Here's an Editor & Publisher story by Debra Gersh that ran in the Nov. 24, 1990, edition of E&P.
WSG Membership Approves 35 Percent Pay Cut for 90 Days
United Press International has received a stay of execution, but it is still on death row.
The Wire Service Guild approved by a 62 percent vote a management proposal to cut pay 35 percent for 90 days in order to give the troubled wire service "breathing space" to find a buyer."
Had the union voted against the cuts, UPI indicated it would have ceased operations the next day and subsequently gone into liquidation through a Chapter 7 bankruptcy filing.
The agreed-to cuts, while easing the financial pressure on UPI which is said to have at least $10 million in immediate debt and is losing about $2.5 million a month do not guarantee UPI's survival. A buyer must be found for the wire service as a whole or any of its parts.
According to the WSG, the pay cut reduces top-scale weekly salary from $690 to $448, with first-year journalists earning $234 a week, down from $360.
"This is the seventh time UPI employees have assisted the company in turnaround efforts," said WSG president Kevin Keane. "Our members are angry about the reckless way in which a series of management teams have tainted UPI's proud name. Employees want owners who will show a commitment to UPI's journalistic traditions and a commitment to the employees who have given so much of themselves in the name of UPI."
UPI management has indicated there are at least six potential bidders for all or part of the company, although no names have been put forth publicly.
The union was first asked to vote on the cuts during an eight-hour emergency meeting Nov. 2 in Philadelphia. While they agreed to put the issue before the voting WSG members, union leaders did not endorse the proposal, citing UPI's lack of guarantee or safeguards and UPI's rejection of WSG counter proposals.
In addition, non-union staffers reportedly were dealt a 35 percent wage reduction and a number of them were laid off without notice or severance.
The investment banking firm of Wertheim Schroder & Co., Inc., has been retained by UPI parent company, Infotechnology, Inc., to help effect a sale. Wertheim Schroder is also seeking buyers for Financial News Network, which is 47 percent owned by Infotech.
Alan J. Hirschfield, one of the recently appointed co-chief executives of Infotech and FNN assigned to restructure the organization, is a managing partner at Wertheim and Schroder.
The other co-chief executive is Allan R. Tessler, chairman of International Financial Group, Inc., and International Controls Corporation. Former Infotech head Earl Brian, while not totally removed, was named non-executive chairman and a board director.
The ideal buyer for UPI would be a company in the information industry, not unlike Infotech, which could integrate UPI information with its other media companies, repackaging and reselling the information, said Pieter VanBennekom, UPI executive vice president/editorial operations in an interview prior to the vote announcement.
UPI's time frame for the immediate future shows financial audits completed by Thanksgiving, with potential suitors weeded out by Christmas and then a completed deal in January, explained VanBennekom.
Independent financial audits of Infotech, FNN and UPI by Coopers & Lybrand are expected just prior to Thanksgiving. The companies split with their previous auditors, Deloitte & Touche, which had argued FNN should show a $28 million investment in FNN:PRO against quarterly earnings rather than spread over a period of years. Deloitte & Touche refused to be associated with financial statements for the three companies.
Insufficient cash flow has been cited as the reason Infotech and FNN have found themselves unable to meet operating expenses, while faced with some $70.2 million in bank loans and $88 million in lease obligations.
Hirschfield and Tessler were seeking a 90-day moratorium on interest and principal payments and leasing payments.
Its parent company's financial problems have caused additional problems for UPI, which abruptly found itself cut off with hardly a penny.
The Securities and Exchange Commission is currently investigating Infotech and FNN, and the two companies are facing a number of lawsuits filed by shareholders who charge the companies with issuing false and misleading statements about their financial position, artificially inflating the value of their stock.
The day it was announced that FNN faced default on its loans, its stock fell from $5.25 to $2.75. Infotech stock fell the same day from $5.75 to $3. Stock in both companies reportedly had been trading around $9 a share about a year earlier.
In addition, the U.S. Attorney's Office in Los Angeles and the FBI are looking at allegations of criminal fraud at FNN and Infotech.
In what it says is an exclusive interview with two former FNN accountants from Los Angeles, Barron's reported that "Virtually every company in Brian's web had a service contract with another Infotechnology-controlled company. Even if no services were performed, sometimes accounts receivable were booked."
In addition, Barron's reported that the former accounting staffers said the various Infotech-controlled companies "themselves swapped stock with each other and commingled funds and assets to a degree that would ultimately baffle even the auditors."
Amber Gordon, Infotech and FNN spokesperson, said the company was not going to address the specifics of the article, as the issues brought forward are under investigation.