UPI Begins Its Descent into Bankruptcy

In scrambling for cash to meet payrolls, UPI at this time was awash with highly paid consultants. Disadvantaging UPI’s growing legion of creditors, Baha’i friends and acquaintances of Ruhe and Geissler increasingly began to propose and execute purchases of UPI assets on extremely favorable terms. Major staff cuts and salary reductions and sweetheart asset divestitures were the order of the day.

Ruhe and Geissler also continued to siphon cash from the company through payments to their Focus holdings. Though not seen in financial statements, under pressure to deliver a life-saving loan to the company, Alhauser later revealed the Focus had been receiving $150,000 to $200,000 a month from UPI. This was far in excess of Ruhe and Geissler’s salaries. According to the book Down to the Wire in 1984:

UPI was sinking in debt, swamped by its staggering communications burden, by the costs of the moves, by fees to a proliferation of highly paid consultants, and by costly joint-venture deals. Compounding the problem was the owners’ secret transfer of cash from UPI to Focus. During 1983, it would total $1.434 million.

The dire straits the company was in could be seen in the explosion of trade creditor debt. AT&T and RCA Service Company were several of UPI’s largest trade creditors. UPI was getting way behind in paying the monthly cost of leasing the telephone lines and teletype machines that were essential to running its offices and carrying news stories to its customers.

The Richard Harnett and Billy Ferguson book Unipress, a history of UPI in the 20th century, reports that the UPI Controller in this period couldn’t convince Ruhe that UPI was running out of money and was regularly disparaged by Ruhe as a “bean counter” for his efforts. The Treasurer Alhauser was said to be either oblivious to the problem or not willing to confront Ruhe and Geissler about money. The exceptional rise in accounts payable produced a bizarre administrative fiasco.

To ensure a smooth transition, Scripps had agreed to handle UPI’s payables for a period of time after the sale to Ruhe and Geissler. At a later point, UPI’s finance department needed to manage the task of sending checks to vendors and suppliers. When the cutover came, UPI’s computer was duly programmed to print out these checks as soon as the invoices for these expenses were approved. However, UPI’s Controller was in no position to mail checks if the funds in the company’s checking account wouldn’t cover them.

Payroll, rent, telephone and teletype service were all top priorities, but even here arrearages began building up. When a lower-priority check would produce an overdraft if cashed by the payee, it would be held back and the check would be put in the Controller’s desk drawer until later. In a sign of impending disaster, at one point nearly $1 million in checks had piled up in the Controller’s desk.

These financial problems continued to be ignored and Ruhe and Geissler shortly threw a lavish party to celebrate the opening of its new Washington, D.C. news headquarters. For a company headed down the tubes, an inexpensive press release announcement might have been more sensible alternative than an over-the-top, costly blowout. In the 9th floor executive suite of a newly constructed 12- story building above the subway station at 14th and U Streets, hundreds of high mucky- mucks from Congress and media organizations milled about the new space feasting on tray after tray of hors d’oeuvres and drinking case after case of spirits and champagne. Gordon and Cohen in Down to the Wire succinctly said of the party, “Ruhe and Geissler spent money as if they had it.”

The main newsroom had been successfully moved from Manhattan to the new building but moving the New York radio studios for UPI’s news reports on the hour and half-hour proved to be a major problem and caused a massive cost overrun in the budget for the move. It turned out no one had thought about recreating the necessary soundproofing for the Washington studios. Part of the new offices had simply been partitioned off with glass walls and fitted with desks and microphones.

UPI 1400 I ST, NW, Washington DC

Site of UPI’s  Washington, DC Radio Studio Debacle

Immediately the many radio stations across the country dependent on retransmitting these reports complained that the voices of UPI’s commentators were hard to hear. The problem was low frequency background noise from the heating and air conditioning fans in the ceiling ventilation ducts. Fixing this was a complicated tasks that both disrupted the broadcast part of the business and cost an arm and a leg as well.