The “shadow bank” that — with the help of
public pension funds — is aiding the destruction of local news
Capital Management is entrenched in the military industrial complex and its
company trained a journalist’s assassins. It also made possible the takeover
of Tribune Publishing.
Sept. 1, 2021, 10:27 a.m.
To the ancient Greeks, Cerberus was
the hound of Hades, a multi-headed dog with a serpent’s tail who kept souls
from escaping the underworld. His eyes burned with fiery lava and he vomited
The canine’s namesake, Cerberus Capital Management, is a private equity firm
that, like Alden Global Capital, specializes in acquiring distressed
businesses — and, alongside Alden, it is now in the business of devouring
newsrooms in the name of profit.
Cerberus was Alden’s financial backer for its recent takeover of Tribune
Publishing, but the two secretive companies have a shared history that goes
back to at least 2015.
The firm, which is heavily supported by investments from public pension
funds, served as Alden’s “shadow” lender well before the Tribune deal. The
largest of Cerberus’s public retirement investments come from California and
Pennsylvania, two of the regions most impacted by diminishing news coverage
at Alden papers.
Cerberus’s founder and CEO Stephen Feinberg, like his colleague, Alden
co-founder Randall Smith, is extremely press-averse. (Cerberus did not
respond to Nieman Lab’s request for comment.)
“We try to hide religiously,” Feinberg once told
“If anyone at Cerberus has his picture in the paper and a picture of his
apartment, we will do more than fire that person. We will kill him. The jail
sentence will be worth it.”
Presumably, he was joking.
Feinberg co-founded Cerberus in 1992 — headquartered one block up Third
Avenue from Randall Smith’s Manhattan offices — and it has since grown to a $53
equity powerhouse that allowed the much smaller Alden to easily take over
Tribune Publishing in May.
Cerberus is what’s known as a “shadow bank.” Economist Paul McCulley coined
the term in 2007, and it’s come to mean a whole spectrum of largely
unregulated finance companies that offer loans and credit outside the
protections and oversight of the traditional banking system.
Shadow banks, blamed
for the 2008 financial meltdown,
were also among the biggest bailout
recipients in 2009. That’s when Cerberus-controlled
Chrysler Financial took a $1.5 billion government bailout and walked away
with nary a scratch after Chrysler’s collapse. That’s also when Feinberg
became a close partner with Ezra Merkin, the infamous funneler
of billions to Bernie Madoff’s funds.
Until recently, Cerberus had a controlling interest in scandal-ridden
DynCorp — which, while under Cerberus’s control, was found at fault or fined
in cases involving sexual
harassment and kickbacks,
with a massive human
trafficking case still pending. The firm has been
accused of profiting
from the Sandy Hook school massacre, because it
promised to unload its ownership in gun manufacturers but
then didn’t — at least not until its company
Remington Arms went bankrupt in 2018. And Cerberus is the owner and founder
of Tier 1 Group, the
company that trained four members of the Tiger
Squad that assassinated and dismembered Washington Post journalist Jamal
So what does a shadow bank entrenched in the murky world of private military
contractors and the politics of espionage have to do with local news?
Cerberus meets Alden
The answer goes back to its enduring relationship with Alden Global Capital.
In 2015, Cerberus was among those interested
in buying Alden’s
Digital First Media newspaper chain (now renamed MNG Enterprises), but the
sale fell through when Alden didn’t get the price it wanted.
Having failed to acquire the chain, Cerberus nonetheless partnered with
Alden on October 20, 2016, according
to UCC filings.
Despite Alden being
under investigation at the time by the Department
of Labor, Cerberus made a loan to Alden, though we don’t know how much money
We do know it was secured by the MNG news chain’s assets, which, just weeks
after the loan was made, were further stripped by Alden’s quiet extraction
of hundreds of millions of dollars in cash.
Those millions were lost — at least to MNG’s newspapers — after Alden used
them to buy and shutter businesses like Fred’s Pharmacies and Payless
The Cerberus loan agreement with Alden was amended in 2018, according to SEC
In 2019, Cerberus lent money to an Alden subsidiary
that bought the
Reading Eagle and immediately laid
off nearly half the paper’s staff. Again, Alden
used the entire company as collateral.
Then came the Tribune Publishing takeover, completed in late May. The deal
would not have happened without Cerberus agreeing to lend
$218 million so
that cash-strapped Alden could buy the chain. The five-year loan carries a
floating interest rate, tied to the Fed rate, plus an “applicable margin.”
In keeping with its dedication to secrecy, Cerberus won’t comment on its
role in the future of local news. But here’s the aftermath of its
Tribune, which publishes Chicago Tribune, the Baltimore Sun, the Orlando
Sentinel, the Hartford Courant, the Virginian-Pilot and others, cut
its overall workforce by 10%,
after previously cutting newsrooms by more
than 30% under Alden’s watch on the Tribune board.
Some Tribune papers saw as
much as 20% in staffing cuts after
the sale. At at least one, the company stopped contributing to workers’
401(K)s, according to union representatives.
The Chicago Tribune shrank
from four sections to three.
According to The
New York Post, all Tribune papers have been ordered
to cut local and feature sections by 20%, deadlines have moved up and
special sections have been “paused."
Last month, a 41-year-old Tribune weekly, the Bowie Blade-News, was
Public pensions as investors
Considering that eight of Cerberus’s top 10 investors are public pension
systems, one can argue that the company is at least partly funded by
At the top of the investors list is the California Public Employees
Retirement System, or CalPERS, the country’s largest public pension plan.
CalPERS has plowed $2 billion into Cerberus since 2012, public
Cerberus’s second-biggest investor is Pennsylvania’s Public School
Employees’ Retirement System, or PSERS. (Fun fact: PSERS’ $1.6 million real
estate deal with an Alden subsidiary is under FBI investigation, according
to the Philadelphia Inquirer.) The system has invested $1.65
billion with Cerberus since 2003.
Other public retirements funds pouring tens of millions to billions into
Cerberus include the San Francisco Employees’ Retirement System, Louisiana
State Employees’ Retirement System, New Mexico Public Employees’ Retirement
Association, San Diego City Employees Retirement System, New York State
Teachers’ Retirement System, Oklahoma Police Pension and Retirement System,
Alameda County Employees’ Retirement Association and the Arkansas Teacher
Because these are government employees’ funds, one could follow the logic
and say that, by investing with this military-contractor-turned-publisher,
we the people are unwittingly helping to finance the destruction of local
Urging or even forcing public pension funds to divest from questionable
industries isn’t new. CalPERS once
responded to mass shootings by divesting from gun companies, and
in 2017 California’s legislature ordered
it to divest from thermal coal companies.
The pandemic has shown us that, despite the cuts, local news organizations
continue to provide essential information to communities nationwide. Perhaps
it’s time to demand that public pensions divest from shadow banks that aid
and abet the aggressive dismantling of the free press.
Julie Reynolds is a freelance investigative reporter and a 2009
Nieman Fellow who has written extensively about Alden for #NewsMatters,
a project of the NewsGuild-Communications Workers of America labor