Rupert Murdoch Bags The Journal; Ottaway Explodes

“Helping persuade the Denver trust to change its mind was a decision by Dow Jones’s board to create a fund to cover payments to firms advising Bancroft family members, including Merrill Lynch and the law firms Hemenway & Barnes and Wachtell, Lipton, Rosen & Katz. News Corp. would assume these liabilities if it bought Dow Jones. The fees could total at least $30 million, according to people familiar with the situation.”

And, as CNBC later reported, Wachtell Lipton stood to get some $10 million of that money.

So in the final moments, the deal appeared to depend not on what Mr. Murdoch would do with the newspaper, but whether the advisers who had been pushing the deal would be able to recover some $30 million in fees from Mr. Murdoch instead of the Bancrofts. Like a finders’ fee, only paid by the person found.

“There’s a lot of corruption in this deal; people are getting bought off,” said a Journal staffer that morning. And: “How can they claim to be giving independent advice when their fees are paid for by Dow Jones?”

“It’s all coming out of Rupert Murdoch’s pocket,” the staffer continued. “It just looks like The Godfather.”

“I think the No. 1 feeling is unbelievable outrage at the obscene conflict of interest between the lawyers and bankers,” said another Journal staffer, angered by the deal. “These money-grubbing scumbags were conspiring with Zannino from the start to make this deal happen. They had no motivation to present them with a fair and balanced assessment of the company’s prospects.”

“The Bancrofts managed to extort an extra $30 million out of him basically to pay for the costs to sell the company to him,” said one veteran staffer. “It’s disgusting. People in the newsroom have been outraged about that. If he has $30 million to pay off the millionaire advisers who helped arrange the sale, we’d like to see that translate into something that actually makes a difference for the staff.”

“Now the burden is on Rupert,” added the staffer. “He needs to make some commitments to the staff. He has said he’s going to invest in this paper. It’s time he brings that same tremendous bit of financial security to the people who work here.”

Robert Block, a Journal reporter based in the Washington bureau, said that for months there had been a steady parade of Dow Jones executives passing through D.C., trying to restore the faith of worried staffers.

Recently, according to Mr. Block, the management types had begun to change their tune.

“It’s a much more powerful message that I’m starting to hear,” said Mr. Block. “They’re saying that if people leave they should leave for acts that are real, not imagined. In the meantime, everyone should fight for the journalism they believe in. It’s a more powerful message. And I think there’s something noble and romantic about it, which ultimately is more appealing.”

“If the paper’s management were to come out and offer a Henry the Fifth-type speech—we band of brothers, all of us who leave will curse ourselves for not being here and fighting for the things we believe—it could be a really powerful statement to Murdoch, to the industry and to the Bancrofts,” said Mr. Block. “I’m not necessarily sure it has a snowball’s hope in hell of working. But I find the idea moving.”

In addition to Dow Jones management, several Journal staffers were critical of the position of managing editor Marcus Brauchli, who was advising the family, and former managing editor and current editor-at-large Paul Steiger, who oversaw the Journal coverage of the deal despite standing to pocket nearly $4 million in compensation and equity stake if the deal goes through, and possibly a News Corp. board seat too.

For Mr. Brauchli, a newsroom favorite for some time, whose promotion became effective May 15, rebuilding the relationship with reporters may be difficult.