Trump’s Chicago tower under construction. Photo (cc) 2006 by JeremyA.
A private equity firm that helped destroy local newspapers was also involved in building Donald Trump’s Chicago tower, a fiasco that was the subject of an in-depth investigative report over the weekend produced by The New York Times and ProPublica. The story, published in the Times, found that Trump may owe $100 million because he used “a dubious accounting maneuver to claim improper tax breaks from his troubled Chicago tower.” That conclusion is based on an Internal Revenue Service investigation whose details the two news organizations uncovered.
The tower, built on the former site of the Chicago Sun-Times, was plagued by cost overruns and overly optimistic estimates of the revenues that would be brought in. But this post isn’t about Trump’s problems. It’s about this:
As his cost estimates increased, Mr. Trump arranged to borrow as much as $770 million for the project — $640 million from Deutsche Bank and $130 million from Fortress Investment Group, a hedge fund and private equity company. He personally guaranteed $40 million of the Deutsche loan. Both Deutsche and Fortress then sold off pieces of the loans to other institutions, spreading the risk and potential gain.
Fortress Investment Group is the firm that launched the era of private equity firms’ owning newspapers, described by Margot Susca in her book “Hedged: How Private Investment Funds Helped Destroy American Newspapers and Undermine Democracy,” which was published earlier this year. I reviewed it for The Arts Fuse. As Susca wrote, Fortress paid $530 million in 2005 to purchase Liberty Group Publishing, which it renamed GateHouse Media.
GateHouse built a nationwide network of community newspapers, taking them in and out of bankruptcy twice and slashing newsrooms in order to goose revenues and fuel the acquisition of still more papers. That culminated in 2019 when GateHouse merged with Gannett, the country’s largest newspaper chain, a $1.1 billion deal that saddled the new Gannett with an enormous pile of debt. Fortress kept right on profiting, Susca wrote, as the firm continued to extract millions of dollars in managment fees. And Gannett kept right on cutting. Susca put it this way in describing what Fortress and other masters of the universe have done to newspapers, and what that has meant for democracy:
Researchers have shown that investments in sustainability, diversity, and community suffer when profit is the only goal; companies involved in those efforts to improve the world around them may actually inspire hedge funds to target them; hedge funds see line items in those businesses that, if eliminated, could lead to more profits….
At a time when government accountability and truth itself are at a crucial nexus, news organizations in the private investment era have failed citizens as these organizations have boosted private investment funds’ bottom lines.
To organizations like Fortress, it makes no difference whether they’re helping to bail out Trump or destroy newspapers. The bottom line is the bottom line, and nothing else matters.
The media business analyst Alan Mutter once memorably asserted that newspapers’ 