I remember when the Omaha Sun Newspapers’ investigative report of Boys Town’s finances came out in 1972 my very Catholic mother and my similarly persuaded maternal aunts took it as a low down, dirty attack against “our Boys Town.” The Father Flanagan established youth care center has always been synonymous with the Catholic Church or at least seen as a Catholic institution, which in fact it has been for its entire life, always with a Catholic priest at its head and traditionally with the local archdiocese and archbishop as its ultimate authority. The story‘s major revelation was that Boys Town still portrayed itself as a poor, humble, perpetually in debt, and on the verge of closing home for boys when in fact it had accumulated a vast fortune through a systematic fundraising apparatus that kept right on churning out teary letters asking for donations — by the tens of million a year –and taking in millions of dollars above and beyond what it cost to operate the place. Boys Town did not share this bounty with anyone and didn’t want anyone to know about it. There’s no doubt the story spurred changes at Boys Town, just as there’s no doubt Boys Town is a very different organization today than it was then — now boasting multiple locations around the country and doing business in a very transparent manner. As for the weekly Sun, which was owned by Warren Buffett at the time, it went out of business a little more than a decade after winning the Pulitzer Prize for the Boys Town investigative report. The following piece I wrote for The Reader (www.thereader.com) takes a look at that report and, in effect, the story behind the story.
NOTE: Also on this blog see my profile of Stan Lipsey titled “Buffett’s Newspaper Man.” Lipsey is back in Omaha for the 2011 Berkshire Hathaway shareholders confab and for an exhibition of his photography at KANEKO. He’s also participating in a panel discussion at KANEKO about a life of creativity in business. For more on KANEKO, see my story titled “Open Minds.”
Of course, Warren Buffett and Berkshire are much in the news these days because of the scandal involving David Sokol, the once heir apparent to Buffett as head of Berkshire.
Sun Reflection, Revisiting the Omaha Sun’s Pulitzer Prize-Winning Expose of Boys Town
©by Leo Adam Biga
As seen in the The Reader (www.thereader.com)
The small but enterprising paper with multiple neighborhood editions had called out a venerable Omaha institution, Boys Town, in crusading journalistic fashion terms. No crime was alleged, but rather the violation of a public trust.
A front page headline asked accusingly, “Whatever happened to Father Flanagan’s dream?” That was followed by the stark declaration, “Boys Town: 700 boys with $209 million.” Thus the Sun set the incredulous tone and exploited the shocking results of a special eight-page report inside provocatively titled, “Boys Town, America’s wealthiest city?”
The subhead, “Give an account of thy stewardship,” was a Biblical admonition for a quasi-Catholic organization that cried poverty in syrupy mass donation appeals each Christmas, while hoarding a fortune no one was supposed to know about or, if they did, question.
Some movers and shakers were prominent characters in the story and in the story behind the story. Sun owner Warren Buffett pointed to the records that revealed Boys Town’s “hidden” assets. Publisher Stan Lipsey supported the investigation. Managing editor Paul Williams masterminded and ran it.
The power behind Boys Town lay with Monsignor Nicholas Wegner and Omaha Archbishop Daniel Sheehan. Aged civic-social leaders comprised a rubber-stamp board.
Pleas for money continued even as fortunes swelled. Making matters worse, Boys Town did little with its wealth after a 1948 building project. It shelved new initiatives and rejected best practices, effectively standing still, stuck in time.
The Sun implied Boys Town betrayed Flanagan’s mission by staying mired in outdated attitudes and methods. Buffett would later write, “We reported the extraordinary contrast between decreasing services and mounting wealth.”
The story won the Sun seven national awards, including a 1973 Pulitzer Prize for local investigative specialized reporting, the same year the Washington Post’s Watergate series took the Pulitzer for Public Service. The papers earlier swapped in the same categories at the national journalism society, Sigma Delta Chi, awards.
More importantly, the Sun’s probing coverage compelled an organization that after Flanagan’s death in 1948 behaved like an imperious empire, paralyzed in what Williams termed “institutional inertia,” to enact long overdue reforms.
Today’s Boys Town hardly resembles that fossilized institution. Its entire methodology of youth care has been transformed. Boys Town is now recognized as a national leader in parenting and child speech-hearing impairment research and treatment.
The Sun was the liberal, plucky alternative to the conservative, timid Omaha World-Herald. Under Williams, the paper previously won awards for covering Omaha environmental issues and Omaha Transit Company irregularities. Boys Town, however, was a bigger target. While the report did the Sun no harm financially, the paper lost its edge when Williams left a couple years later. In 1980, Buffett sold it to a Chicago publisher. After an anti-trust suit against the World-Herald, the Sun disbanded in 1983.
Nearly 40 years since the story shook Boys Town’s foundation, The Readerspoke to key players who worked on the project.
Doug Smith, the youngest, least experienced member of the reporting team Williams assembled, says the irascible editor was the driving force behind “Project B.”
“Paul wanted that big recognition, he wanted that big prize … and he really went after it.
“I think he knew this was going to be the biggest story of his career, or not. I thought, maybe we all thought — he’s obsessed with this thing. When we got the announcement we won the Pulitzer one of the guys said, ‘Ahab has his whale.’ Paul was a great leader on this project. He did bring it home.”
“The story was really there for the taking by somebody with energy and enterprise, and that’s what Paul Williams had,” says Randy Brown, hired as associate managing editor just as the Sun launched the investigation. “He was the brains.”
As the team dug into the reality behind the carefully cultivated Boys Town facade, it became clear the wary institution was paranoid for a reason.
“I felt the story was really justified,” says Smith.
He and his colleagues knew the heart-tugging letters Boys Town sent out suggesting the boys would go hungry without donations were pure hokum.
“I’d say an unethical appeal considering they were sitting on a lot of money,” he says.
Team member Wes Iversen, the Sun business editor, was dismayed Boys Town made it appear “as though the wolf were at the door when they had a big pile of money they were doing nothing with.”
In the end, Boys Town was its own worst enemy.
“It was a case of they had lost their way, their mission,” says Smith. “It was the story of an American institution that had gone off track.”
When Smith asked Boys Town post office officials how much mail went through to try and gauge the scope of fundraising efforts, a reluctant staffer was quoted saying: “The reason they won’t let me give out the amount of postal receipts is because people will get everything misconstrued.”
It turned out up to 50 million appeal letters went out per year. The volume suggested a cash cow system returning huge revenues.
Boys Town officials repeatedly made ill-advised statements that came back to haunt them. In classic investigative fashion Smith and photographer Len Cook burst in on its secret direct mail apparatus, housed in a downtown building, to find 125 women typing the appeal letters and a flustered fundraising director trying to hush it up.
The Sun quoted the director as saying, “Please don’t mention this in your article. It’s so easy for the public to get the wrong idea. People will think we’re rich.”
Smith recalls Boys Town as remarkably unsavvy then in handling press inquiries. “At that time they were not equipped to handle this kind of assault by journalists,” he says.
Ironically, Flanagan had been a genius at promotion. He invited Hollywood to make two feature films on Boys Town. He cooperated with newsreels, he did national radio broadcasts, he toured the home’s band and football team nationwide, he made speaking appearances across the country and he welcomed celebrities to the campus.
By the early ’‘70s the cautious Wegner isolated Boys Town, making it an island cut-off from the world.
Bulldog reporter Mick Rood interviewed Wegner and caught him in several untruths, including the assertion Boys Town was in debt. Even when confronted by the facts, Wegner and, in a separate interview, Sheehan indicated the fundraising would continue unabated. Business as usual. The arrogant dismissal of serious questions, such as when would enough money be enough, made everything Boys Town said suspect.
“When you as a reporter or newspaper discover that,” says Rood, “that makes you want to dig. It makes you forget for a little while that the poor monsignor was in very poor health, it makes you forget that some people wouldn’t like the story because people don’t need to be deceived like that. That’s the motivation right there.”
For that interview, Rood was armed with sensitive, though public record documents that delineated the true picture of Boys Town’s finances. Buffett had informed the Sun team of a federal tax statement, Form 990, that nonprofits were required to file. He had to file one for his own foundation and it dawned on him Boys Town did, too. It took much wrangling and waiting to pry a copy from the Internal Revenue Service. When all 100 pages arrived the scope of the holdings stunned the team. Boys Town stocks, bonds, properties, though undervalued, gave it a net worth exceeding Omaha’s largest bank, and an endowment surpassing all but a few universities nationwide.
“I didn’t know quite what to think of it because the numbers were enormous,” says Brown. “It was jaw dropping.”
Iversen says it was “a money machine.”
Until those documents were secured, the team had only been able to speculate about Boy’s Town’s riches. With the hard numbers in hand, all was exposed.
“This was the whole kit and caboodle,” says Rood.
The surviving team members readily credit Buffett with giving them the golden egg that pushed the project over the top.
“Without that it would have been a good story, but not a Pulitzer story,” says Lipsey.
Buffet also helped the Sun analyze the Boys Town treasure chest.
“I worked with Warren compiling the numbers, making sure they added up, getting all the details straight, ready for publication,” says Brown. “And he insisted on double checking everything. We knew we were taking on an institution that’s beloved in the community and he didn’t want any mistakes — not 25 cents in the wrong column.”
Rood says Williams was methodical planning assignments and supervising their execution: “He made very thorough outlines … very detailed things, so we were all well aware of what we were supposed to be doing. It was also a way to make you accountable. I mean, if it was written down there you better have done it. There was no excuse. You had to have made that call you said you were going to make.
“We worked separately most all of the time. We had periodic meetings to compare notes. It was a very disciplined operation — one you wouldn’t expect from such a small paper. He was the best editor I ever worked for, ever will work for, and a good friend.”
Brown says, “everything was reread and reedited,” adding, “It was a grind.”
Iversen recalls months of slogging away, interspersed by occasional euphoria.
“A lot of it is just hard, heavy-duty grunt work,” he says. “At that time we had no easy way to check things. It’s just a lot of legwork, a lot of looking things up in books in libraries and county offices and you name it, running around checking various places and trying to piece things together. At times it could seem like drudgery, at other times when we would get a major insight everybody would say, Ah-ha, now we see where this is headed and we’ve made a breakthrough here.
“It was really heady times.”
Some intrigue did attend the story. Though the stakes were much different from the Post’s Watergate coverage, the Sun had its own Deep Throat in Claude Organ, a reform-minded Boys Town board member. Buffett met with Dr. Organ about the project and the surgeon-educator steered the Sun in the right direction.
“Everything was closely held,” says Rood. “We were more than sworn to secrecy.”
During the investigation’s last few weeks Williams took the precaution of the team working out of his home’s basement rec room for fear of losing the story to the Herald. Rood says a defensive Boys Town came to suspect the story was more than the routine historical piece the Sun painted it as. When the report broke, no one at Boys Town was prepared for its all-encompassing depth. The expose laid Boys Town bare.
Much more could have been published, team members say.
The Sun did many follow-ups over the next year and beyond as Boys Town changed its administration and board, opened the campus to consultants, replaced its warehousing of youth with a home-family model and developed new facilities and programs.
In 1974 a desperate Boys Town, still reeling from the fallout from the story, which went national and spawned new stories, hired Omaha PR man Bill Ramsey to help repair its tarnished image. It took time, but things turned around by the late 1970s-early 1980s.
Current Boys Town spokesperson Kara Neuverth says the institution did act on the reported misalignment of net worth and youth services:
“We listened to that feedback regarding some fund raising practices. What I can tell you about this organization today is that we are transparent and we pride ourselves on our experience. For an organization to remain at the forefront it must adjust its practices to stakeholder input, changing times, and new knowledge — just as we did 40 years ago. That is the lesson learned.”
The Sun investigative team scattered to the far winds. The shared Pulitzer opened doors for Rood, Iversen, Brown and Smith. Paul Williams left to teach at Ohio State. He also co-founded IRE, Investigative Reporters and Editors, and wrote a book before his untimely death. Publisher Stan Lipsey went on to head the Buffalo News for Buffett.
The story solidified Buffet’s long-held interest in newspapers — he soon acquired a major share of the Washington Post — and confirmed for him their vital role in a free society. In a letter to Berkshire Hathaway shareholders he wrote the Sun’s achievement “vividly illustrated that size need not be equated with significance in publishing.”
The Changing Face of Boys Town and its Finances
The following sidebar appears in the print edition of The Reader but not in the Web edition:
©by Leo Adam Biga
In 1972 you had to be a member of the Boys Town inner circle to see its balance sheet. Or, as in the case of the Sun Newspapers, you had to know about a new and therefore obscure tax form filing that required nonprofits to report their financials. Even then, it took the Sun time and expense to obtain the public records, documents and figures Boys Town dearly wanted to suppress.
Today, due in part to the Sun’s disclosures of Boys Town’s worth, the law requires nonprofits to be much more transparent about their assets. The same information the Sun had to go to some lengths to get 40 years ago, anyone with access to a computer can easily and freely obtain today with a few keystrokes or mouse clicks.
In 2009, Boys Town, which now has a national reach, reported $1 billion in assets, $810 million in the Father Flanagan’s Fund for Needy Children (the institution’s endowment) and $122 million in liabilities for a net worth of $903 million. Five to six percent of the endowment supports annual operations.
Boys Town reports nearly 90 percent of every dollar received is spent on child care.
Charity Navigator awarded it a four-star rating for sound fiscal management. Boys Town’s accountability has earned it recognition as a Better Business Bureau Wise Giving Alliance accredited charity. These are all signs of how the organization does business very differently now compared to when the Sun rattled its cage.
- Omaha, NE- and you thought St. Louis was cold… (craftycreek.wordpress.com)
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- Berkshire’s Sokol broke law, report says (business.financialpost.com)
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Another native Omahan who has achieved great things is Stanford Lipsey. This publishing scion has enjoyed a full career in journalism. A good deal of his newspapering life has been associated with billionaire investor Warren Buffett. The two men are good friends. Lipsey retains strong ties to Omaha, where Buffett and Berkshire Hathaway are based. This story appeared in The Reader (www.thereader.com) on the eve of the annual Berkshire shareholders meeting, which draws tens of thousands to Omaha for what’s been described as a Wooodstock for capitalists. Lispey and Buffett made journalistic history back in the early 1970s with the Omaha Sun Newspapers, when an investigative report into Boys Town’s vast financial holdings and wealth ended up winning the paper and its publishing team a Pulitzer Prize. Buffett later hired Lipsey as publisher of the Buffalo News, a position he continues in today.
NOTE: See my new story on this blog about the Omaha Sun’s Pulitzer winning report on Boys Town during Lipsey’s reign as publisher. The story is titled “Sun Reflection.” Lipsey is back in Omaha for the 2011 Berkshire Hathaway confab and for an exhibition of his photography at KANEKO. He’s also participating in a panel discussion at KANEKO about a life of creativity in business. For more on KANEKO, see my story titled “Open Minds.”
Of course, Warren Buffett and Berkshire are much in the news these days because of the scandal involving David Sokol, the once heir apparent to Buffett as head of Berkshire.
Buffett’s Newspaper Man, Stanford Lipsey
©by Leo Adam Biga
Originally published in The Reader (www.thereader.com)
Omaha native and veteran newspaper publisher Stanford Lipsey has seen and done it all in a six-decade journalism career that’s closely allied him to Berkshire Hathaway CEO Warren Buffett.
Lipsey climbed the ranks at the now defunct Sun Newspapers in Omaha to become owner-publisher. In 1969 he sold the Sun to Buffett, but remained as publisher. In 1972 Lipsey was at the helm when the Sun, acting on a lead from Buffett, poked into the finances of Boys Town. The Sun’s probing led to sweeping changes at the charitable organization and earned the paper a Pulitzer Prize.
Buffett later appointed Lipsey publisher of the Buffalo (N.Y.) News. Lipsey is still its publisher today. In 1988 he was named a Berkshire vice president. The old friends, inducted in the Omaha Press Club Hall of Fame in 2008, may or may not get together this weekend at Berkshire’s annual shareholders’ meeting in Omaha.
Lipsey, who got his start as a photojournalist, came out with a photography book, Affinity of Form (2009, powerHouse Books), that can be purchased at the Qwest Center exhibition hall during the May 1 meeting or at the Bookworm. He still shoots, only with digital equipment, not the Brownie or Speed Graphic he began with. Instead of snapping news pics, he makes fine art images for galleries and books.
His life as a news hound has spanned hot type, clattering typewriters, digital off-set presses, computerized newsrooms and newspaper web sites. His training began at Omaha Central High and the University of Michigan. While in the U.S. Air Force he served as editor of the Offutt Air Force Base publication Air Pulse.
He began working at the Sun in 1952, learning the business inside and out. Lipsey said the Sun “was small enough so I could do it all.” He considers a well-rounded newspapering experience an “invaluable” education most publishers “don’t have” today. “In the large daily business hardly anybody has it. They come from one field. They were either an editor or an advertising manager or a business manager, but they don’t have the crossover background between news and advertising,” he said.
Buffett said, “He’s a real journalist but he understands every aspect of the business, and that was one of the considerations why we wanted him up in Buffalo.”
Under Lipsey’s watch, managing editor Paul Williams guided the Sun expose of Boys Town when the still single-campus, dormitory-style, boys-only home used weepy mass mail appeals to portray itself as destitute. The Sun revealed Boys Town sat on a $162 million endowment dwarfing that of many national institutions. Property and building assets created a total net value in excess of $200 million.
“We knew there was a story there, but we didn’t know how to get it,” said Buffett. “I was sitting at home doing the tax return for my own tiny little foundation and there was something in the instructions that said my tax return would be public. All of a sudden it dawned on me if a tax-free institution such as this foundation of mine had to make the return public, Boys Town probably did.”
The story goes Buffett called on a well-placed source who sat on the Boys Town board to verify Sun suspicions the nonprofit had accumulated a fortune. Public records confirmed the rest. Public indignation was strong.
“It’s a helluva story,” Lipsey said by phone. “It was so well done.”
He said breaking the exclusive, which major news outlets picked up, was what the Sun needed to do to stay relevant opposite the Omaha World-Herald.
In Buffett, the paper had deep pockets and considerable clout. In Williams, who went on to help found Investigative Reporters and Editors, Inc., a solid newsman. In Lipsey, a crusading publisher.
“See, we didn’t have the advantage of being a daily, so when we came out we had to have something fresh, so we did investigative reports, enterprise reports,” said Lipsey. “Warren, Paul Williams and I would sit down and brainstorm — what’s the story, what should we go after, and then this thing came along — it actually came along on a tip from Warren. It made for a great story.”
Like Lipsey, Buffett still feels a sense of pride about what they did.
“That was a watershed. It didn’t do us any good commercially as a paper, but that was probably as interesting a month or two of my life as has ever occurred,” said Buffett.
The report upset the Catholic community. Defensive Boys Town officials attacked the Sun as “a yellow rag.” The gutsy coverage earned the Sun the first Pulitzer given to a weekly for Local Investigative Specialized Reporting. It’s the last Pulitzer, period, won by any Nebraska newspaper. The award also recognized the reforms the story instigated. A chastened, more transparent Boys Town embarked on a course serving at-risk youth in new, home-like environs across the nation. Boys Town also built the first of its major research facilities.
When Buffett acquired the Buffalo News in 1977 he asked Lipsey for help. “When I was in trouble up in Buffalo with the paper I called him,” said Buffett. At first Lipsey served as a consultant, commuting between Omaha and Buffalo, before accepting the role of publisher in 1983. The two men share an abiding mutual respect. “I admire Warren. I would say he’s someone who has taught me a lot. He’s a steady hand. He makes decisions that are totally moral, totally wise, and for the right reasons, and they’re not always necessarily for profit,” said Lipsey. “He won’t buy a company where the management isn’t in place. The only exception to that is me.”
The book The Warren Buffett CEO, Secrets from the Berkshire Hathaway Managers, devotes a chapter to “the turnaround” Lipsey engineered in Buffalo.
“You see a newspaper doesn’t really match what Warren buys in companies because this paper was losing money when he bought it but he always had enormous respect and love for newspapers. But then he was short — we had a very good editor but we didn’t have a good publisher here. He had to get one to come in, and he tapped me,” said Lipsey. “There was a daily newspaper here in competition called the Courier Express. It became one of these fights to the death type thing. I got very interested in that. That was an enormous challenge, and I wanted to make sure we survived.”
Buffett said Lipsey was well qualified coming from a small paper to oversee a big paper because he knew all phases of newspaper operations: “Stan knew the press room, he knew circulation, he knew ad sales, he knew the newsroom. Stan’’s been a terrific friend and business associate. He’s over 80 now and he goes to work every day with the same zest as always. There’s no one I trust more.”
With the dynamic pair behind it, the Buffalo News won out. Lipsey’s still in charge, but the shrinking place of printed newspapers in this digital age concerns him
“Certainly right now the newspaper business is challenging. We’re doing better than most papers, but we’re not doing well. All our numbers are way down. Circulation, advertising, profit, volume, everything, and I think you’ve seen the same thing with the World-Herald, and they were enormously profitable. The trouble with newspapers is they’re extraordinarily costly, so when you have a sharp fall off in revenue it’s hard to cut as much as you’re losing, because you have to so many people in the newsroom, so many people running the presses, so many people driving the delivery trucks. That’s the problem.”
- New Book on Berkshire Hathaway by Ronald Chan; Behind the Berkshire Hathaway Curtain: Lessons from Warren Buffett’s Top Business Leaders (eon.businesswire.com)
- The 15 Best Things Warren Buffett Has Ever Said About Investing (businessinsider.com)
- Sun Reflection, Revisiting the Omaha Sun’s Pulitzer-Prize Winning Expose on Boys Town (leoadambiga.wordpress.com)
- Berkshire Hathaway Board Responds to David Sokol Controversy (blogs.wsj.com)
- How Warren Buffett Protégé David Sokol Lost His Way (businessweek.com)