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A Split in the Family

The feud over the O.C. Register's parent comes to a head today

October 01, 2003|E. Scott Reckard | Times Staff Writer

Facing vociferous demands to sell Freedom Communications Inc., corporate secretary and board member Richard A. Wallace urged shareholders in an e-mail last fall to consider the role that the Orange County Register parent long had played as a libertarian standard-bearer.

"I would hate to think that the descendant shareholders value dollars more than the ability to promote ideals that benefit all humanity," wrote Wallace, who is married to a granddaughter of Raymond Cyrus "R.C." Hoiles, an Ohio farmer's son who bought the newspaper in 1935 as a mouthpiece for his stridently free-market views.

Another director, David C. Hardie, quickly fired back. In his own e-mail to stockholders, he dismissed the high-minded pleading of his relative by marriage to keep the company in family hands.

What Wallace called the "wonderful gift and honor" of owning Freedom had become "for some, an entitlement and crutch upon which they emotionally depend," wrote Hardie, a grandson of Hoiles who, along with other disaffected members of the clan, wants to sell his Freedom shares for the best price possible and put the money to work elsewhere.

The essence of the electronic duel between Wallace and Hardie comes to a head today when Freedom's directors meet to consider outsiders' bids to purchase or invest in their closely held Irvine-based newspaper and television empire. The fractious board must decide which proposal or proposals will be put to a general vote of the 90 family-member shareholders in November.

In the sweep of such a high-stakes drama -- freighted with the emotion of long-nurtured grudges -- it's difficult to predict whether the stakeholders will decide to sell the company outright or settle on a less extensive transaction that allows those who want to sell their shares to do so.

Yet the positions of various relatives are set out clearly in dozens of e-mails circulated among themselves over the last 18 months. The messages, disseminated by the company through a shareholder chat room and reviewed by The Times, open a small window into the family's intensely private world. It is an arena in which third-generation Hoiles descendants are referred to as G-3s, the fourth generation as G-4s and so on, and where R.C. Hoiles still casts a long shadow.

Divided it may be, but this family keeps in touch -- from upbeat recaps of "high, positive-energy" meetings discussing sales and recapitalization options to terse comments such as "Stick it."

Other e-mails show how the increasingly public squabble has wounded a clan unaccustomed to outside scrutiny.

"I'd like to take a moment to congratulate those shareholders who have gone to the press with personal agendas," David D. Threshie, a member of the fourth generation and son of the current chairman, wrote after published reports appeared in January about his third-generation relatives' campaign to force a sale.

Complaining that rumors were stifling productivity, encouraging corporate recruiters to raid the staff and embarrassing the company -- the Wall Street Journal had included the Hoileses in a year-end quiz about notorious families -- Threshie added, "Your efforts are going a long way to devalue the company and demoralize our associates."

Tradition of Discord

In fact, such discord is a family tradition that predates the current company.

In the 1920s, R.C. Hoiles co-owned three Ohio newspapers with his brother Frank Hoiles but wasn't satisfied. In what has become libertarian legend, the brothers dissolved their partnership because Frank refused to print R.C.'s attacks on the influence of labor unions.

R.C. Hoiles, on a mission to promote his philosophy of individual rights over government and collective enterprises, later bought the Santa Ana Register for $750,000, launching the company that today owns 65 papers and eight television stations.

The Register, which since the 1970s has confined its libertarianism to the editorial pages, has grown into the 36th-largest newspaper in the nation, with daily circulation of more than 300,000. Along the way, it has helped define Orange County's identity and won three Pulitzer Prizes. Together with the 100,000-circulation Gazette of Colorado Springs, Colo., the Register is one of two jewels in Freedom's crown.

"The two major newspapers are properties anyone would want," said independent newspaper analyst John Morton. And the rest? "You sort of take the beer with the champagne."

Several large newspaper companies, including USA Today publisher Gannett Co. and Los Angeles Daily News owner MediaNews Group Inc., have made bids for Freedom. In addition, private equity firms such as Kohlberg Kravis Roberts & Co., Spectrum Equity Investors and Madison Dearborn Partners have offered to buy out disgruntled shareholders.

Another offer, from Blackstone Group and Providence Equity Partners, was developed in conjunction with some fourth-generation Hoiles descendants with an eye toward keeping the family in control.

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