Scaife trust files accounting month early
The trust fund at the center of a bitter court battle paid late Tribune-Review publisher Dick Scaife $448 million in the 20 years before his July 4 death, according to an accounting filed Friday in Allegheny County Common Pleas Court.
Over the two decades, most of the money subsidized the growth and operation of Scaife's media companies, a lawyer for one of the trustees said. Scaife's daughter and son, Jennie and David Scaife, sued the trustees to get the accounting, claiming they would have inherited the money had their father not spent it before he died.
Trustees say they followed the wishes of Scaife's mother, Sarah Mellon Scaife, who set up the trust for her son in 1935. She gave trustees the authority to give her son “all or such portion of the (trust's principal) as the trustees shall deem to be for his best interests,” according to the document that created the trust.
“Dick Scaife knew exactly what he wanted the money for, but he also had to go through the procedures the trustees set up pursuant to the trust,” said E.J. Strassburger, lawyer for H. Yale Gutnick, a trustee, longtime Scaife lawyer and chairman of the Trib's board of directors.
“This wasn't a rubber stamp,” Strassburger said.
Gutnick and fellow trustee James Walton argued in court filings that Sarah Mellon Scaife never intended the 1935 trust to benefit anyone but her son. At Dick Scaife's urging, they say, Sarah Mellon Scaife set up a separate trust for her grandchildren in 1963, shortly before Jennie Scaife was born.
That trust is worth $560 million and pays about $1 million a month each to Jennie Scaife, 51, of Palm Beach, Fla., and David Scaife, 49, of Shadyside, court filings say.
The accounting was filed a month earlier than required by the court. Allegheny County Common Pleas Judge Kathleen Durkin had given the trustees until June 1 to complete the task.
Most of the accounting's 102 pages show stock transactions and tax payments to federal and state governments. Distributions to Scaife, heir to the Mellon and Scaife fortunes, take up six pages and show only dates and amounts, not how Scaife spent the money.
Sarah Mellon Scaife required trustees to make quarterly payments to Dick Scaife from the trust's income. Most of the $36.2 million doled out by these payments were worth between $100,000 and $1.2 million. The last payment of only $2.86 closed out the fund on the day before he died.
Most of the fund's principal — the heart of the Scaife siblings' complaint — was paid to Dick Scaife by late 2011. In all, the principal payments totaled almost $412 million in cash and stock, according to the accounting.
“Some went for capital (projects), printing, acquisition of newspapers and other media investments,” Strassburger said. “Some went to support the operations of media properties.”
He declined to elaborate.
Scaife spent more than three decades building his media company after first acquiring the Tribune-Review of Greensburg in 1970. He bought three daily newspapers from Thomson Newspapers and two dailies from the Gannett Co. in 1997, five years after he started the Trib's Pittsburgh edition.
He spent $43 million building the NewsWorks printing facility in Marshall, which opened in 1997. In 2004, he bought Pennysaver Publications of Pennsylvania, Gateway Press Inc. and the McKeesport Daily News, expanding Trib Total Media to seven daily newspapers and 24 weekly papers.
Starting in 1982, he acquired a majority of stock in KQV Radio, an AM all-news station in Pittsburgh; he sold that interest in 2013.
He also acquired a substantial interest in the stock of NewsMax, a national news website and magazine.
From 2000 through 2007, trustees made monthly payments to Scaife from the trust's principal, usually providing $1.5 million to $2 million at a time, the accounting shows. Before that, the payments came less regularly, and in amounts as high as $36 million on Dec. 1, 1997.
In 2008, the trust paid Scaife $55.8 million from its principal, then $1.1 million in 2010. The last major payment —about $57.7 million worth of stocks — went to Scaife on Aug. 17, 2011, the trust accounting shows.
Trustees kept just over $650,000 in cash and 6,330 shares of Johnson & Johnson Co. stock to cover any administrative fees, Strassburger said.
Trustees began transferring the last of the money in June 2014, the accounting shows.
They paid Scaife $644,000 in cash, and transferred the stocks — worth $564,000, according to Johnson & Johnson stock's closing price on the day of the transfer — to him on June 16 and 23. Trustee James Walton received $625 on June 18, and $8,231.50 in lawyers' fees was paid June 20 to Strassburger McKenna Gutnick & Gefsky, where Strassburger and Gutnick are partners.
Jennie and David Scaife argue the money propped up money-losing media companies, including the Trib.
Strassburger said the trust's broad language didn't prohibit that. Gutnick has argued in court filings that Scaife's newspaper businesses, profitable or not, were central to Scaife's life.
“Passing out polio vaccines in Africa isn't going to be making money,” said Strassburger, referring to the worldwide immunization campaign initiated by Pittsburgh's Dr. Jonas Salk, whose ground-breaking research was financially supported by Scaife and his mother. “Just go back to our Founding Fathers' views on the importance of a free and vigorous press, and you can attach social utility (to supporting the papers), in addition to the enjoyment he gained from it.”
Strassburger, who retired this week as president of the Greater Pittsburgh chapter of the American Civil Liberties Union, said newspapers are “where my civil libertarian and Mr. Scaife's libertarian views converged.”
“If it's spitting in the wind to subsidize newspapers, they'd all close tomorrow,” he said. “The Post-Gazette is being subsidized by its owners (with) tens of millions of dollars a year,” and the same is true of many metropolitan newspapers and other media operations nationally, he added.
Mike Wereschagin is a staff writer for Trib Total Media. Contact him at 412-320-7900 or mwereschagin@tribweb.com.
