Tuesday, May 3, 2016

Paper Industry Analyst Prevails in Libel Case

In a victory for freedom of the press and good old American stubbornness, a bogus defamation lawsuit against paper-industry commentator and gadfly Verle Sutton was recently dropped. Sutton, never one to mince words, issued a colorful news release (below) yesterday announcing that his name had been cleared.

In the May 2014 issue of his newsletter, The Reel Time Report, Sutton exposed a scheme that enabled Cate Street Capital to make money from managing the unprofitable, hopelessly outdated Great Northern paper mills in Maine by tapping state funds. He also pointed out the somewhat checkered history of the company and its CEO, John Halle, who responded by filing a libel suit and partially blaming Sutton for Great Northern’s September 2014 bankruptcy.

His Great Northern exposé was not the first time Sutton had plumbed the depths of questionable government handouts to the U.S. paper industry: When news broke in 2009 that federal eco-fuel tax credits were being handed out to pulp mills for burning black liquor, The Reel Time Report accurately detailed the potential bonanza, company by company. Later, Sutton showed that Democrats had turned a blind eye to that multi-billion-dollar bit of corporate welfare to gain passage of Obamacare.

Sutton was his usual forthright self in the 2014 “The Maine Problem” report on Great Northern. Some highlights:
  • “Technically, Cate Street purchased the Katahdin mill late in 2011 from Brookfield for $1.00. Practically, however, it was the State of Maine that really provided the capital needed to get the mill up and running again.”
  • “Cate Street began operating the mill late in 2011. It messed up everything right from the beginning . . . and it generally behaved like a company that had no clue what it was doing.” 
  • “After stranding customers with an abrupt mill closure in January 2014, [Cate Street] stated publicly that it was shutting down to work on its business plan. That was the first time that anyone had ever heard of a company shutting down to develop a business plan.”
  • “In hindsight, the high-cost paper company [Great Northern] did not go bankrupt as quickly as we thought it would, because the State of Maine supplied it with a steady flow of funds: newspapers have reported the total at $142 million in loans, grants, and guarantees. So, in effect, Cate Street has lost $142 million in just over two years; this is in addition to the $2.5 million it owes the feds in back taxes, the $2.5 million it owes Brookfield in unpaid utility bills, the $3.0 million it owes Millinocket and East Millinocket in unpaid real estate taxes, and smaller quantities owed to numerous other suppliers. This massive financial failure does not affect Cate Street, of course, because Cate Street is a separate financial entity."
  • “Perhaps the game plan all along was just to ride Great Northern as long as it would last, taking a big cut along the way. Great Northern’s slow demise might have lined the pockets of Cate Street owners, and perhaps others.”
It’s no wonder Halle was miffed. Fortunately for Sutton, truth is an absolute defense in libel cases.

Here is Sutton’s news release, verbatim:

John Halle, of Cate Street Capital, drops libel lawsuit against paper analyst and author of The Reel Time Report, Verle Sutton

Chicago, Illinois — May 2, 2016 — As reported recently in the Bangor Daily News (April 22, 2016), John Halle (CEO of Cate Street Capital) has formally dismissed the libel lawsuit that Cate Street Capital and Halle had initiated against Verle Sutton almost two years ago. This claim of libel had resulted from an article in the May 2014 issue of The Reel Time Report, written by Sutton, in which Cate Street Capital and State of Maine officials were strongly criticized for actions they took that related to the Great Northern Paper mills in northern Maine.

Industry Intelligence, the publisher of Reel Time, had also been named as a defendant in this lawsuit. Industry Intelligence and John Halle reached a settlement earlier in 2016.

In response to John Halle choosing to end the lawsuit against Sutton, and the Industry Intelligence settlement, Verle Sutton has issued the following statement:

I am grateful to family and friends who have been so supportive during the last two years as we fought through the groundless lawsuit that John Halle and Cate Street Capital initiated against me for authoring “The Maine Problem.”

The legal costs incurred during the last two years have been substantial, and the time our family lost was unfortunate. However, our losses pale in comparison to the damage that has been inflicted on the East Millinocket and Millinocket communities and, in fact, on all of northern Maine. These communities and this region were misled by state officials and Cate Street about the viability of the restarted Great Northern Paper mills.

And it was mostly small businesses in Maine that lost more than $20 million as a result of the bankruptcy of Great Northern Paper that occurred under the watch of John Halle and Cate Street. In addition, tens of millions of Maine taxpayer dollars were wasted by way of Dolby landfill costs, FAME loans, the New Market Tax Credit program, etc.

Although the financial and personal damages to Maine businesses and taxpayers were severe, that was not the case with the finances of Cate Street Capital. It was my opinion, when “The Maine Problem” was published, that Cate Street Capital had assumed little or no financial risk in its Great Northern investment. That opinion has not changed.

Since my family and I do not live or have business activity in Maine, we have no personal stake in Maine business or politics. I am simply a paper analyst. I initially wrote about Great Northern because it was a paper company in a segment of the paper industry covered by The Reel Time Report. However, in reviewing the activities related to the restart of Great Northern, and the subsequent actions of Cate Street and Maine government officials, it became obvious that something was very wrong.

When Halle initiated the libel lawsuit against me, he stated that I had knowingly lied when writing “The Maine Problem.” That was absolute nonsense. It is unfortunate, from my perspective, that our legal system does not allow me to counter‐sue Halle and Cate Street based on the accusations in that lawsuit. (Accusations made in a lawsuit are, for some reason, legally considered “protected speech.”)

Although the lawsuit has been dismissed, when you Google my name — Verle Sutton — the Cate Street lawsuit is the first story that comes up at the top of the page. It is clear that the blatantly false accusations made by Halle will never go away. The newspaper story that reported those accusations in May 2014 will forever be my online legacy.

In the lawsuit initiated by Halle, he claimed that roughly 73 lines in “The Maine Problem” were libelous. Later, after I had incurred substantial legal costs, all but 18 of those lines (four statements) were simply dropped from the lawsuit by Halle’s attorney. Therefore, after publicly claiming libel based on 73 lines of the report, he privately dropped 75% of the complaint.

My attorney then filed a Motion for Summary Judgment — principally based on protected opinion. Based on this motion, the judge threw out three of the last four statements, leaving two lines remaining— really, only one word.

The next steps were to be 1) a deposition on the part of John Halle (I had already given my deposition), and 2) another Motion for Summary Judgment (but this motion was to be based on relevant factual evidence).

So, at the time this lawsuit was dismissed by Halle, the only remaining issue was the use of the word “convicted.” John Halle had objected to the use of “convicted,” arguing that the word suggested a criminal offense. (The judge had previously ruled that the word “cheated” was not actionable since a New York court had ruled that Halle was legally responsible for committing civil fraud.)

It is true that “conviction” does, in court proceedings, refer to criminal cases, and had I known of this distinction when “The Maine Problem” was written, I would have used a different word. Nevertheless, it is not an error — much less libel — to use words as they are often used in our society. The fact is that “conviction” is commonly used in public discourse, and occasionally even in the media, to refer to the results of civil cases. (A quick computer search had discovered 40 very interesting examples we were prepared to present had the lawsuit continued, but hundreds of examples could have been located.) In addition, it was clear based on the context of the paragraph in question that I did not intend to imply criminal activity. The next sentence stated, “The $1 million (that had never been paid) is, after fourteen years, now up to $2.3 million, according to a New York judge’s ruling.” There was absolutely no reference to criminal penalties, as there would have been had this been a criminal proceeding.

I was, therefore, very disappointed that the insurance company representing Industry Intelligence agreed to a clarification of the word “conviction,” and a sanitized rewriting of the passage in general as part of a settlement agreement. I strongly objected to their settlement, but my concerns were ignored. The insurance company demonstrated a complete absence of ethical conviction. And it was a bad business decision as well.

 
For more information, contact:

Jane Keyes
Sutton Paper Strategies 
mail@suttonpaperstrategies.com

Saturday, April 30, 2016

Survey Says: The USPS Is a Terrible Place to Work

An organizational tumor that has festered within the U.S. Postal Service for years burst into public view this week at exactly the wrong time.

Part of report obtained by InsideSources
An employee survey that postal officials tried to keep under wraps proves what countless postal workers have been saying for years: The USPS is generally a horrible, dysfunctional place to work.

What makes the Postal Pulse survey results so meaningful is that the Gallup Organization compared the USPS data to those of other client organizations.

InsideSources, which obtained the survey results through a Freedom of Information Act request, estimates the comparison involved a pool of 400 companies. Even for those of us who’ve heard horror stories from hundreds of postal employees, the USPS’s numbers were stunningly awful.

How low can you go?
On nine of the 13 questions – from how supportive immediate supervisors are, to development opportunities, to fellow workers’ commitment to quality – the USPS scored in the bottom 1 percentile. In other words, for each of those nine questions, about 396 companies scored better than the USPS and only three, at most, scored the same or worse.

On job satisfaction, postal workers were in the 2nd percentile, while on “I have the materials and equipment I need to do my work right” the USPS was in the 3rd percentile. By far, the Postal Service’s best question, in just the 16th percentile, was “I know what is expected of me at work.”

Having a toxic workplace wasn’t so bad for the USPS a few years ago when retention and recruiting weren’t issues. With shrinking mail volumes and virtually no ability to implement layoffs, the agency rarely hired new workers and encouraged long-timers to retire.

Hiring boom
But a shift to using more non-career employees has been a major USPS cost-saving tactic the past few years. That, coupled with stabilizing mail volumes and high turnover among the non-career workers, has caused the USPS’s hiring needs to explode – to the tune of 117,000 new employees last year and a projection for 125,000 newbies this year. (See Postal Service Revs Up Its Hiring.)

And with other big employers like Walmart and McDonald’s recently boosting their minimum pay, the Postal Service faces stiffer competition for new employees willing to work for relatively low pay and limited benefits. It can’t afford to have a bad reputation, backed up by data, for being a lousy employer.

A USPS spokesperson told InsideSources that the agency has “assembled a dedicated, high-performing Employee Engagement team of employees who have begun the process of training all our postal leaders (tens of thousands) to translate” the survey’s results “into a Daily Mission. We will hold postal leaders accountable for actively identifying and correcting their work environment issues in order to achieve a more satisfied and productive workforce, ultimately resulting in more satisfied customers.”

The USPS didn’t become such a toxic workplace solely because supervisors don’t know how to lead, so training alone won’t fix what ails it. A mess this big requires massive culture change, which usually means a thorough overhaul of how an organization hires, promotes, evaluates employees, and communicates with them, among other things.

Related articles:

Thursday, April 21, 2016

This Environmental Advice Really Blows!

Magzter's green claims contain enough BS to fertilize an entire forest.

So here we are, ready to celebrate the last Earth Day before President Trump outlaws climate change. Or builds a wall around it. Or sends it back to Kenya where it came from.

Whatever. In any case, it’s time for the Dead Tree Edition Research Institute’s annual look at dubious environmental achievements.We have two awards to hand out this year:

The Toshiba Award for Shameless Greenwashing goes to Magzter, one of the world's leading sellers of digital magazines, for its bold, unfounded claim that it has "saved" more than 92,000 trees.

Nowhere does its web site provide any substantiation for its claims or how they were calculated. Nor does Magzter reveal anything about its own environmental footprint or policies.

How paper is really made
What makes the claims especially hypocritical is that Magzter makes its money from selling the content of magazine publishers. So it's basically accusing its business partners of killing trees.

I'll bet some of those business partners, including environmental leaders like Hearst and Time Inc., are far more scrupulous than Magzter about their environmental practices. They're certainly more transparent.

Magzter's claims are reminiscent of Toshiba's infamous shoot-ourselves-in-the-foot National No-Print Day campaign from four years ago that was supposed to raise awareness “of the impact printing has on our planet” but was full of unsubstantiated claims and outright falsehoods. That was especially embarrassing because Toshiba makes presses and other products for the printing industry -- and has an environmental record that's almost as sloppy as its accounting.

Advice to Toshiba, Magzter, and their greenwashing ilk: Read this Milwaukee Journal Sentinel article about how declines in Wisconsin's paper industry are threatening the health of its forests. Or study TwoSides' new infographic "Busting Myths About How Paper Is Made."

The not-so-coveted This Really Blows Award goes to the folks who've been touting the Dyson Airblade hand dryer as a green alternative to paper towels.

The Airblade is apparently the most energy-efficient hand dryer on the market. And it's powerful enough that users rarely have that "Damn, my hands are still wet" experience that causes them to wipe their hands on their pants.

But some of the research touting it as a green alternative to paper towels has been flawed. Like the Rochester Institute of Technology study that assumed the paper towels contained only virgin fiber and were transported from the mill by truck (not rail) -- and that didn't account for whether the mill used hydro power or other carbon-neutral sources of energy. In other words, the study didn't consider the possibility of switching to more environmentally friendly paper.

The real trouble, however, arose with a recent Journal of Applied Microbiology article revealing that, as Popular Science put it, Airblades were "spraying 1,300 times more viral plaques (clumps of viruses) than paper towels, and sending some of them nearly 10 feet from the dryer itself." That's on top of an earlier study indicating that jet-air dryers like the Airblade "spread 27 times more bacteria than paper towels."

So don't try to go paperless by switching from paper towels to hand dryers. You'll just end up using more tissue paper to blow your nose or more toilet paper to -- oh, never mind.

Other articles featuring Dead Tree Edition's offbeat perspective on Earth Day and print media include:

Monday, April 18, 2016

Good Money After Bad? Mailers Try to Block FSS Expansion

An FSS machine: savior or white elephant?
Where the U.S. Postal Service sees an opportunity to expand the Flats Sequencing System to more ZIP codes, mailers see a backdoor rate increase.

Postal officials recently told mailing-industry representatives that declining volumes and some equipment upgrades are creating excess capacity for the FSS. At a meeting of the Mailers Technical Advisory Committee (MTAC), they proposed having the football-field-sized machines process the mail for additional ZIP codes.

See ya in court!
Irate mailers and printers responded by threatening to shift more business to alternate delivery -- private services that bypass the USPS. And they pointed out that the change would in essence be a rate increase for catalogs, publications, and other flat mail. In other words, a legal challenge is possible. (See FSS -- A Four Letter Word for some great insights and additional developments regarding FSS expansion.)

Publication printers are perturbed that they already have to absorb extra costs from handling and shipping FSS mail, without their customers getting any benefit. What’s especially galling is that, no thanks to postal officials, the printers’ expansion of co-mailing is the one recent investment that has brought about significant savings for both flats mailers and the USPS.

Mail that's been sorted by an FSS machine
The catalog and magazine industries are still smarting from a string of broken promises about FSS. They’re in no mood to support an alleged “efficiency” change that appears to be more about saving face than saving money.

Postal officials, including two previous postmaster generals, repeatedly promised mailers that FSS mail would cost no more than traditional carrier-route mail. That made sense: FSS was supposed to save the Postal Service lots of money by automating the labor-intensive process of sorting flat mail into walk sequence.

But it hasn’t worked out that way. On a recent (post-April 10) Standard Class postage statement I examined, FSS-sorted catalogs cost at least 7% more than the equivalent carrier-route pieces.

Today's vocab word: "obfuscatory"
The USPS has given coyly obfuscatory answers to recent questions about its FSS costs, telling the Postal Regulatory Commission a few weeks ago that it had not calculated the return on its $1.4 billion FSS investment. But clearly the system hasn’t worked as planned, and the high FSS postage rates bolster widespread suspicions that the system is still a money loser.

Why then, mailers ask, should the Postal Service throw good money after bad by shifting mail that is mostly in carrier-route bundles to FSS processing? It looks like a lose-lose for both mailers and the Postal Service, except for providing the face-saving illusion that the FSS is working.

Postal officials explain that the FSS would run more efficiently if it didn't have so much excess volume. They told MTAC that the labor-saving high-speed flats feeders they are installing will boost the machines’ throughput by 15% to 20%.

Related articles: