Ron Russell

 

 

Cable Guy

Al Gore and ex-Stanford prof Joel Hyatt say their

San Francisco-based cable news channel for twentysomethings won't be ideological. But do the Democratic moneymen behind the venture know that?

 

 

By Ron Russell

 

It's Friday afternoon and, despite a daylong series of appointments, Joel Hyatt shows little sign of fatigue. When you're the CEO of a new cable channel and your partner is the former vice president of the United States, the office can be pretty much wherever you happen to be. This day it’s Paragon Restaurant & Bar, an eatery near SBC Park and the epicenter of what was once San Francisco’s bustling dot-com district. Tieless and with his sport coat slung over the back of his chair, the millionaire entrepreneur, ex-Stanford business professor, and now Al Gore TV buddy is holding court in roughly 90-minute sessions, and he's running late. "Sorry, give me just a second," he says, escorting an attractive blond woman in her 20s with a "hire me" look on her face toward the door.

 

Hyatt and Gore are on a mission to claim the MTV generation for democracy, and Hyatt is ebullient about their prospects. "Al and I have learned from the successes and failures of other cable networks, and we're confident this is a winning concept," he says. Ending months of speculation, the duo in May made it official, paying French media conglomerate Vivendi-Universal a reported $70 million to buy an obscure cable news channel called Newsworld International to obtain its coveted slots in the lineups of several cable TV providers. Now comes the hard part. Next April, their newly formed company, INdTV Holdings, will launch an as-yet-unnamed news and information channel -- to be based in San Francisco -- aimed at accomplishing what many have dreamed about, but no one has mastered: turning the 18-to-34 crowd into news junkies.

 

No interest in public affairs? No problem. Al and Joel have a plan. Provide news and information for young people by young people. Empower them. Let them define what's relevant. Let them tell stories in ways that only they can. "Contrary to what a lot of people believe, young people want news, and we're going to provide news, but not necessarily the 'Two soldiers died today in Iraq' kind of news," insists Hyatt, who, at age 53, is three years Gore's junior.

 

But what exactly does that mean? Is Hyatt (who co-authored a book, The Long Boom, that predicted an era of unprecedented prosperity just a few milliseconds before the dot-com crash began) actually onto something? Or is this new venture destined to be another joke-line bonanza for those who can't get enough of ridiculing the man who snatched defeat from the jaws of victory in the 2000 presidential race?

 

Verdicts will have to wait. By design, the INdTV game plan is under tight wraps. The few details Hyatt will disclose now are general: The channel expects to start with 120 employees and ramp up to perhaps 300 within a year. Although production facilities will be located in San Francisco (at press time he and Gore were "close" to signing a commercial lease), Hyatt purposely avoids the word "studio," lest that give away whether INdTV intends to air live newscasts. He quotes Orson Welles: "Don't give them what they think they want; give them what they never thought was possible." And what might that be? Sorry, you'll have to wait to find out.

 

Yes, it will be a 24-hour channel. Yes, it will use the "documentary format." Yes, it will also use the "comedic format." It will be "irreverent." It will be "bold." It will be "programming that young people care about, told in their language, as only they can."

 

There are already those who can't wait for it to fail. From the moment word of the venture surfaced, conservative pundits have salivated at the prospect that Gore might be gearing up to create a liberal news channel to countervail Fox News. The former veep may have helped fuel the chatter with a speech last year in which he singled out Fox and radio talker Rush Limbaugh as part of a media "fifth column" whose task is to dispense "talking points" for the Republicans.

 

Gore is known to have arranged meetings between key Hollywood figures and a Chicago couple who were prime investors in Air America, the liberal talk-radio experiment starring Al Franken that has floundered since its launch earlier this year. Hyatt, in the first interviews he's granted since the Newsworld acquisition was announced, disclaims the idea that the channel will have political overtones. "This is not going to be politically oriented," he insists. "It is not ideologically driven."

 

Yet it is easy to see why some may be skeptical. Among those most intimately involved with the project are a veritable who's who of super-connected Democratic donors and operatives, from INdTV's board of directors on down. Besides Gore and Hyatt, those directors include San Francisco investment banker Richard Blum, the husband of U.S. Sen. Dianne Feinstein; Ron Burkle, the billionaire Los Angeles investment banker and Democratic megadonor; and Ed Renwick, a partner in Burkle's investment firm. (That firm, Yucaipa Companies, claims former President Bill Clinton and the Rev. Jesse Jackson among its directors.)

 

Indeed, perhaps the least publicized aspect of the Gore-Hyatt venture is where the money has come from. Securities and Exchange Commission records and other public documents suggest that a big chunk of the funding for INdTV is being supplied, at least indirectly, by ordinary Californians who probably have no idea that they are invested in the former vice president's next career move. That's because two of the six "beneficial owners" listed in documents filed with the SEC are private equity funds controlled by the Burkle and Blum firms, respectively. And each of those funds is slated to receive huge investments from the California Public Employees' Retirement System, a $160 billion public pension fund controlled by Democratic officials whose party and campaigns have been supported by huge contributions from Burkle and Blum.

 

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Some of INdTV's individual investors appear to have been scooped from the Gore 2000 all-star donor team. There's Indiana shopping mall magnate Melvin Simon and his wife, Brenda. Beyond each giving the $1,000 legal maximum to Gore for his White House bid, the couple shelled out $2 million in so-called "soft money" to the Democratic National Committee between 2000 and 2002, federal campaign records show. There's Albert Dwoskin, a commercial real estate developer from suburban Washington, D.C., and another longtime Gore backer, who gave the DNC $370,000 between 1999 and 2002. And there's Warren Lieberfarb of Los Angeles, the former head of Time Warner Video and a Friend of Al. He has tossed at least $87,000 to the Democrats since 1997.

 

Ownership percentages of INdTV have not been disclosed. An SEC filing lists Gore, Hyatt, and trusts set up for Hyatt's sons, Jared, 20, and Zachary, 17, as "beneficial owners," indicating that they are substantial stakeholders in the venture. But it is INdTV's other two significant owners -- the private equity funds Yucaipa Corporate Initiatives and Blum Strategic Partners, with their connections to CalPERS -- that are likely to raise eyebrows among those suspicious of the venture as a liberal antidote to right-wing media.

 

CalPERS, the nation's largest pension fund, has long cultivated a reputation as one of the good cops of the securities business, flagging corporate malfeasance and yanking investments from entire countries in the name of financial transparency. But critics have also accused its powerful 13-member board, which is dominated by organized labor and the state Democratic Party apparatus, of engaging in political cronyism that mocks the good governance principles CalPERS ostensibly promotes.

 

One such criticism -- that the handful of politicians who by law sit on the CalPERS board routinely accept campaign money from entities in which CalPERS invests -- is clearly applicable in the case of the Burkle fund that helped stake INdTV. In 2001 the CalPERS board voted to invest $200 million in Yucaipa Corporate Initiatives, part of an overall $560 million commitment to one or another of the funds managed by Yucaipa Companies. (CalPERS committed $50 million to the Blum fund that invested in INdTV, which is managed by Blum Capital Partners, the firm headed by Feinstein's husband.)

 

Among the CalPERS directors who approved the Yucaipa investment were state Treasurer Phil Angelides, then-state Controller Kathleen Connell, and then-San Francisco Mayor Willie Brown. All three had a long history of accepting campaign money from Burkle and Yucaipa Companies before the investment was approved. Brown's law firm was also paid to do legal work for Yucaipa after he left the state Legislature. Connell is no longer on the CalPERS board, having been replaced early last year by current state Controller Steve Westly. Although not on the board at the time the Yucaipa investment was approved, Westly also has accepted campaign money from Burkle since joining CalPERS.

 

Burkle's influence within Democratic Party circles can hardly be overstated. His A-list involvements include serving as a trustee of the J. Paul Getty Trust; as a board member of the Carter Center, founded by former President Jimmy Carter; and as a trustee of the John F. Kennedy Center for the Performing Arts. Since 1998, state records show, the one-time grocery chain magnate (Jurgensen's, Ralphs, Food 4 Less) has contributed more than $2 million to Democratic candidates and causes in California. More than $600,000 of that went to Gray Davis, who while governor held the authority to appoint four members of the CalPERS board.

 

In 2001, Golden State Foods, one of Burkle's companies, placed Davis' wife, Sharon, a former flight attendant, on its board. At the time the CalPERS board approved the investment in Yucaipa Corporate Initiatives, one of Yucaipa's partners was John Garamendi, who left the firm to become state insurance commissioner and who has received campaign money from Burkle and Yucaipa while in office.

 

Burkle's equal among the state's monied Democratic power brokers would be Blum, whose firm manages more than $3.5 billion in assets and who as the wealthy spouse of one of Washington's most influential Democrats enjoys almost limitless political connections. Blum gave more than $366,000 in "soft money" contributions to Democratic causes between 1999 and 2002 alone, records show, and has continued to give many thousands of dollars more to a slew of U.S. Senate candidates and political action committees up to the present. He's also long been a major donor to state Democrats. For example, he either gave or helped raise more than $250,000 for Gray Davis before Davis appointed him in 2002 to the Board of Regents of the University of California.

 

Earlier this year, Blum wrote a $100,000 check to the Media Fund, a pro-Democratic group formed to defeat President George W. Bush that is headed by Harold M. Ickes, former deputy chief of staff in the Clinton White House. Last month, when Clinton dropped into the Bay Area for a trio of book-signings for his autobiography, he found the time to speak to the American Himalayan Foundation, a nonprofit run by adventurer Blum out of Blum Capital Partners' Montgomery Street offices. Even Blum and Hyatt have reason to rub shoulders, each serving as trustees of the liberal Brookings Institution.

 

While declining to disclose the size of the Blum firm's investment in INdTV, Blum spokesman Owen Blicksilver insists that politics had nothing to do with it. "The investment went through a strict due-diligence process," he says. "The [Blum] partners would not have made this investment if they did not believe it had potential for a good return."

 

Yucaipa Corporate Initiatives' investment earlier this year in the cable channel is noteworthy for another reason. Yucaipa was chosen as a CalPERS investment vehicle as part of a competition among private equity funds to be included in the California Initiative Program, a CalPERS effort to foster economic development in "underserved areas" of the state. Of the $475 million doled out to the 11 entities in which CalPERS chose to invest as part of the program, the $200 million awarded to Yucaipa was by far the largest sum. CalPERS promotional materials describe the Yucaipa fund's objective as "[seeking] corporate partnerships to relocate or expand their operations in underserved areas." Asked how an investment in a San Francisco-based cable channel headed by the former vice president fit that criterion, CalPERS spokesman Brad Pacheco told SF Weekly that he would need to research the matter "and get back with you." He never did.

 

A Yucaipa spokesman says that the investment in INdTV had nothing to do with the participation of Gore and other prominent Democrats. Frank Quintero, the spokesman, says the involvement came about as the result of contacts between Renwick, the Yucaipa partner, and Mark Goldman, an INdTV executive who recently joined the Gore-Hyatt team and who formerly ran Rupert Murdoch's satellite operations in Latin America. Quintero offered no explanation about the "underserved areas" criterion, saying only that Yucaipa saw INdTV "as an opportunity to invest in a company that has a strong commitment to increase the representation of women and people of color."

 

But others are less sanguine. "It sounds as much like a political decision as an investment decision, even though it doesn't necessarily mean that the investment was a bad one," says Jim McRitchie, who heads PERSwatch, a CalPERS watchdog group. "You'd have to look at the financials and see if the thing looks like it's going to pay off." Charlie Oates, another CalPERS monitor who long published an independent newsletter for the pension fund's members, is perhaps more uncertain about the investment. "I don't claim to know anything about their cable channel," he says. "But I look at who the players are and where much of the money is coming from, and, am I suspicious? Sure I am."

 

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When the Gore-Hyatt channel takes to the air, Newsworld International, the channel the duo acquired in May, will go dark. With its deadly serious programming (recent specials include Bosnia Gets Back on Its Feet and A Portrait of Shakespeare), Newsworld is the antithesis of a youth-oriented outlet. Still, it was attractive for its carriage rights: that is, the long-term contracts with major cable and satellite carriers for a place in their lineups, something no cable channel starting from scratch could hope to possess. It had been orphaned three times previously since the Canadian Broadcasting Co. started it a decade ago. Even the acquisition inspired right-wing radio hosts and other Gore bashers to weigh in. "Can you imagine?" cracked Tucker Carlson, Public Broadcasting's new token conservative, in a recent TV Guide interview. "Does the world need more Canadian television?" Hyatt claims to be unfazed by such barbs, lumping Carlson in with other "uninformed pundits" who've had a field day with the concept of Al Gore as TV mogul.

 

Of greater significance, at least according to some in the cable industry, is that Newsworld's meager 17 million subscribers -- fully half of whom are attached to Rupert Murdoch's satellite DIRECTV -- hardly offer the Gore-Hyatt team much of a platform to succeed. "In the cable business, you're dead in the water in terms of attracting advertisers until you reach 30 million subscribers," says John Higgins, deputy editor of Broadcasting and Cable, a trade journal. "The question is, 'How do they get there?' I don't see it."

 

With access concentrated in the hands of a few powerful cable giants, including Comcast and Time Warner, it is difficult enough for any channel not owned by a media conglomerate to break into the lineup. But skeptics say that may go double for Gore, who as a U.S. senator helped usher in regulation with the Cable Act of 1992 that cost operators a bundle. "It's hysterical in a sense," says Higgins. "Here's Gore now needing the good will of people who loathe him to provide carriage for his new cable channel."

 

When the former VP made a surprise appearance along with Hyatt in May at a convention of cable executives in New Orleans to announce his ambitions, the execs received him politely and then proceeded to savage him behind his back, say several sources who witnessed it. "I was a little shocked by it. There was clearly a lot of hostility towards Al Gore expressed behind the scenes," says Rene Schenk, a self-professed "dyed-in-the-wool Republican" and chief financial officer of Q Television, an upstart channel aimed at gays and lesbians.

 

Others discount the industry's anti-Gore factor.

 

"Sure, they'll make jokes, but the bottom line for the cable industry is that Al Gore is now one of them, and cable executives have to love that," says Thomas Hazlett, a former chief economist at the Federal Communications Commission and a fellow at the Manhattan Institute for Policy Research. He predicts Gore will soon "be on the other side" and will lobby against some of the same provisions of the 1992 law that he helped pass. "I don't think his history with the industry will cause a problem [for INdTV's channel]. Not when he can go up to Capitol Hill on the industry's behalf and get a quick audience with at least half of elected Washington."

 

Through a spokesman, Gore declined to be interviewed for this article. But Hyatt and others say there is no doubt that the former vice president will be hands-on as INdTV's chairman. "I've seen him numerous times in recent months, and he's utterly unaffected in terms of having a mind-set of being above the fray," says Orville Schell, the dean of UC Berkeley's journalism school, who sits on the INdTV board. "He has no intention of being a hood ornament."

 

Schell is the only INdTV director who does not have a financial stake in the venture. ("If I did, I would give it to the school.") He got involved in the project in November 2002 after Hyatt invited him to an all-day brainstorming session at the offices of the Global Business Network in Emeryville. At the gathering, about two dozen luminaries -- including Google co-founder Larry Page and New York media investor Steve Rattner -- tossed around ideas about what a news channel geared to young people should look like. Although Peter Schwartz, a GBN co-founder and close friend of Hyatt, was the moderator, Gore assumed a prominent role.

 

"He was there, introducing the thing, running around like Oprah Winfrey, challenging people, talking about what it could be," recalls Schell.

 

By then, Hyatt says, he and Gore were already "about a year" into planning the venture. The idea emerged in the months after Gore's disappointing election defeat when Gore turned to Hyatt, who had played a key fund-raising role during the campaign, to vet an idea involving the delivery of news over the Internet. That brainstorm didn't go anywhere, but it led to "an exchange of ideas" that evolved into the cable concept, Hyatt says.

 

Schell, who declined to talk about INdTV specifics, says that he was drawn to the venture because it fills a void no one has addressed, and because of Gore and Hyatt's commitment to "hiring several hundred digital correspondents" around the world, including young graduates of his journalism school. "It will be an unabashedly American media outlet using young international correspondents to cover the world in a relatively cosmopolitan fashion," he says.

 

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While naysayers may question Gore's ability to run a cable news operation (notwithstanding a stint as a young journalist at the Nashville Tennessean in the 1970s), Hyatt's entrepreneurial credentials are hard to assail. In a certain sense, Hyatt's role as TV mogul is consistent with his unorthodox career. In 1977, he was a silk-stocking lawyer fresh out of Yale Law School and an associate under former JFK Special Counsel Ted Sorensen at a prestigious New York law firm, when he tossed it all for a storefront in Cleveland. That storefront evolved into Hyatt Legal Services, the country's leading provider of cut-rate legal aid to the masses.

 

"People thought he was crazy at the time, but Joel has always marched to his own drummer," says Marc Morgenstern, a corporate lawyer in Cleveland who has known Hyatt since kindergarten. Joel Z. Hyatt grew up in Cleveland, the son of Polish immigrants, but not as a Hyatt. He changed his name from Zylberberg in the mid-'70s, not because of anti-Semitism, but in frustration at the way people forever mangled its pronunciation. Of modest means (his father ran an umbrella shop), he took out student loans as an undergraduate at Dartmouth, where he served as class president and graduated magna cum laude in 1972.

 

His nationwide chain of legal clinics got an early boost from a 1977 U.S. Supreme Court ruling that cleared the way for lawyers to advertise. That year Hyatt persuaded the Supreme Court of Ohio to make it the first state to allow advertising on television and radio as well as in print. Amid scorn from the legal establishment, he soon became a household name in the state, thanks to television. Commercials featured the lanky and serious-looking Hyatt speaking directly into the camera, often with law books as a backdrop. His tag line, "I'm Joel Hyatt, and you can depend on it," became so familiar that even children mimicked it.

 

On the way to becoming wealthy Hyatt was also making a name for himself in politics. In 1976, his wife's father, Howard Metzenbaum, made his third attempt at winning a U.S. Senate seat from Ohio. Hyatt managed the campaign. Metzenbaum, a liberal Democrat, won and went on to serve three terms. (Hyatt and the senator's daughter, Susan, had met on a blind date the summer after Hyatt's first year in law school.)

 

When Metzenbaum chose not to seek re-election in 1994 it was a foregone conclusion that Hyatt, with his name recognition, wealth, and family connections, would try to succeed him. The attempt was disastrous. The week he announced his candidacy coincided with the premiere of Philadelphia, the popular movie starring Tom Hanks that traced the discriminatory firing of an HIV-infected lawyer. The story drew an uncanny parallel to Hyatt's dismissal in 1987 of an HIV-positive attorney from Hyatt Legal Services' Philadelphia office. (Hyatt calls the firing "the worst mistake" he ever made.) After eking out a primary victory against a little-known opponent, he garnered just 38 percent of the vote in the fall, losing to Republican Congressman Mike DeWine.

 

"For someone not used to anything but success, that defeat bugged him a lot," says Dale Butland, who helped manage the '94 campaign. It didn't prevent party honchos from trying to recruit Hyatt to run for the Senate again, and later for Ohio secretary of state, even after he came to Stanford in 1996. But Hyatt's interests were elsewhere. As an entrepreneur teaching entrepreneurialism in Silicon Valley during the tech boom, he had found his niche. Besides, he says, "my wife and sons immediately fell in love with the Bay Area." In 1997, he sold his interest in the legal business he co-founded. (The company is now a subsidiary of Metropolitan Life.) In 1999, the family moved to a five-bedroom home in Atherton for which the Hyatts paid $5.5 million, real estate records show.

 

That summer, Gov. Gray Davis appointed Hyatt to the California Public Utilities Commission. But he resigned after barely six months on the job, unable to stomach the prospect of spending the remaining 5 1/2 years of his term buried in regulatory trench work. A few days later, investment banker and Gore confidant Peter Knight called, inquiring as to Hyatt's availability to assume the fund-raising role for Gore during the 2000 campaign.

 

As a finance chair for the Democratic National Committee, Hyatt presided over a record haul for the party in previously infertile Silicon Valley. Even with Bill Clinton as a popular incumbent, the DNC had raised only $1 million from among the valley's mostly apathetic titans of technology in 1996. Under Hyatt, that sum zoomed to $18 million during the Gore campaign. A single reception for Gore at the Hyatt home in April 2000 raked in $2.6 million.

 

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Now, instead of raising money for Gore, Hyatt has set out to build a franchise together with the former vice president.

 

"They're very close; very fraternal. They share a common view of this thing," says Schell, the INdTV director. "Joel is the practical one, running the nuts and bolts. Gore is dealing more with external relations, moving the external furniture around. They're truly like Jack Spratt and his wife. They need each other. Together they can lick the platter clean."

 

Although Hyatt is as guarded about who has been recruited to help get the cable channel up and running as he is about its planned content, there's at least a hint that politicos may also be involved at the operational level.

 

The day Hyatt and Gore announced the Newsworld acquisition, the domain INdTV.net was registered by San Francisco resident James (aka Jamie) Daves, 31, a former graduate student of Hyatt at Stanford. Daves was the first research assistant hired when Hyatt and Gore decided to enter the TV biz. Before pursuing an MBA at Stanford, Daves was special assistant to William Kennard when he chaired the Federal Communications Commission and was student coordinator for the 1992 Clinton-Gore campaign.

 

Asked about Daves, Hyatt retreats to the "I'd rather not say" mantra that characterizes his response to many questions about the new channel. Other questions, such as the matter of CalPERS's involvement, he deflects entirely. "You'd have to ask them," he says of the pension fund investment. "That's their analysis, not mine." Indeed, Al Gore's partner sees nothing unusual in the venture's attracting the involvement of so many Democratic heavy hitters. "We went out to our friends. It's only a natural thing to do," he says. "We have wonderful friends."