Newspaper Chase

The Arizona Republic made national news earlier this year when the paper's managing editor called 60 laid-off employees "fat, lazy, incompetent and slow."

Some or all of the newsroom employees booted in January 1997 likely will sue the company by the end of the summer, sources tell New Times, buoyed by Steve Knickmeyer's poorly placed remarks. (Knickmeyer's comments appeared in the Columbia Journalism Review, a trade magazine read by editors and reporters throughout the country; he resigned almost immediately thereafter.)

More intriguing, though, is a lawsuit that's been quietly wending its way through the federal court system since last August.

The main allegation is ageism, but buried in former Arizona Republic chief financial officer Don Zabek's lawsuit are allegations that Republic honcho Louis "Chip" Weil piddled away more than $5 million of the company's money on contracts for useless services provided by a close friend.

Weil and the Republic's holding companies deny that claim, as well as the claim they discriminated against anyone, based on age. In his suit, Zabek lists a dozen senior managers terminated and replaced with younger individuals.

According to court documents, Don Zabek, 49, was hired as an accounting manager at Phoenix Newspapers Inc. (PNI, the parent company of the Arizona Republic) in 1982, at a salary of $37,000. By 1990, Zabek had been named to PNI's board of directors; in 1995, he was named chief financial officer and secretary/treasurer of the board.

By 1996, Zabek's annual salary--perks included--topped $250,000. He managed 75 employees, assets of $250 million and sales of more than $400 million a year.

In the spring of 1996, Zabek was named "newsprint purchasing director" for Central Newspapers Inc. (CNI, PNI's parent company and the publisher of newspapers including The Indianapolis Star). Zabek says most of his financial duties were shifted to John Held, a PNI employee.

On September 3, Held was named chief financial officer for PNI; Zabek says Weil forced him to resign from the PNI board. By the end of that month, Zabek had been terminated from his newsprint purchasing duties.

Zabek's primary allegation is age discrimination. He was 48 when he was terminated; John Held was 40.

"Weil told Zabek he was 'living in bookkeeping days,' and that he 'must be willing to break from the past,'" Zabek alleges in his lawsuit. "Shortly before Zabek's surprise demotion, his successor as PNI's chief financial officer, John Held, stated that 'no one should work for a company for 14 years.'"

Zabek's other allegation is far more intriguing.
From Zabek's initial complaint against PNI, CNI and Weil: "Nothing was said to Zabek regarding unsatisfactory performance in his new position, corporate downsizing or other potential justification of Zabek's dismissal. However, subsequent to Zabek's termination, Weil was falsely and maliciously stated (sic) to various third parties that Zabek's employment was terminated because Zabek had engaged in certain 'irregularities' in the handling of PNI's financial statements."

Zabek contends that Weil retaliated against him for his "legitimate activity as corporate financial watchdog," that before Weil came to PNI in 1991, Zabek was praised for being "honest and industrious."

In the lawsuit, Zabek alleges that he questioned Weil's approval of more than $5 million in contracts with companies run by Weil's personal friend Jerry Kackley, including:

"A series of contracts with the K-Group from 1993 through 1996 that were worth $4.5 million to Kackley but contained no measurable performance clauses;

"A contract for $550,000 with Potomac Growth Associates for various internal assessments that provided little or no value to PNI; and

"A contract worth approximately $228,000 with Certified Environmental Management, Limited for advice regarding an environmental matter that was later contradicted by an independent firm."

According to court documents, "Zabek reasonably believed that these transactions violated Arizona law. As a result, he voiced questions and concerns regarding these transactions to Weil and to individual members of the PNI and CNI Boards of Directors. Some of these transactions had not been disclosed to the boards or submitted for approval. Weil expressed his displeasure to Zabek regarding perceived criticisms of Weil's business dealings and the heightened scrutiny that Zabek's comments would create. Weil demoted and discharged Zabek following his discovery of Zabek's activities."

Neither Zabek nor his attorney, Ansis Viksnins, returned repeated calls. Thus, there is no indication as to what Arizona law was allegedly violated.

Weil, et al., deny the allegation, according to the court documents and their attorney, Marshall Anstandig.

In papers filed earlier this month, Zabek rattled off the affidavits, e-mails and memorandums he intends to produce in the discovery process.

Unless PNI and CNI settle this case and make it disappear, it can only get more interesting--no matter who's telling the truth.

Contact Amy Silverman at her online address: [email protected]