Heaven & Hell at the San Juan Star
Chronicle of a Death Foretold by John Marino

On a smoldering Saturday afternoon deep in August, I realized The San Juan Star was finished. In the building's main hallway, graced with blown-up prints of the best photographs in the newspaper's storied history, the hulking figures of Star publisher Gerardo Angulo and Union of Journalists, Graphic Artists and Related Occupations chief Nestor Soto stalked each other, hurling insults and threats, oblivious to everything but their mutual intransigence.

The union, known by its Spanish acronym UPAGRA, stopped work Friday night over a broken pledge to ensure sufficient bank funds so all workers could cash their checks when they were paid. Angulo said his hands were tied until Monday when the banks opened. Soto insisted no work would be done until all checks were cashed. Angulo threatened to shutter the paper for good if it failed to publish on Monday. Soto retorted: “liar.”

“Are you telling them that, Nestor?” Angulo screamed. “Your job is to protect workers' jobs, not endanger them.” “You tell them!” Soto snapped back.

During their face-off, I stared at the worn floors and stained ceilings. For me, this building, clearly buckling under neglect, was a temple of journalism, forever tied to the rigors and satisfactions of a profession that consumed the best years of my life, but had defined it and given it purpose in the process. It was a feeling that was shared by The Star's newsmen and newswomen, who stayed on despite the increasing certainty that its demise was drawing ever near.

“It was like the death of a friend,” says Assistant Business Editor Michelle Kantrow, of the shuttering of the publication that she joined “as a rookie” in 1995. “It was agony, week after week. Like seeing somebody on his deathbed. I always wondered how much longer we could go on like that.”

University of Puerto Rico President Antonio García Padilla says The Star's closing represented a big loss for Puerto Rico . “It has made extraordinary contributions to the island and to the quality of its journalism,” he said. “This was evidenced not only by The Star's Pulitzer Prize, but by its daily news coverage and its fostering of a public debate on important issues.”

García Padilla, like several other prominent Puerto Ricans, says that as an English-language daily, The Star played an important and unique role in keeping business and government leaders, both on the island and abroad, informed on the important issues of the day. President Jimmy Carter's top staff read it, and so did Karl Rove, President George W. Bush's top political strategist.

The Star was never a huge moneymaker, and finances have been tight since its inception in 1959, former newsroom executives say. But the newspaper bucked situations from huge expansions to steep cutbacks under Angulo's reign as publisher.

While the closure may have shocked readers, things had gotten markedly worse over the past year, with signs of trouble everywhere. You did not need access to privileged information to see the ad space shrink, or know that the company was increasingly delinquent in meeting major commitments like payroll, newsprint, ink and power costs. More chilling was that checks to major suppliers as well as payroll checks had begun bouncing—the clearest sign yet that the business was in deep trouble. Bills could only be paid by certified check, and employees cashed their checks at The Star's bank to circumvent the problem. And the newspaper—either because of press problems, newsprint shortages or union work stoppages—just did not get out some days, or got out to very few places. The Star would not publish again until Tuesday, Aug. 22 (after Angulo deposited enough money to cover worker paychecks on that Monday). Its last edition would appear that Friday.

A Renowned Name

The newspaper's Hunter S. Thompson and William Kennedy connections kicked its closing to the Associated Press A-wire. The Star, which opened in November 1959, won fame early through its 1961 Pulitzer Prize for editorials on Roman Catholic bishops interfering in local politics.

Kennedy, the author of the 1984 Pulitzer Prize winning novel ``Ironweed,'' was one of its first managing editors. Thompson, who used the paper as a setting in his novel “The Rum Diary,” unsuccessfully applied to him for a job, but the rejection sparked a years-long letter writing relationship between the two renowned writers.

The Star's coverage of the Cerro Maravilla murders, the drive against the Navy in Vieques, and its unbiased political reporting throughout the years are also seen as high water marks. It also had among the finest cultural and business sections on the island. Such reporting earned The Star a loyal following, which included the island's most influential readership, and it instilled a fierce loyalty among ex-staffers.

“The Star was the only newspaper in Puerto Rico that put the facts together without any slant. If you read it in The Star, it was true,” says Rafael Matos, a 37-year island newspaper veteran. “The Star represented a kind of journalism that was independent from government and political influences,” adds former managing editor Barbara LeBlanc, who ran the newsroom under Angulo until 2000. “That's important because in Puerto Rico , the government is the biggest game in town: the biggest advertiser, the biggest supplier, the biggest everything. Political positions are so deeply etched in Puerto Rico . And The Star stood for independent and aggressive reporting that would straddle the divide and not bend to favoritism.”

A.W. Maldonado, a Star staff member at its inception, says the English-language daily's impact was immediate and profound. “The Star was a revolution in Puerto Rico ,” Maldonado says. “It was because of William Dorvillier. He was the absolute journalist.” Maldonado says the exacting founder, editor and publisher set high standards, which was immediately recognized by its 1961 Pulitzer Prize for a series of 20 editorials on the Catholic Church's intrusion into the 1960 gubernatorial race.

The Star has received its knocks over the years, and been hit with charges of bias. One former newsroom executive says it was criticized when it came out with a Spanish edition while advertising executives aggressively pursued a bigger cut of government advertising during the Rosselló administration because “news coverage was seen through that prism.” But despite its ups and downs over the years, The Star was able to uphold those high standards set at the start until its very final day, according to former staffers. The Star, they say, was not only known for, but also actually marked by, balanced reporting and an attempt at fair mindedness.

Maldonado, who went on to serve as managing editor of El Mundo before founding El Reportero, says the English-language publication played to political and business leaders in San Juan, Washington and elsewhere, making it far more influential than its limited circulation, which exceeded 40,000 in its heyday. And it was still the source for White House and Congressional staffers at its demise. “The Star was it. It was the Bible,” he says.

Doug Zehr, who rose from the copy desk to business reporter and then managing editor, credits The Star with bringing “nonpartisan journalism” to the island. “Even on its worst days, The Star worked a lot harder at being fair and thorough and professional than our competitors. The Star always made an effort to put the story in context,“ he says.

Noting that tradition, Mercy McCloskey, The Star's last business editor, says: “Its loss was particularly significant two months before the elections because objective reporting was allowed to evaporate.” While editorial resources were slashed back substantially in the last few years, newsroom staff continued to lay claim to the publication's proud tradition of impartial reporting.

“It was just loving what you did. We were the balancing act,” says Kantrow, who won three major awards in 2008 for her business reporting, including the Overseas Press Club of Puerto Rico's Teodoro Moscoso Award for Excellence in Business Journalism. “We were allowed to be fair. It was a privilege. I talked to my peers at other papers, and they get censored. They get told what to write. It was also our ability to analyze issues beyond the press conference.”

In recent months, despite dwindling numbers and faltering equipment, the staff was dedicated to remaining a relevant news force in Puerto Rico . The complaints kept piling up: about lousy delivery, cancelled favorite comics and increased misspellings because of a depleted copy editor corps, but the fan base still sent us accolades on our reporting. It still provided full coverage of the major news events of the day, and also delivered in-depth reporting and feature news stories on issues of top public concern.

“Despite all the handicaps, work at The Star was a heady challenge,” McCloskey says. “It was great fun because we were allowed to cover the news as we saw fit. The aim in covering a story was always to tell both sides with integrity. Even if the subject could be embarrassing for a friend of the publisher, we could go forward with the story as long as we were sure of it. It was real freedom of the press, the kind that hardly exists anymore because publishing is big business.”

Casting Blame

Angulo painted the closure as a breakdown in negotiations on proposed benefit and salary cuts as well as a plan to contract out some circulation to a competing newspaper. “The union is firm in its opinion, and I'm firm in mine,” he tells the Associated Press, adding that he doubted a reopening would happen. “I am not going to subsidize the newspaper anymore. It has to stand on its own.”

Speaking after the shutdown, Angulo continued to blame the union. “The Star had been handicapped for years by the union,” he says, also chastising the “very terrible Department of Labor system, which has allowed employees to behave like you would not expect employees to behave.” Management did have genuine concerns regarding the collective bargaining agreement and legitimate complaints about productivity and accountability. Economic realities at the end also probably justified a cut in benefits for union employees, as well as other concessions for cost savings.

The union was long seen by management as detrimental to the newspaper's best interests. A failure in 1993 to reach a collective bargaining agreement was a major factor in the newspaper being put up for sale, according to news reports at the time. But union leaders also say they had just cause to mistrust Angulo, and had expressed willingness to consider cuts if the publisher shared financial information with them. UPAGRA attorney Miguel Simonet Sierra said the publisher had fallen behind on pension, child support and Social Security payments after deducting them from employee paychecks. Angulo and his chief accountant discussed the closure with former management employees as if it were a bankruptcy, where creditors, including former employees, would have to each make a claim on the company's remaining assets.

Yet, as Metro San Juan went to press, there had been no bankruptcy protection filing, despite Angulo having acknowledged in recent weeks that The Star's debt had surged to $20 million.“I'm not going to comment on that,” Angulo says of a possible bankruptcy filing. “The Star is closed. It does not have any liquid assets; it owes more money than it has.”

Union officials might have overplayed their hand during that final three-day shutdown, if they thought Angulo would remain open without instilling steep cutbacks. But they felt pushed into the action because employee paychecks had been bouncing all year long.

The problem was so acute, that it became a weekly ritual for employees to cash their paychecks at Westernbank branches before depositing the money in their own bank accounts. And sometimes, employees who had waited too long were unable to cash their checks.

Employees found the experience humiliating, especially because there would only be an hour between when paychecks were distributed and the bank closed. The last minute deposits to payroll accounts, workers openly speculated, were done to avoid seizure from government agencies with which the publication had built up debts.

“That's one mistake an employer should never make: fail to pay an employee on time,” says industrial psychologist Dr. Belchor Batista, of Management & Psychological Services in Río Piedras. “The effect is devastating and demoralizing. It's one of the most harmful things that a company can do. It harms the employees, it harms the management, it harms the organization. It harms everyone.”

Batista also says that a company that begins bouncing paychecks has already allowed its financial problems to fester too long. “That's a problem that the company has to face up front and deal with ahead of time. It can't just wait until the problem gets that bad.”

But Angulo downplayed the pay issue. “There were problems, but employees were always paid.” He accused UPAGRA of using it as a red herring to harm the company for its recent attempt to increase distribution through non-union handlers and other issues. He said the union had undertaken “17 wildcat strikes” in the days leading up to the three-day shutdown that affected some aspect of the paper's production or distribution. “The union has been acting this way for the past year and a half,” Angulo says. “We have been cutting back for some time now to cut costs, and they have been reacting.”

When he closed, Angulo stiffed most of the newspaper's 120 employees (including 90 union workers) out of their last week's pay, as well as accrued vacation, sick and severance payments mandated by local labor law and the union's collective bargaining agreement. Simonet, saying the accrued debts are a substantial sum, and that complaints and requests for arbitration have been filed at the National Labor Relations Board and the local Labor Department. Angulo responded by saying union work stoppages also caused company losses.

Show Me the Money

From the time I was put in charge of the editorial department in December 2003, Angulo constantly complained that the newspaper was losing money, a lot of it, and he wanted to stop subsidizing it or shut it down. He said his other firms were supporting The Star and he was forced to invest personal funds. Other newspaper executives also said the newer properties did subsidize the newspaper in later years, often to their own financial detriment.

But it was never clear where Angulo's money ended and The Star's began. Funds were allegedly routinely funneled back and forth between his companies, depending on cash flow needs. The Star also is said to have covered payments for Angulo's and his family's personal expenses and would also provide him with cash for gas and other necessities. He always justified such payments by saying he did not collect a salary.

While The Star could have plausibly helped finance Angulo's expansion into other island business properties, he denies that his other companies have anything to do with The Star. Star debts totaled $20 million, Angulo told management and union officials in the weeks before the shutdown, and, in an interview for this article, he said that debt broke down into $16 million in bank debt and $4 million in other obligations.

Two former executives and a third financial industry source put Angulo's total debt at about twice that, when that held by his other companies—which run a mail order business, Vea, Teve Guía and San Juan City magazines, among others, and the Spanish Caguas weekly La Semana—are factored in. “The problem,” one former executive with knowledge of his finances in January 2008, tells me, “is that his companies are not worth that much.” When asked about these estimates, Angulo responded: “Why are you asking about that? My other companies have nothing to do with The Star.”

Angulo began racking up The Star's debt almost immediately, with the newspaper reportedly paying the costly loan he used to finance his purchase of it, according to news reports and legal documents. In summer 1994, he first became known publicly as The Star's owner after firing the three ex-El Nuevo Día executives who had been running it since his purchase of it in December 1993 from E.W. Scripps Co. for $6 million.

The three executives were popular among employees, known as “The Three Kings” for their arrival during the holiday season and a widespread belief that the paper would have closed had they not bought it. Angulo justified the firing because the executives planned to start up a Spanish edition (something he himself would do in 1997), which he said at the time would have destroyed the English product. The executives, however, say they were dismissed after refusing to transfer Star funds to other companies controlled by Angulo. They also say Angulo had initially promised to buy the newspaper with cash, but then used a 15-percent bridge loan to make the purchase, which was paid back out of Star revenues. The only money that was put up for the sale, they say, was the $350,000 they put up to buy a stake in the publication.

Instead, one of Angulo's firms pocketed it as a commission on the loan extended to buy The Star, according to reports. The soured partnership was settled in the courts. There would be other court cases, including a costly one against a former partner in his New York investment firm.

Angulo also took out a mortgage on the Star building and received subsequent loans and refinancing. Angulo acknowledged the financing for The Star's purchase, but noted he used his personal guarantee to get the loan, which was refinanced “once finances stabilized.”

It's not clear whether Angulo's acknowledged $20 million debt includes the money owed to vendors, which is substantial. Bills only got paid when failure to do so would mean a service shut off. Even then, such payments would usually require personal intervention from a top manager and represented an enormous waste of limited resources. Many thought the Byzantine payment system was purposefully designed that way.

Getting bills paid was always difficult with Angulo, not only in recent years when the newspaper's financial situation appeared to turn critical, former newsroom executives say. “That kind of thing started happening early on….just not paying people,” says one executive, who was there in the mid 1990s, when Angulo took over. “He used to say ‘Scripps Howard pays their bills on time. They don't understand cash flow.' I think Gerry Angulo really bled that paper. Right from the beginning, he was an operator.”

But Angulo called such critics “ignorant” for not knowing a thing about the newspaper's finances. “Anyone who knows The Star, knows it was not a profitable business. It was subsidized by me,” Angulo said.

Lost in Translation

In the end, Angulo's tenure as publisher was marked by his big bet on a Spanish edition and his failure to go on the Internet. By the time I became editor, Angulo's eye was off the ball, more directed at his other companies, and we were cutting staff and losing other resources at a steady pace. Angulo says he was focused on other companies from 2003 through 2007.

When he first came down to Puerto Rico, Angulo worked hard at boosting advertising sales at The Star and decided to take the bold step of publishing a Spanish edition in 1997. It was Angulo's idea, one aimed more at gaining influence and clout from a marketing perspective, than in serving any editorial end, according to former executives. To make a second edition feasible, Angulo invested in The Star's first computerized pagination system, an important move, which, unfortunately, was the last significant investment he made in the newspaper.

“We were surprised and a little concerned that he would want to do that. We had not been prepared for that,” LeBlanc recalls, saying that he had denounced plans to start a Spanish edition by his predecessors as “ruinous” for the English edition.

LeBlanc believes he became convinced of the idea after learning more about the local advertising market. Former newsroom employees also believe that Angulo went Spanish to get a bigger share of the lucrative government advertising market under the Rosselló administration.

Angulo, citing the newspaper's “credibility and objectivity,” pushed for a faithful translation of the English-language version, a decision most newsroom veterans say killed the venture from the start. Editors had pushed for a smaller translation desk and Spanish-language reporters, which they believed would have given the new edition its own identity and helped both products. Also, the new edition quickly grew into five, as Arecibo , Mayagüez and Ponce Stars were launched along with the afternoon crime tabloid El Extra. And then the effort ran out of money.

“We had five newspapers instead of one and all of a sudden we had to do it with half the people,” recalls Matos, a former Star paper boy who became managing editor, in between a full career at the Associated Press and other island media.

But the worst aspect of the edition was that it drained resources from the English edition, and harmed it through early deadlines, which especially hurt sports coverage, according to former editors. “The STAR wasted a lot of time and money on publishing a Spanish edition. The effort cost the English-language edition valuable resources as well as staff morale,” McCloskey adds.

While the new edition was initially popular, representing a boon in circulation, the effort fell apart with a loss of focus and further diversification on the Spanish side, which was then strangled of resources. Talk among Star executives was that many Spanish-speaking subscribers switched to the Spanish El San Juan Star, but then, unhappy with the quality of the product, canceled their subscriptions and never returned to the English product.

Yet, it would take years before Angulo would scale back the Spanish operation, which stayed alive for a decade, despite its limited circulation and poor quality. And all the time the English edition was losing reporters and photographers, copy editors and designers through staff cuts. Meanwhile, the publisher failed to invest money in production technology that would have allowed the newspaper to cut staff without hurting quality and would have saved newsroom jobs.

Angulo continues to insist launching a Spanish edition was a good idea, and blames its failure on an AFICA bond issue granted to El Nuevo Día by the Sila Calderón administration that allowed it to refinance its debt at preferential rates. “That helped our competitors in a way that was difficult to overcome,” he says.

Former newsroom executives, however, say that by the time former Gov. Sila Calderón took office in 2001, the Spanish edition was already a shadow of its former self.

Angulo's other big decision was to hold off from launching an Internet edition. While newsroom executives in the 1990s said Angulo's position was part of an ongoing debate over whether a web edition would hurt print sales, by 2000, when Internet costs dropped and ad revenue soared, it became apparently clear it could have bolstered The Star's credibility, reach and marketing potential. Yet Angulo refused to finance the venture.

Nobody felt the lack more than Star Washington correspondent Robert Friedman. “The Star lost a huge opportunity to play an influential role in Washington on Puerto Rico issues by not going online, where it could have reached a captive English-language readership of members of Congress, their staffers and other federal officials in the nation's capital,” Friedman says.

“This attitude was symptomatic of the unenlightened and short-sighted way Angulo ran the newspaper…and a bad business decision,” Friedman continues. “By going online, newspapers reach out to even more readers and build readership. The Star's owner was, I believe, the only owner of any newspaper of any note anywhere that either did not understand or refused to accept the increasing dependency of newspapers and the Internet on one another.”

Star newsroom veterans, to a reporter or editor, acknowledge The Star was never a profitable enterprise, but believe it could have survived if its resources were not diverted into the ill-fated Spanish venture and it built a strong web presence able to tap into the potential audience of four million stateside Puerto Ricans.

Angulo also expresses regret that he could not keep The Star open. “I'm very sad, but I subsidized it for years. I'm sad to lose it, and because of that I put a lot of money into it to try to keep it afloat.” Star veterans say that in the end, Angulo, a businessman who knew nothing of the newspaper industry, simply made too many mistakes.

“The Star needed a real publisher who cared about it. He had the best news people in Puerto Rico at his disposal and he did not respect them. He's going to be remembered as the guy who closed the best newspaper in town,” Matos says.

Editor's Note: The San Juan Star's demise lead a group of former San Juan Star employees to launch a new paper called The Puerto Rico Daily Sun, the first island daily published by a cooperative. The new English-language daily's first issue hit newsstands on Oct. 22 with an initial circulation of 15,000 to 20,000 copies.

-John Marino