Staff flees bounced paychecks, unpaid medical claims

“Give me eight percent of our collectibles, and we wouldn’t be having this conversation,” says Kerry Farley, vice president of operations for Yesse! Communications, based in Carmel, Ind.

The conversation to which he refers is regarding the financial straits at Impact Weekly in Dayton, Ohio, one of two newspapers Yesse! still owns. The conversation is taking place because as of a week and a half ago, roughly half of Impact’s staff walked out because of bounced paychecks, uncovered health insurance claims and, with some, a general feeling of not having their employer’s respect. As of June 13, only five people remained, Farley says.

“I don’t think anyone has any intention of going back,” says Production Manager Michelle Bodine, of those who quit.

Joining her were Managing Editor Sara Farr, News Editor Melissa Fowler and Arts and Entertainment Editor Don Thrasher. According to Kristen Wicker, who was managing editor before resigning at the beginning of March, her departure triggered a “domino effect” of employees leaving Impact even before recent events.

He Says

Farley says he drove from his Indiana home to Dayton June 3 at the request of the Impact staff. Once there, he was told that if Business Manager Michael Stern wasn’t fired, they were leaving. The reason? The staff, freelancers and drivers had not been paid in two weeks.

Further, they accused Stern of letting collectible accounts lie fallow, not sending invoices to all advertisers, and spending as little time on the job as possible. Farley adds that for six months prior to the meeting, staff had raised concerns about Stern to corporate management, i.e., to Farley and President Craig Hitchcock, but nothing was done.

In fact, Farley says he personally had reservations about Stern “from the very day that guy was hired” in January 2001, when he learned that Stern was married to (but separating from) Impact freelancer Robin Keener. He adds that Keener is the only freelancer who was paid up through June 3.

Farley says Stern was let go the next day, and when he started combing the books, he found “a huge accounting mess.” Pulling one April issue at random, he found that $4,200 from that week alone had not been billed out to advertisers. Another find was roughly 100 credit card receipts that he could not match to accounts.

“We’re probably looking at a total receivables amount double what it should be,” he says. Although it’s not unusual for an alternative weekly to have five issues’ worth of revenue uncollected at any given time, Farley says he found about 12 weeks’ worth. In addition, several major accounts’ tearsheets had never been mailed out.

This all prompted him to bring in the business manager from the other Yesse! paper, Illinois Times, of Springfield, Ill., and put remaining Impact employees to work going through back issues to reconcile ads with accounts. By his accounting, roughly $130,000 is outstanding in collections, and of this, $36,000 to $40,000 was never billed.

“We’re actually knocking door to door” to collect back payments and send out back invoices to advertisers, he says, several of whom he says have already paid up.

“They’ve been extremely supportive, and everybody’s sent their checks in,” Farley adds. “We’ve not yet talked to any customer who’s interested in pulling advertising.” This, despite anonymous faxes of a June 5 Dayton Daily News article about Impact’s financial difficulties to several West Coast advertisers. Farley says he’s still trying to determine who sent the faxes.

For now, Yesse! has instituted a cash payroll for people owed back pay, and as of June 13, the drivers, freelancers and printer, who hadn’t been paid for three weeks, are all paid up, as well as much of what is owed to former and remaining staff members, Farley says.

The problem, Farley insists, is not the financial solubility of Impact; the problem was Stern first not doing his job properly, and then becoming overwhelmed by the backlog.

“The money’s all there,” he says. “It offends me that I’m here (catching up on Stern’s work). It really does.”

Classified advertising is up 20 percent so far this year over 2001, and display advertising is five percent higher than last year, he says. At one time, the paper was earning $800,000 in revenue per year, and ad sales in May reflected that old prosperity, after a year of recessionary slump and bad times for the newspaper industry in general, Farley says.

Yesse! President Hitchcock says he is “still not clear on what happened there,” when asked if Stern was at fault for Impact‘s troubles.

He says he had responded to concerns before last week, and that he’d had conversations with Stern to improve his performance. In fact, after Stern resigned in April to take another job and then decided he wanted to come back to the paper a few weeks later, Hitchcock says he gave him a second chance because some of the staff wanted Stern back. Stern also was taking on the duties of the circulation manager, who had resigned. Hitchcock says he was sure Stern wanted to do a better job.

“At some point, you have to trust people are doing what they say they’re doing,” he says.

Stern’s take on the matter is markedly different from Farley’s.

Former Publisher Daniel Emerich hired Stern (Emerich and Yesse! parted ways last November, and he was not replaced). Stern says none of his fellow employees ever came to him about problems with his job performance, and he says he had a good working relationship with Hitchcock.

Asked if he did anything to contribute to Impact’s financial difficulties, Stern says, “No, I did not.”

He also says his own paychecks have bounced, and that he has unpaid medical insurance claims, as well.

“I’m not going to get into a war of words,” he says. “There’s lots of things I’d like to say, but I won’t comment at this time.”

They Say

Farley says Impact Weekly is just going through a rough patch brought on by the negligence and “incompetence” of one employee, which can be repaired by catching up on back collections. But some former Impact and Yesse! employees are skeptical.

“If Michael is the sole cause of the company’s financial problems, why did they declare bankruptcy last April?” former Managing Editor Wicker asks. “If Michael is the sole cause of the company’s financial problems, why did [Yesse!] have to close down the (Iowa City) Icon and Bloomington Independent? Or sell the (Champaign-Urbana, Ill.) Octopus?”

Wicker, who began with Impact as an intern in 1997 when it was still the Dayton Voice, says bounced paychecks go back well before May 15. It began last summer when “every now and then” someone’s paycheck would bounce, she says. By autumn, it seemed at least one check was bouncing in every pay cycle, Wicker says.

“I don’t remember it happening that way,” Farley says, adding that he wouldn’t necessarily have been notified since “even though I’m an officer of the company, on paper, I’m just an employee.”

Former Production Manager Bodine says pay has been sporadic for the past few months. At one point, Impact employees were issued two checks each pay period and told to cash only one — half their pay — and to hold the second for a few days so it wouldn’t bounce. Eventually employees were waiting to be able to cash even that first check.

“It didn’t seem to matter (to them),” she says.

Emerich says before he left, he became uncomfortable “writing checks I knew damn well would bounce.” He adds that the corporate share of premium payments to the paper’s health insurance carrier weren’t always up to date, either, even though the employees’ portions continued to be deducted from their paychecks.

“(That’s) the situation that seems to make people the most angry,” he says.

It certainly made Wicker angry, when her son’s doctor contacted her more than a year ago to inform her he wasn’t getting paid by the insurance carrier. Shortly after she checked into the matter, Yesse! paid up its premium and all was well.

“This seems almost a cycle with Yesse!,” she says. “We go a few months, we find out Yesse! hasn’t paid their portion of the insurance, Yesse! then comes up with the money, magically.”

That cycle, however, came to an end. Bodine says she tried to fill a prescription last month and was told her policy was no good. She soon learned the policy had been canceled in December. A few weeks ago, Wicker adds, she and other current and former employees received letters about uncovered claims from the insurance carrier.

Hitchcock admits Yesse! hadn’t always been current on its premium payments, but says the company had been getting cooperation from the insurance carrier. He adds that he was as surprised as anyone else when he found out this spring that the policy had been canceled.

Farley, who also has an outstanding medical claim, says the insurance carrier has promised to reinstate the policy when Yesse! pays all its back premiums. Wicker counters the carrier has told several Impact staffers that the policy will not be reinstated.

“I do not intend to be out several hundred dollars over this, and if that takes legal action, so be it,” she says. Other former employees also said they would sue, if necessary, to collect medical benefits.

Some former employees worry whether Yesse! has met government-mandated financial requirements, especially since Yesse! has gone to a cash payout to settle up the medical claims, Wicker says.

A Tale of Five Papers

The Bloomington Independent was Hitchcock’s first newspaper purchase in the mid-1990s. He bought each successive paper from independent owners, and all but the Illinois Times — a Springfield staple for nearly three decades — had been noteworthy for lack of profitability. In January 2001, Yesse! shut down the Icon; later that year, it sold The Octopus to Saga Communications (which renamed it CU Cityview earlier this year) and in December, Bloomington was shut down, ostensibly temporarily.

Farley says none of the three were making a profit, partly because they were in markets — roughly 100,000 to 200,000 each — too small to draw adequate advertising for the circulation. By comparison, Dayton’s market is 950,000. Also, Yesse! encountered some staff resistance when it tried to introduce new sales methods into those newspapers, Farley says. Again, Illinois Times was an exception. Their sales and ad staff Farley calls “aggressive and hard-working.”

“At some point, it’s just a mercy killing, for crying out loud,” he says, calling the continued operation like “pouring money into a black hole.”

In a recent interview with the Dayton Business Journal, Emerich blamed poor circulation practices and an overly complex sales strategy for keeping Impact in the red. Specifically, he cited Yesse! pulling roughly 5,000 copies from grocery and video stores because it didn’t want to pay distribution costs.

Farley explains that he let the distribution go for longer than he wanted after the paper’s name change so the community would become familiar with it. Eventually, however, Yesse! pulled those copies because, as Hitchcock says, “Kroger stores don’t exactly reflect the demographics we’re after.”

In fact, Farley says once Impact started targeted distribution — instead of just putting the papers out in all stores — it increased market penetration by 11,000 readers. Hitchcock also explains that the 27 store locations were costing an extra $26,000 a year.

Display Ad Sales Manager Chris Sexson, one of the few remaining Impact employees, says he didn’t find the new sales strategies difficult at all. He’s been at the paper for nearly six years, and even before Farley joined Yesse!, when he was still with NUVO in Indianapolis, Sexson would contact him and ask for advice on how to do a better sales job. An admirer of his style, Sexson also attended sales seminars Farley would host.

“Here was a guy I really felt I could learn something from,” he says.

Sexson, who’s worked his way up from selling just music advertisements, adds that the strategy Emerich found “complex” was really just a way of making sure “hard work was rewarded.”

Another criticism Emerich leveled was Yesse! making poor financial decisions, such as not cutting staff where possible. Hitchcock counters that he wanted to keep people employed, even when it meant paying them himself.

Hitchcock says he didn’t take a paycheck from Impact in 2001 and has drawn only one this year, liquidating personal assets along the way to fund its shortfalls. He and Farley work out of their homes and can afford only a part-time bookkeeper.

Jeff Ignatius, now news and arts editor for River Cities’ Reader, and CU Cityview Arts and Culture Editor Jenny Southlynn, both former Octopus employees, say Yesse! employees who respect Hitchcock do so more for his steadfastness than for his business acumen.

“He wasn’t a good manager, but he cared about his employees, to pay them out of his own pocket,” Southlynn added. She also says the paper did get some new equipment and a more visible location after Yesse!’s purchase.

She further says Octopus employees’ paychecks never bounced, but at the time Saga purchased it, “we knew we were on the brink of going under.” This was before Sept. 11, one of the causes Yesse! has cited for poor financial performance in the past year.

“For them to blame Sept. 11 or any of the (Impact) staff is laughable,” Southlynn says.

Both she and Ignatius say Yesse! corporate management neglected the papers, were rarely on-site to guide or train, and sometimes didn’t place the right employee in the right job. Hitchcock says he likes to give his employees the freedom to respond to their individual markets without being overbearing.

“Basically we’ve tried to institute a strong general manager/editor model, with varying degrees of success depending on the market,” Hitchcock says.

Lack of marketing is another frequent lament of former employees.

“With what dollars?” Farley asks.

He and Hitchcock felt such money — if Yesse! had it — would probably be better spent on equipment, salaries and the like.

Sexson points out that when Impact Weekly was the Dayton Voice, it was no better off. Previous owners Jeff Epton and Marrianne McMullen were “great people” with high journalistic principles, but times were always tough for the scrappy paper.

“Usually, it was (between) going to the AAN convention or buying pencils,” he says. He adds that even before Yesse! took over, employees were sometimes asked to hold their checks. Nevertheless, according to Wicker, payroll checks never bounced under Epton and McMullen.

Placing Blame

More than one former employee used the term “corporate mismanagement” to describe Yesse!’s handling of its properties. To Hitchcock, that’s inaccurate, especially following a “horrible” recession and last year’s bankruptcy filing following the pullout of a major investor.

“We’ve kept papers alive, when others would’ve shut them down,” he says, “[Keeping them going is] not pretty, and it’s not comfortable. My view is we’ve done everything to make sure people have had jobs and benefits.”

Except for Stern, Farley praises the Impact staff, both present and recently-departed. There are rumors that Yesse! is planning to bring Bloomington writers in to take their places, but Farley says that’s a “worst-case” scenario. He would prefer having the regular employees back, if they would come.

“I want those people who are here,” he says. “The only good thing of this is that the staff finally understands it did a great job.”

Some employees feel that up-to-date medical benefits and non-bouncing paychecks are a better hallmark of appreciation than a pat on the back.

“I stuck it out as long as possible,” says Bodine. “I wanted that paper to succeed, and if I left and it failed, I thought I’d be part of that failure.”

“I worked sometimes 70 hours a week,” Wicker says, adding she tried to fill the paper even when standard feature services such as AlterNet weren’t available because they hadn’t been paid. “I feel like I and my employees really gave it our best. … It seems almost like (Yesse!) bit off more than they could chew.

“It is really disheartening to think this paper will no longer exist. … I don’t think there is a simple culprit.”

Sexson also uses the phrase “bit-off-more-than-he-could-chew” when referring to Hitchcock.

“I don’t have all the confidence in Craig,” he says.

When asked if Farley is hoping to take the reins of Yesse! himself, Sexson admits, “That is something I would like to see. I don’t know if he’d want that responsibility or not.” He believes some employees would come back if Hitchcock were out of the picture.

Farley and Hitchcock say rumors of the paper’s demise are greatly exaggerated. An issue was published last week. Sexson also says the paper has so many advertisements right now that it could theoretically publish for a while just running those, though he would prefer to have editorial content, too.

“I wish (the editorial staff) would all come back, and we’d wake up and it’d all be fine,” he says. “I’m not going to walk away, and nobody here really wants to.”

Emerich, though, doubts the paper can survive. “I think the wrath of those employees who left recently was more than they counted on, and I think the media attention is more than they counted on,” he says.

Ann Hinch is a freelance writer based in Knoxville, Tenn.