Weldon family fights over assets

The struggle for control of valuable Weldon family properties in Jefferson City, Fulton and California, Mo., may have reached its end—at least in the courts.

Three judges of the Western District Court of Appeals issued a ruling in May that preserved the Callaway Hills Stables until the death of owner and Jefferson City News Tribune publisher Betty Goshorn Weldon, although Weldon had died the previous month. The judges then reinstated daughter Lenore “Tony” Weldon as the sole family member among the trustees who will divide the property.

On July 31, the appellate court denied a petition for all 10 judges of that court to rehear the case or transfer it to the Missouri Supreme Court. Parties have 15 days to ask the Supreme Court directly to hear the case.

Weldon, after a six-year siege of cortical dementia, died April 18 at age 85, leaving equal shares of the Jefferson City News Tribune, Fulton Sun, California Democrat and other property to her three children, who have been at odds since January 2003 about the holdings.

Her death raised questions, especially about whether the children would sell the crown jewel of the properties—the Jefferson City paper—after 80 years of family control.

That decision-making will occur outside public view because Betty Weldon established a trust in 1998 to avoid probate jurisdiction.

Former Circuit Judge Tom Brown is representing the estate in its minimal contact with circuit court, and a newspaper official already has declared that all of Weldon’s property rests in the trust.

Family members were circumspect about the prospects for a sale.

Daughter Tony Weldon, publisher of the Fulton Sun, did not rule out eventual sale of the papers but emphasized, “It could easily stay in the family. There is no way the paper is going to be sold in the near future.”

She noted that the paper has not contracted with a broker to negotiate a sale.

Tony Weldon, however, would not have controlling interest if the three children made the decision after their mother’s estate was divided.

Son Gifford Weldon refused to comment on the paper’s future, the lawsuit or the current status of his family relations. Daughter Sally Weldon Brooks Proctor, who lives in Bigfork, Mont., could not be reached for comment.

Others who have worked closely with the family in recent years consider family operation by the children a recipe for disaster, after more than four years of tension. “I don’t think they would have any option except to sell,” said one family adviser, citing the effects of the bad blood of recent years.

Without a doubt, the Jefferson City newspaper is attractive to buyers.

Ted Rickenbacher, a newspaper broker with Rickenbacher Media in Texas, placed its value “easily at $25 million to $30 million,” not counting the real estate, the new printing press, affiliated properties and intangibles.

“I think if the family decides to sell it, you’ll see a lot of pursuers,” said Rickenbacher, who once discussed the News Tribune’s status with Betty Weldon.

“A property like that in that market [area and size] is highly desirable, even in today’s market,” said Gregg Knowles, a Bakersfield, Calif., newspaper broker. He said such properties are rare, especially in politically prominent state capitals.

While major metro newspapers are struggling to maintain value—as the Internet aggravates circulation declines—that trend has not affected daily newspapers serving areas with populations of 100,000 or fewer people. Such papers have emerged as prize holdings, Knowles said.

The daily circulation of the News Tribune is about 20,000, and the company employs 115 people. In transcripts of News Tribune board meetings filed in the lawsuit, the $13 million projected cost of a new press and building—now located on the city’s east side—was estimated to increase the value of the company by 20 percent, or possibly exceeding $60 million.
The court filings indicated the property has been consistently profitable, with net income exceeding $2.4 million in 2004. Figures presented during the trial show the income falling sharply into the red in 2005 because of the new press and building, but the data does not reflect the revenue-generating capacity of the new press.
In 2004, the net income for the Fulton Sun amounted to $200,000, while the California Democrat’s reached $80,000.
The News Tribune, rather than buy the press, ended up in a lease-back agreement with Central Bank that took advantage of tax laws—lowering the overall cost—and tripled its ability to print in 2006. The Jefferson City News Tribune was expected to increse its net income from $2.2 million in 2004 to $2.3 million in 2005. Health care and other costs for Betty ?Weldon––the trust’s primary beneficiary––reached only $300,000.
Knowles said daily newspapers typically were bringing “10 to 15 times” net income and perhaps as much as 30, depending on the “auction effect” that takes place when the availability of a paper becomes known. A newspaper like the Jefferson City News Tribune “would draw multiples at the high end,” Knowles said.
Knowles, who focuses on business in the states of California and Iowa but not Missouri, said such a newspaper likely would attract the attention of Rust Communications in Cape Girardeau, which owns more than 40 newspapers and at least 17 radio stations in eight states. Gary Rust, a former Republican state legislator, serves as board chairman for the family-owned company.
Dave Bradley, president of the Missouri Press Association and publisher of the family-owned St. Joseph News-Press, said he’s “interested in looking at everything out there” although he’d had no contact with the Weldon family or its representatives until after his interview with the Jefferson City Business Times. “It’s very attractive,” he said of the Jefferson City daily. “They’re in great shape on their technical and production facilities.”
However, some family representatives appeared to be trying to dampen talk about a potential sale of the papers. Ed Anderson, a media broker with National Media Associates in Branson, told the Business Times that he would have “a statement” the next day about the paper. But after talking with parties unknown, Anderson said he could only refer questions to Senior Circuit Judge Byron Kinder, who now sits on the trustees overseeing the eventual distribution of Betty Weldon’s estate. Anderson added that the Weldons are a “very well-respected family.” He no longer had a statement.
Knowles noted that such talk about control of the newspapers now occurs in a vacuum. “Everybody has their price,” he said, if it’s named.
Richard McGonegal, editor of the News Tribune, declined to talk to JCBT about the effect of the Weldon family dispute. Asked whether he detected any anxiety among newsroom employees about the continuing talk of a possible sale, the lawsuit and the publisher’s death, he responded: “I’m not in a position to talk about those matters.”

Lawsuit highlights corporate, family disputes
over newspaper’s future
This week’s appellate court ruling may resolve the cloud of uncertainty that had hung over the trustees who control division of the estate property.

In 2000, Betty Weldon had named her daughter Tony Weldon, News Tribune General Manager Larry “Mike” Vivion and McGonegal the trustees to succeed her if she lost her capacity to manage her affairs, as she did the following year.
The trustees initially held casual meetings to discuss Betty Weldon’s health care and business matters, such as employee raises.
But by January 2003, the boards of the Weldon Holding Co. and Jefferson City News Tribune Co.—which are identical and act as the corporate alter ego of Weldon’s trust—began holding formal meetings.
At one of the first such meetings, the board—which includes the three children, Vivion, McGonegal and former News Tribune executives Roman Patten and Bob Blosser—agreed to raise the salaries of Betty Weldon’s children Gifford Weldon and Sally Weldon Proctor to $150,000 a year. They previously had been paid $30,000 and $60,000, respectively.
The two have no official duties except attendance at board meetings. Proctor lives in Montana and attends board meetings usually via conference call. Vivion said at the trial that Gifford Weldon, who moved back to Jefferson City after his mother’s illness but had no office at the newspaper, “walks around and talks to people” while he also does some research.
Tony Weldon, however, had given up a position with the Missouri Board of Probation and Parole in late 1997 to become the publisher in Fulton, at her mother’s request. Besides living in a home she built at the farm, she acted as de facto manager of the Callaway Hills Stables, the 2007 American Saddlebred Association “breeder of the year,” as well as the animal shelter that operates on the grounds.
“I was dumbfounded. I was pretty much in shock” when the board voted with no notice to award salaries to Gifford and Sally that matched Tony’s compensation as the Fulton publisher who performed extensive duties, Tony Weldon told the court in the local trial that took place in August 2005.
McGonegal testified that he backed the raises for “sentimental” reasons: “I mean, to me it was kind of a question of why should they be kind of living in half poverty now when, later on, they are all going to be multi-millionaires.”
The votes on the salaries by Vivion and McGonegal later provoked Cole County Circuit Judge Richard Callahan to remove them as trustees, even though none of the parties had sought such action. He had that power by law, however.
Shortly after that meeting, Tony Weldon said she found her authority as publisher in Fulton undermined when board members or unnamed executives first killed a front-page local story in her paper and then did the same thing to an Associated Press article.
After January 2003, Tony Weldon said she came to see Vivion, McGonegal and her siblings as a voting bloc that controlled the company.
At a board meeting in May 2005, Gifford Weldon (actually a half-brother from Betty Weldon’s first marriage) led the charge to close the stables, dismiss most of the staff and sell the horses that summer and fall. Although Tony Weldon had been the only family member with an interest in the stables and she lived on the farm, her meeting notice was mailed to a post office box she no longer used and for which she had no key.
Tony Weldon was summoned by phone after the meeting was under way, and she was expected to make a presentation countering Gifford Weldon’s plan to close the stables when she hurriedly arrived. Tony Weldon responded by calling her brother a “greedy, arrogant jerk” and leaving the meeting.
A board majority favored the decision because the newspaper needed to guard its income to pay for the press and new building.
The resulting decision to close the stables and sell almost all of the horses led to a lawsuit filed in June 2005 by Tony Weldon and her mother, through a “next friend,” local attorney Anjali Ganhi, to block the actions. Vivion and McGonegal then asked Callahan for a declaratory judgment on their powers.
The case came down to amendments, which Betty Weldon adopted for her trust in 2000, indicating that she expected the stables to continue operating through her death. She had added language that required the trustees, before dividing property after her death, to “make adequate arrangements for the horses at Callaway Hills … so that none are slaughtered.”
The trial, however, provided an insider’s view of the Weldon Holding Co.’s operations and sharply deteriorating relations within the family and company.
Tony Weldon described her brother as “estranged” from their mother and distant from the rest of the family, and Sally Proctor talked of calls from her mother complaining about clashes with Tony Weldon. In response to a question from Callahan, Proctor said she didn’t know whether the siblings could repair their relationship in six to nine months, noting that Tony Weldon didn’t want her to have any relationship with their brother. Tony Weldon referred to Vivion as “sleazy” and to Vivion and McGonegal as “unethical and heartless” in their business dealings with the family. Vivion said he and McGonegal had discussed resigning as trustees to make room for Proctor and Gifford Weldon to avert a likely lawsuit.
The trial only sketched a glimmer of the tensions in the family.
On Sept. 1, 2005—the day after the presentation of evidence ended in the trial—the News Tribune board voted to remove Betty and Tony Weldon from the largely defunct board of the subsidiary Callaway Hills Stables and replace them with Gifford Weldon and Sally Proctor.
The new board of Callaway Hills then voted to strip Tony Weldon of all authority at the stables, according to a motion filed by her attorney, Dale Doerhoff.
Callahan responded shortly with a ruling that nixed the interim decision-making. He ruled that:
• Betty Weldon, who had diverted $26.5 million in newspaper profits into the stables over 27 years, had intended the horse venture to continue until her death, and Callahan provided for Tony Weldon—the only heir with an interest and training in horsemanship—to inherit Callaway Hills.
• All three trustees should be replaced. He termed the removal of Tony Weldon a “close” issue but struck her from the list to improve the functioning of the group. He named an entirely new slate of trustees: Kinder, Linda McAnany (head of the local United Way) and Eddie Barnett of Fulton. Callahan’s opinion, dwelling on the salary issue, indicated that Gifford Weldon and Sally Proctor had “unduly influenced” trustees Vivion and McGonegal, who were looking ahead to the day when the two children of Betty Weldon could determine their employment.
Callahan said the $150,000 salaries of Proctor and Gifford Weldon “served no legitimate trust or business purpose,” but he did not order any changes.
The last round of appeals
All three of the children appealed. Gifford Weldon and Sally Proctor sought review of the wholesale replacement of the trustees, among other points, while Tony Weldon asked for reconsideration of her removal.
In general, the appellate court sided with Tony Weldon, placing her among the trustees again, alongside the three new trustees named by Callahan. Weldon lost on one issue; the appellate judges ruled that no grounds existed for designating her the recipient of the stables.
On a point of potential interest to small-business owners, the judges ruled that trust law, which takes into account the intent of the trust’s founder, trumped corporate law in such cases. Vivion and McGonegal had defended their actions generally as attempts to “maximize profitability” of the trust, or the so-called “business judgment” rule.
The appellate court ruled that because the News Tribune Co. was the “alter ego” of the trust and incorporated its assets, trust law that takes into account intent takes precedence over corporate law
Callahan generally was upheld on almost all of his rulings in the trial decision.
What lies ahead?
The fate of the News Tribune and the estate’s other properties—except the horses, which rest in the hands of the trustees—lies with either the trustees or the heirs.
Kinder, who was interviewed before the appellate court rejected the rehearing or transfer petition, said he anticipates that the trustees will have little or no role in any decision about individual properties. He said he expects the trustees to complete income and estate tax filings and then simply divide the 100,000 shares of Weldon Holding Co. stock among the three children.
The future of the News Tribune and the other papers “is a matter for the heirs,” he said. “The trustees won’t make that decision. The trustees wouldn’t have anything to do with the future of the newspaper.”
He omitted mention of the stables. Betty Weldon’s trust agreement appears to leave that matter to the trustees, although they could incorporate the property into a division of the estate and stock.
Sources close to the family said that under Tony Weldon’s management, the stables have been posting bottom-line figures in black instead of red. But she said she’s unsure whether anyone who inherits the stables can continue to operate them at their current size, which, at least until recently, exceeded 200 horses.