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Leaked letter reveals deep problems at Denver Post, Denver Newspaper Agency

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The story about the possible sale of the Rocky Mountain News by its owner, E.W. Scripps, continues to evolve in unexpected and fascinating ways -- and many of the developments have come to our attention via the Rocky 's own reporting. Case in point: Today's article "Scripps says Post Violates JOA" by business writer extraordinaire David Milstead (pictured).

The piece is built around a letter signed by Scripps CEO Rich Boehne (the subject of a recent More Messages blog) and fellow exec Mark Contreras and dated December 9, shortly after the sale announcement. The text claims that the Denver Post borrowed $13 million from the Denver Newspaper Agency, the entity created to handle business matters for the Rocky and the Post as part of the joint-operating agreement that links them, in order to pay newsroom expenses. Moreover, the missive's authors say the DNA had to take out a loan from its banks in order to provide this funding, but it won't be able to do so in the immediate future because, Milstead writes, "the agency's credit has dried up and the banks will not lend it any more money."

This information shines new light on the current Denver newspaper crisis even as it suggests that shutting down of the Rocky may not be the only possible outcome.

Neither a Scripps spokesman nor the Post's owner, MediaNews Group, represented in the Rocky report by Dean Singleton's right-hand man, Jody Lodovic, confirm the authenticity of the letter -- but the tone of their statements, coupled with additional Rocky sourcing, leaves little doubt that it's the real thing. If so, the urgency behind MediaNews' request to renegotiate union pacts at the Post and the DNA in an attempt to save $20 million becomes even more clear.

At the same time, the letter represents posturing on Scripps' part. As Milstead notes, the JOA allows the partners to treat the DNA as a piggy bank from time to time, so long as the money is repaid -- and if there's a specific time frame by which that must be done, it's not mentioned. Hence, Scripps may have brought up the issue early on because it didn't want the Post to wind up with the money free and clear in the event that a legitimate buyer for the Rocky didn't materialize.

That's one theory for the delay in a decision about the Rocky's future beyond the original mid-January time period mentioned by Boehne at the time of the sale announcement: MediaNews and Scripps are hashing out closure details, and the talks are dragging out due to the pitiful financial condition of both parties. But in recent days, the Rocky newsroom has been abuzz with another possibility: A wannabe buyer has come forward, in part because of a belief that Singleton's house of cards is about to fall.

This last supposition may be nothing more than wishful thinking. After all, Milstead's January 21 column, "Denver Post Also Negotiating Rocky Road," offers a compelling argument for why no savvy entrepreneur would want to wade into the fiscal quagmire that is the Rocky -- at least not without major alterations in the current agreement. But this process has already taken more unexpected turns than most observers expected. Why not another one?

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