least rebellious of the children. James had dropped out of college but quickly came back into the fold, joining News Corp. in 1996, and was at the time working, with only limited success, on scouting out digital investments for News Corp. Their sister, Elisabeth, almost thirty, was at the time of the conference running digital operations for Murdoch's SkyTV satellite operator. She had given birth the previous year to her second child with Vassar classmate Elkin Pianim, the son of a once imprisoned opposition figure in Ghana. More recently, Elisabeth had begun an affair with public relations impresario Matthew Freud, great-grandson of Sigmund, much to the delight of the British tabloid press. She and Pianim divorced, and her father hadn't approved of any of it. Prudence, Murdoch's eldest daughter and only child of his first marriage, lived in Australia and stayed out of the succession race.

At the time of Jimmy's approach, the sons and their father were in the middle of talking about a subject near and dear to their hearts: their workouts. James was slim, a black belt in karate; Lachlan, a hunkier-looking athletic type with spiked hair and a tribal tattoo. The men compared notes and swapped stories. "Do you lift?" Jimmy asked. "Do you run?" It was a comfortable, manly conversation between a banker and moguls, and Lachlan asked Jimmy if he would like to work out the following day.

"Geez, I'd love to. No sweat," Jimmy replied. "What time?"

"Oh, around five," Lachlan said.

"Great, but doesn't dinner start then?" Jimmy asked.

"No," Lachlan corrected. "We meant five in the morning." Jimmy got up early to make the appointment.

Murdoch, always seeking to guarantee his longevity, was accompanied by the former captain of the Australian Rugby team, who was traveling with him. The men worked out together and discussed, among other things, Dow Jones. After Jimmy flew back to New York, he drew up a "book"—a financial brief—outlining how Dow Jones could fit into News Corp.

Soon after, back in New York at a Fox News party, Jimmy sought out Murdoch to tell him, "I've done a lot of work on Dow Jones." He presented the book to Murdoch and his loyal chief financial officer, Dave DeVoe, with whom he discussed the logistics of how such an offer might work, such as whether to offer News Corp. stock to buy the company or just cash, or a combination of the two. Jimmy was determined that JPMorgan would land some News Corp. business, and so he stayed in touch, always looking for ways to be useful to Murdoch. With Hammer and Kann still in place at Dow Jones, however, no one could make much progress. "The art of the possible wasn't possible while we had guys who wouldn't have the conversation," Jimmy remembered.

O
N THE COLD MORNING
of November 12, 2005, Mike Elefante arrived in New York with an unlikely ally for an unprecedented task. He was joining with one of his most persistent critics in the Bancroft family—Leslie Hill—to drive Peter Kann, Dow Jones's most powerful executive, from his chair.

Elefante had earlier that spring taken over Roy Hammer's seat on Dow Jones's board. Elefante, the son of a New Jersey hairdresser, grew up far from the country estates inhabited by his clients. He had been working for Hemenway & Barnes since 1970, a year out of Harvard Law School, and had grown to know the New England Bancroft sisters after working for years as a lawyer on their account. Elefante now served as a trustee on almost half of the family's trusts.

Like his imperious predecessor, he had long held the view that Dow Jones was best as an independent company under the control of the Bancroft family. Unlike his predecessor, however, he was open and friendly. Tall, with salt-and-pepper hair, he kept a mustache long after it was out of fashion.

In the spring of 2005, Elefante was facing an increasingly restless Bancroft family. Throughout Elisabeth's campaign, one group of cousins had watched her travails with particular interest. The Hill family—rooted in Philadelphia but spread now to Hawaii, California, and up and down the East Coast from Washington, DC, to Boston's quiet suburbs—were by far the least glamorous of the Bancrofts. They were argumentative, a trait the more docile factions of the Bancroft clan blamed on their upbringing. The Hill matriarch, Jane MacElree—married to Louis Hill, an ambitious, hard-working Pennsylvania lawyer and state senator who left her in 1975 for the campaign manager of his unsuccessful Philadelphia mayoral campaign—had encouraged her children to discuss the events of the day, and disagree, at the dinner table. With seven children, the family couldn't help but be a touch cacophonous, an unusual trait in the broader family tree and one that made MacElree and her children particularly irritating to Roy Hammer and Peter Kann. Unlike their cousins, they held down unglamorous jobs and seemed the unlikeliest of newspaper scions. MacElree's oldest son, Crawford, was a high school biology teacher; his youngest brother, Michael, worked as an environmental scientist; their oldest sister, Leslie, was a retired airline pilot. They didn't keep horses the way their cousins did, race cars, or throw elegant dinner parties. They lived in relatively modest houses with threadbare furniture and came to their lawyers' offices carrying documents in tattered bags.

They did, however, take great interest in the business of Dow Jones. Growing up, the Hill family visited Jessie Cox's rambling mansion on Cohasset Harbor. The Hill kids played with their Cox cousins—Billy Cox III among them—and dug through Clarence Barron's old trunks full of his canes and hats that their grandmother kept in the attic, using the paraphernalia as props for plays.

Leslie Hill was the Hills' representative on the Dow Jones board of directors. Her decidedly demanding profession suited her perfectly. She was the picture of WASPy practicality. She wore no makeup, and her brown hair ran chin length and showed streaks of gray. Her husband, whom she met at a flight school on Cape Cod, loved her willful manner. Like her siblings and cousins, she didn't advertise the family's connection to the paper. Her house, on a leafy block in suburban Washington, DC, was filled with modest sofas and armchairs that had been clawed by the family cat. Many of her neighbors knew her only as a pilot, not as a member of the Bancroft dynasty.

Inside her family, she was well known for her stubbornness. She tended to disagree with whoever was speaking or whatever proposal was on the table at that moment. She loved Dow Jones, but she was tired of what she saw as the company's inept management. If somebody came along to save the company, she would support him or her. Unless she decided she wouldn't.

Even beyond the Hills, the goodwill that had extended to Kann immediately following the attacks of September 11 was dwindling. The dot-com bubble had deflated, and the flight of advertisers from newspapers hit the
Journal
harder than most; the paper had lost money for the past three years. Kann, ever unflappable, had come up with a reassuring refrain for investors, employees, and Bancrofts: these were cyclical problems, just part of the ups and downs of the economic cycle. The Internet had come and gone, he reasoned, and this scare, too, would pass. But this explanation was losing credibility.

The company was desperately trying to dig itself out of the print medium's decline and move the paper itself beyond the technology and financial advertising on which it relied so heavily. In January of that year, at the urging of Zannino and Gordon Crovitz, president of Dow Jones's electronic publishing division, Dow Jones had bought the financial news site MarketWatch.com, to expose the company to what executives hoped would be a boom in online advertising. The
Journal
was planning to launch a weekend edition of the paper, covering "soft" topics such as food, fashion, and what Karen House called "the business of life," to attract a wider range of advertisers to the paper. The company was in need of rescue. Revenues at the
Journal
had fallen nearly 9 percent in the first quarter of the year.

Michael Hill, the Hill clan's youngest brother, was a grown man living outside Boston. He was close to his older brothers Crawford, the high school teacher, and Tom, a documentary filmmaker and corporate videographer, and seemed the mildest and most patient of the bunch. The Cohasset house had served as a daycare center of sorts for him when his older siblings followed their parents on vacation out West, hiking the Sierra Mountains and the Grand Tetons. Mike, too young to hike, stayed home for many of these trips and amused himself on a small sand patch his grandmother Jessie had hauled in and dumped on the corner of her property for him. He spent so much time there the family called it "Michael's beach."

With his high-pitched voice, Mike was often drowned out in conversations with his brothers, who talked over him and cut in when he seemed to meander in his explanations, which happened frequently. None of the Hills had worked for Dow Jones (save a brief stint for Leslie at Dow Jones's library and at one of the company's Ottaway community papers on Cape Cod). Mike seemed to regret his lack of involvement. With soft eyes and a round face topped with feathery brown hair, Mike thought his family should have been more caught up in Dow Jones's business, and was frustrated by the role Hemenway & Barnes played in keeping his family away from the company they owned.

Kann was sixty-two at the time, and as his retirement age approached, Mike, his brothers, and their sister Leslie asked Hammer, and later Elefante, at every opportunity, "What is being done about Peter Kann's succession plan?" Their mother, who served as trustee for a large number of family trusts, asked the same thing. But Hemenway & Barnes seemed to barely listen and quickly dismissed the Hills.

Leslie and her brother Mike were talking frequently in 2005 about the company. As a director bound by the confidentiality of the boardroom, Leslie knew a great deal she couldn't repeat to her brother. That frustrated Mike, who thought that if only the family could have more insight into the company, they could help improve it. One late-spring day that year, in one of their many conversations, Mike, after another failed attempt to get some information out of his sister, said, "You know what? A great Christmas present would be some change before the end of the year." He had no idea that the change was already under way.

 

The momentum had started early in the year, when James H. Lowell 2nd, a money manager and professional trustee hired by Hemenway & Barnes to advise on the Bancrofts' investments, grew frustrated with what he saw as Hemenway's neglect of its client. Lowell, an outspoken Boston native, was spurred by a combination of chivalry and anger. In one of the family's regular meetings earlier that year at Hemenway & Barnes's antiseptic offices in downtown Boston, Lowell had watched as Hammer dismissed MacElree's questions. "He's treating her like shit," he thought. He had decided to take action.

Lowell's job was to advise Hemenway & Barnes, not to deal directly with the Bancrofts outside of quarterly trustee meetings. But he had been talking to Hammer for years about how the family should take on more of a role at Dow Jones. Hammer ignored him, too. Lowell decided to go straight to the people he thought Hemenway was mistreating. The Bancrofts had to figure out what the hell they were going to do with the company. And Lowell wanted to help them. The first step was getting the Hemenway lawyers out of the way.

Lowell wrote to Jane MacElree in February. "Dear Jane," he began, "I am asking for your help in trying to build a family consensus ... Why start with you? Simply because your family has perhaps been most critical (deservedly), yet individual complaints are easily dismissed by an arrogant Board of Directors." Lowell went on to say that Kann needed desperately to reduce the company's debt and explain in detail to the family how he planned to fix Dow Jones. He closed by writing that he was making this unusual overture to her not because he wanted to be paid—"I am not looking for any compensation for my efforts"—but because his legacy, as well as the Bancrofts' legacy, was on the line.