By: Lucia Moses

World-Herald Explains Gambling Connections

The recent sale of The Daily Nonpareil in Council Bluffs, Iowa, was unusual in a few ways.

The paper returned to local hands for the first time in 35 years, bucking a national trend toward chain ownership. And its new manager, the Omaha World-Herald Co., just across the Missouri River in Nebraska, is one of the few U.S. newspaper companies that is employee-owned and serves the entire state. But the aspect of the Oct. 31 deal that raised eyebrows in the journalism community was the paper’s partial purchase by the Iowa West Foundation, which is indirectly funded by casino gambling.

The nonprofit entity gets its funding from investments and the Iowa West Racing Foundation, the nonprofit license holder for three casinos in Council Bluffs. It now owns 20% of the Nonpareil; the remaining 80% is split equally by the World-Herald Co. and a group of local investors. The sale price wasn’t disclosed.

Executives at both the World-Herald Co. and Iowa West said the Nonpareil will operate independently. “We don’t know anything about the newspaper business,” said Jerry Mathiasen, the foundation’s associate director. “That’ll be up to … World-Herald.”

But observers said the foundation, while it may be merely a minority partner, casts a shadow that could threaten the paper’s credibility.

“Anytime you have a business relationship with someone, there are going to be questions about the coverage,” said Gilbert Cranberg, journalism professor emeritus at the University of Iowa.

Gambling is big business in southwestern Iowa, and the foundation’s charitable influence is felt throughout the region. According to its annual report, it gave away $10.8 million to 93 organizations in 1999. Its grants have helped build an arts center, a library, and a 911 center.

“Iowa West and the three casinos have done a good effort to put out a good face in the community,” observed Harlan Vogel, treatment coordinator at Family Services, a local gambling treatment provider that has received grants from Iowa West.

The Omaha World-Herald has consistently editorialized against extending gambling to Nebraska, and that stance won’t change, said John Gottschalk, chairman of the World-Herald Co. and publisher of the World-Herald. As for Iowa West’s gambling link, he said, “This is not an institution that is owned by, governed by, gambling interests.”

In contrast, The Daily Nonpareil, circulation 16,807, has been supportive of gambling in its

area – since, said its editor, John Leu, “We’ve not seen any real evidence that it’s hugely bad.”

Under the previous owner, Denver-based MediaNews Group Inc., Leu’s publisher reviewed his editorials before publication. Leu sensed that he would have more independence now. After the sale, he asked a World-Herald executive how editorials would be handled and was told, “You know the issues in town better than we do. Just put it in the paper.”

Council Bluffs community leaders had approached the World-Herald Co. before for help

in buying the paper, but the foundation entered the picture only recently, Gottschalk said. He compared Iowa West’s role to that of the Peter Kiewit Foundation, which owns 20% of the World-Herald Co. (the rest is employee-owned) and serves to ensure its continued local ownership.

The Nonpareil will have ample opportunity to show its independence on the issue. Gambling is on the rise, as are the problems associated with it, the paper reported recently. Controversy erupted earlier this year about the use of state funds to treat problem gamblers. In two years, voters will consider a referendum to keep gaming in Council Bluff’s Pottawattamie County.

Gottschalk said, ultimately, the marketplace will decide if the World-Herald Co. keeps its promise. “We have a strong reputation for integrity and credibility,” he said, “and if readers perceive the newspaper’s not trustworthy, they’ll respond to that – and the business will suffer.”

Lucia Moses ([email protected]) is an associate editor covering business for E&P.

Copyright 2000, Editor & Publisher.

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