Before the Deluge – United Press International

upi teletype machine

Vintage United Press International Teletype Machine

After I left Bradford in 1983, I briefly settled back into the practice of law. Joining several of my former Roan & Grossman partners as Of Counsel, I worked in a LaSalle Street office across from architect Helmut Jahn’s nearly completed State of Illinois Center (later the James R. Thompson Center). My strongest memory of this short period is not the legal work I did but rather being at eye level with the glass dome under construction atop the unique 17-story building. It was impossible not to frequently stare out the window at the steel workers clambering along the yet to be glazed skylight structure above the building’s atrium. Their ballet-like, death-defying, angled tightrope walks were so gripping that anyone watching it for long could fairly be accused of having the morbid curiosity worthy of a Formula One fan.

State of Illinois Center

Notwithstanding this distraction, I continued to do some carryover corporate work for Bradford and general legal matters for other clients. One matter in particular I remember working on was an odd problem that cropped up in the administration of an estate. My friend Arthur Cushman had recently started a long-planned vacation trip across the Canadian Rockies. He was headed westbound to Vancouver from Toronto on a Via Rail Canada train. He never made it. Though only in his early 50s, a contemporaneous police report said he that not long after leaving Toronto he had been eating dinner in the dining car when he suddenly stood up, grabbed his chest, collapsed, and died. I knew he had had heart troubles in the past, but the report of his grand mal seizure and sudden death had come as a shock to me and all those who knew him.

Arthur Cushman wearing Bolo Tie Clasp

The executor of his estate retained me to track down several missing items known to be on his person when he died. Strangely, they had not been on him when his remains were claimed by next of kin. One item was a money belt that he always wore travelling. It was said to have $200 of mad money in it. The other missing item was of more sentimental value, a gold Bolo sheep’s head tie clasp that was always a part of his informal string tie attire.

The train crew had promptly alerted Via Rail’s far away dispatcher, who in turn contacted authorities in the first available stopping place along the route.

Cushman was tall and very heavy and, when I later talked to the local sheriff, I learned that his corpse had been offloaded from the train with some difficulty. The body was put in an ambulance in a sparsely populated location and driven to the nearest mortuary.

                Linda Thoren Neal

The sheriff took my report of the missing items seriously and, amazingly enough to me, he mostly solved the mystery of the missing items. It turned out the ambulance driver and his assistant couldn’t resist temptation. It had been a dark night when they picked up the body after all, and the only other person around them as they drove to the undertakers would never be able to tell the tale of their filching. Confronted by the law, they had given up the gold Bolo tie clasp without ado, disclaiming any knowledge of what might have happened to the cold, hard cash. Although I never found out, my guess is that in return for giving up the clasp, the sheriff let the matter ride.

My priority in this period was to find another corporate law position. In pursuit of this goal, I began to talk to friends and family and other lawyers I knew for advice and pointers to possible opportunities. One of those I talked with was a classmate of mine at the University of Chicago Law School, Linda Neal (then Linda Thoren). One of the few women in the class that graduated with me in 1967, Linda had first worked in the development office of the University and later at the Art Institute of Chicago. At this time, she was an associate in private practice with the large Chicago firm of Hopkins & Sutter. There she was doing legal work for Cordell Overgaard, a partner at the firm who was representing new owners of the United Press International wire service.

United Press had been founded in 1907 by E.W. Scripps, the owner of newspapers in Cincinnati, Cleveland, Columbus, and Toledo. The papers covered local news in these cities adequately but were at a disadvantage in covering non-local news. The competitors to Scripps had inexpensive access to news stories outside their local markets because they had access to the Associated Press wire service and Scripps did not. AP was a standalone cooperative news gathering organization created and funded at the time by its members, most of the country’s largest newspapers. With these newspapers making all of their own coverage available to their AP cooperative, the AP was able to telegraph these local stories to all the other AP members.

The cooperative newspapers that owned AP had solidified their monopoly on this kind of economic news reporting by making it against AP policy for it to sell to more than one newspaper in each market. This had forced Scripps into the uneconomic step of beginning to put its own reporters in cities in which it had no newspaper or way to offset the cost.

The answer to this problem that Scripps arrived at was to create a competitor to AP. After some years, his United Press had a small number of correspondents in cities that were transmitting about 12,000 words of Morse code over leased telegraph lines to 369 newspapers.

In later years UP grew to be a worthy competitor to the AP, but throughout the decades always remained second in size and scope to the AP. What it lacked in AP’s deeper resources, it tried to make up for with a colorful focus on people and succinct lively reporting. It took pride in its scrappy reputation as the Avis to the AP’s Hertz and continuously over its long competition with AP scored many news scoops.

In the late 1920s, UP’s head briefly met with William Randolph Hearst to discuss merging with the Hearst newspaper chain’s competing International News Service, INS was having its own difficulties competing with the AP behemoth at the time. According to the history of UPI in the book Down to the Wire, written by Gregory Gordon and Ronald Cohen, Hearst is said to have replied, “You know a mother is always fondest of her sickest child. So, I guess I will just keep the INS.” However, in 1954, three years after Hearst’s death, the mother of INS was no longer in the picture. The merger went forward and the United Press became United Press International.

In the next two decades, UPI thrived. By 1975, it counted 6,911 customers. Its main revenue producers then were 1,146 newspapers and 3,680 broadcasters. Technology advances in computerization had brought teletype machine advances, but cost-saving satellite technology was still in the future.

After 1975, the continuing movement of advertising dollars from newspapers to television had begun to sharply reduce the number of afternoon newspapers in the country. This had an increasingly negative effect on UPI’s finances. In the late 1970s, UPI merger talks with CBS, National Public Radio, and other possible buyers went nowhere and Scripps’ executives went public with news that it was interested in a sale or other divestiture of UPI. By 1980, a quadrennial year with extra news expenses for both the presidential election and the Olympics, the Scripps chain was forced to underwrite a $12 million annual operating loss at its UPI subsidiary.

220 East 42nd Street NYC Newsroom 1981

With no responsible parties in the news business stepping up to the plate with an offer to take UPI off its hands, the E.W. Scripps Family Trust, which owned the newspaper chain, began pressing for a sale of UPI on any basis. Beneficiaries of the Trust were Scripps family heirs. Trustees of the Trust, owing a fiduciary duty to the heirs, were increasingly concerned that it the Trust continued to own UPI, at some time in the future the trustees might be subject to up to $50 million in unfunded pension liabilities. They were also worried that lawsuits could also be brought by the heirs against the trustees for wasting the Trust’s assets by continuing to fund the losses of a wire service that no longer was essential for the Scripps newspapers to own.

Enter at this propitious moment, Douglas Ruhe and William Geissler. They bought UPI from Scripps for $1 in June 1982.

UPI’s new owners, Douglas Ruhe and William Geissler, were young Nashville entrepreneurs. Though they had started out with little business experience or capital, their small Nashville company, Focus Communications, had successfully taken advantage of a minority set- aside program of the Federal Communications Commission and had been issued one low-powered television license in Illinois and had several others pending.

Ruhe had grown up in an unusual family. His father, Dr. David Ruhe, was appointed the first professor of Medical Communications at the University of Kansas Medical School in 1954. Dr. Ruhe was a medical educator who made more than 100 training films. A member of the Baha’i Faith, he was later elected Secretary of the National Spiritual Assembly of the Bahais of the United States. As the Baha’i Faith has no clergy, it is governed by elected spiritual assemblies. Then from 1968 to 1993, the senior Ruhe served as one of the nine members of the representative body of the global Baha’i community, the Universal House of Justice of the Bahai Faith resident in Haifa Israel. Dr. Ruhe had also long been active in civil rights, working in Atlanta in the 1940s to increase the hiring of African American police officers, and in Kansas City in the 1960s in protesting segregation.

His son Doug had followed his father in the Bahai faith. He had met Bill Geissler when both attended the University of Massachusetts. When they bought UPI in 1982, a lengthy profile of the pair was published in Nashville’s newspaper, The Tennessean.   The Tennessean reported that neither Ruhe nor Geissler had ever received an undergraduate college degree.  Ruhe explained to the Tennessean that he had studied sociology for a time at the University of Kansas but left without his degree because he was “bad with math.”  Oddly, they had nonetheless both received master’s degrees in education from the University of Massachusetts at Amherst.  This likely was related to the fact that the dean of the education school, Dr. Dwight Allen, was a national leader of the Baha’i faith and the program had no requirement for a master’s thesis in order to earn the degree.

After receiving leaving school, both Ruhe and Geissler worked together on the staff of the Baha’i denomination in the 1970s at The Bahai National Center in Wilmette, Illinois near where Dr. Ruhe lived. In 1977, with a loan from Ruhe’s mother-in- law, the two joined with a Korean-born graphics designer they knew from their Baha’i work and started a small public relations firm in the attic of Ruhe’s home in nearby Evanston.

In 1980, under President Jimmy Carter, the Federal Communication Commission had launched a program to “let the little guy” get into commercial television broadcasting. The idea was to ease licensing requirements and financial hurdles for low-power TV stations that would have a small range of 15 miles, rather than the average 50 miles for full-power stations. The thinking was that these stations would be cheaper to build and minorities and more single station owners would be able to get a broadcast license. Applicants for low-power stations also would no longer have to prove they had the financial wherewithal to actually make a go of it.

By 1985, many of the 40,000 applications received were for overlapping geographic areas. In these cases. licenses had been awarded in over 300 lotteries. To steer more applications to minority applicants and increase their chances of beating out non-minority applicants, minority applicants were given more lottery numbers. With Doug Ruhe married to a Black, and their Korean-born partner married to a Native American, enough boxes were checked for several low-power licenses to be pending or issued to their Focus Communications enterprise. The issued license at the time was for Channel 66 in Joliet, Illinois near Chicago. The then chief of the FCC’s low-power TV branch, Barbara Kreisman, estimated that minorities, with given extra numbers to play with in the lottery, had won about two-thirds of the lotteries they had participated in.

At, the self-described “world’s largest fan wiki platform,” I found a brief history of Ruhe and Geissler’s Joliet station WFBN. In its early days its scrambled signal gave low-power television stations wide programming latitude to attract a paying, subscription audience.

“Independent station WFBN. Originally owned by Nashville- based Focus Broadcasting, it initially ran local public-access programs during the daytime hours and the subscription television service Spectrum during the nighttime. By 1982, WFBN ran Spectrum programming almost 24 hours a day; however, by the fall of 1983, Spectrum shared the same schedule with that service’s Chicago subscription rival ONTV. The station as well as ONTV parent National Subscription Television faced legal scrutiny because of its lack of news or public affairs programming and was faced with class action lawsuits because of the pornographic films aired by ONTV during late-night timeslots, with some of these legal challenges continuing even after ONTV was discontinued; however, a ruling by the Federal Communications Commission (FCC) permitted broadcast television stations to air content normally considered indecent through an amendment to its definition of what constituted “public airwaves” declaring that “broadcasts which could not be seen and heard in the clear by an ordinary viewer with an ordinary television” were exempt, as long as the signal was encrypted.”

Having vaulted into the ownership of several active and pending television station licenses, Ruhe happened to see a Wall Street Journal article in 1982 that E.W. Scrips, Co., having failed to sell UPI to other buyers, was considering selling the company to National Public Radio, a private and publicly funded not-for-profit company. Ruhe immediately focused on his next goal, buying UPI.

Knowing that they lacked experience in the news business, they contacted the lawyer for their earlier public relations firm, Cordell Overgaard, a partner in Linda Neal’s law firm of Hopkins & Sutter. Overgaard put them in touch with Rob Small, another client of his and a publisher of several small Illinois newspapers. Ruhe and Geissler thought Rob Small would be a good partner and agreed he would be Chairman of UPI after the sale. This choice lent a needed patina of credibility to their bid to buy UPI. Also, joining their effort to buy UPI was a fresh Baha’i graduate of Harvard Business School, Bill Alhauser. He became UPI Treasurer. Ruhe and Geissler initially had a 60% interest in UPI, Rob Small and Overgaard got 15% each, and Alhauser and another financial advisor, Tom Haughney, 5%.

Scripps had diligently been trying to sell UPI for five years at this point and was ready to throw in the towel. To finally get rid of it to Ruhe and Geissler, they offered to loan UPI $5 million interest free in working capital and put another $2 million plus into its pension funds. For their part, Ruhe and Geissler put up the proverbial $1. On June 3, 1982, UPI was theirs.

What they had bought was the second largest generator of news on the planet, with more than 200 bureaus around the world and over 1,500 employees writing, editing and distributing over 12 million words of news daily.

The purchase by Ruhe and Geissler got a rough reception once its customer base of newspaper publishers heard of the sale. Their unease was accentuated when The Nashville Tennessean newspaper reported that both men had previously been arrested, Ruhe in a civil rights demonstration and Geissler for draft evasion. Geissler had even served a year in federal prison as a result.

Following their purchase of UPI, operational chaos was quickly the order of the day in upper management. UPI’s carryover President was shown the door and a former news executive with NBC and CBS, Bill Small (no relation to Rob Small), arrived as an expensive replacement. Small had no experience in the wholesale news business, but he at least gave Ruhe and Geissler a known figure in the news business to be the public face of UPI.

After the purchase UPI’s owners commissioned International Management Consultants in New York City to assess the long-term strategy for UPI.  With losses on the order of $1million a month, time was clearly of the essence.  The firm’s considered recommendation was to immediately and substantially reduce the number of editorial employees.   Ruhe rejected the advice, citing internal pushback from UPI’s managers and with dissent being registered by minority owners Rob Small and Overgaard, UPI’s Treasurer Alhauser directed the company’s Controller to stop sending Overgaard and  Small monthly financial statements.

The upshot was reported in the article UPI’s Disaster – What Went On and What Went Wrong by Katharine Seelye and Lawrence Roberts that appeared in the September/October 1985, edition of Columbia Journalism Review:

To Rob Small and other executives, this was just one more indication that there was no realistic strategy for putting UPI on track. Ruhe and Geissler “had tenacity, energy, street smarts, charisma, and some classic entrepreneurial skills,” says Small, who is back behind his desk at the Moline, Illinois, Daily Dispatch, of which he is editor and publisher. “But the key was that they lacked a sense of organization, of priorities, a sense of urgency. They didn’t know the big problems from the little problems, and we had a big problem the meter was running.” The company was losing $1 million a month.  In mid-January 1983, Small and Overgaard decided to confront Ruhe and Geissler with what they saw as the company’s problems and to vent their dissatisfaction. On January 26, at a meeting in Ruhe’s room at the Grand Hyatt Hotel in New York, they told Ruhe and Geissler that the company needed between $6 million and $15 million. Ruhe disagreed. Then, Small recalls, “I tried to get across to Doug (Ruhe) that he was a creative, imaginative guy but that we needed a more methodical person to run things. He wasn’t interested. He just shook his head. There wasn’t that much dialogue. Cordy and I said we would step aside. There wasn’t a big fight. “Says Overgaard: “I think their reaction was one of relief.”

Gordon and Cohen’s Down to the Wire  provide a similar account of  Small’s and Overgaard’s reaction to what had happened in the short time that had elapsed since the purchase of UPI:

Ruhe and Geissler, they felt, were lost in dreamy idealism that distorted their business judgement. If their partners were going to run UPI into the ground, Small and Overgaard wanted no part of it.

Other major changes in management followed in 1983. Australian Maxwell McCrohon, the Chicago Tribune’s Vice President for News came in as UPI’s Editor-in-Chief and Luis Nogales, a Vice President in Gene Autry’s Golden West Broadcasting, arrived as Executive Vice President.

Ruhe and Geissler had made Linda Neal UPI’s General Counsel after their purchase of UPI. They also had decided to save money by moving UPI’s news headquarters from Manhattan to Washington, D.C., and the company’s corporate headquarters from Scripps’s offices in Cincinnati to Nashville, where both Ruhe and Geissler then lived.

UPI Office, 1400 I Street, Washington, DC

With UPI having moved out from under the Scripps administrative umbrella, the company needed to create a standalone internal law department for the first time. Linda had a varied practice at Hopkins & Sutter and had no desire to fill this role by moving to Nashville. She remembered that I was looking for a corporate law position and that I had already created one law department from scratch at Bradford. She asked me to think about starting UPI’s law department in Nashville and serving there as the company’s Assistant General Counsel.

On the plus side, this sounded like a good opportunity, though on the negative side it would entail moving with Cathy and our three-year- old son Andy to Nashville. It was certainly worthy of a serious look on my part, so I travelled to Nashville to meet with Ruhe, Geissler and Alhauser to learn more about UPI’s plans and finances.

I first met with Ruhe in the pie-shaped Focus Communication office in the Union Bank of Commerce in downtown Nashville. Ruhe was a whirlwind of upbeat blather, who presented himself as a know-it- all, “I see the future!” business wunderkind. He explained to me more than once that owning a television station was like having “a license to make money.”

My dinner meeting with Geissler was, in a Pythonesque way, something entirely different. Geissler had been born in Venezuela and was fluent in Spanish as well as English. During dinner, he strangely had little to say in either language about anything. For whatever reason, he remained largely catatonic throughout our meal.

Since Linda had little direct knowledge of the company’s current financial condition, she had steered me to UPI Treasurer Bill Alhauser for the straight dope. I was entirely focused on the state of UPI’s finances when we met and my questions to the mild-mannered Alhauser about the company’s financial position were very direct. As I later found out, I was not the only one he regularly misled. As a result, while I had met the three principal operating managers of UPI, and was generally aware of its turnaround posture, I hadn’t a clue the company would crater in the next 18 months and that I would get the post-graduate education in bankruptcy law that I never got in law school. Contrary to the rosy picture painted by both Ruhe and Alhauser, UPI actually ended 1983 with a loss of $14 million and was facing debts of $15 million. Peanuts today perhaps, but a lot of money in 1983.

Though I didn’t know it at the time I was meeting with Ruhe, Geissler and Alhauser, UPI was regularly having a hard time meeting payroll. Fortunately for UPI, Tom Haughney found that Los Angeles-based high-risk lender Foothill Capital Corporation was willing to lend UPI

$4 million. The loan would cover payrolls for a period of time and would help deal with arrearages due AT&T and RCA. Unfortunately for UPI, the loan carried an interest rate of 14.25%, three points above prime in that period of still high inflation.

8245 Frontier Lane, Brentwood, TN

With this background that I knew nothing about, in early 1984 Cathy, Andy and I settled into our new home in the Nashville suburb of Brentwood, not far from UPI’s new business headquarters there.

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.

Site of Washington, DC Broadcast 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.