The National Enquirer has long explained its support for Donald Trump as a business decision based on the president's popularity among its readers. But private financial documents and circulation figures obtained by The Associated Press show that the tabloid's business was declining even as it published stories attacking Trump's political foes and, prosecutors claim, helped suppress stories about his alleged sexual affairs.
The Enquirer's privately held parent company, American Media Inc., lost $72 million for the year ending in March, the records obtained by the AP show. And despite AMI chairman David Pecker's claims that the Enquirer's heavy focus on Trump sells magazines, the documents show that the Enquirer's average weekly circulation fell by 18 percent to 265,000 in its 2018 fiscal year from the same period the year before — the greatest percentage loss of any AMI-owned publication. The slide follows the Enquirer's 15 percent circulation loss for the previous 12 months, a span that included the presidential election.
More broadly, the documents obtained by the AP show that American Media isn't making enough money to cover the interest accruing on its $882 million in long-term debt and that the company expects "continued declines in circulation and advertising revenues" in the current year. That leaves AMI reliant on debt to keep its operations afloat and finance a string of recent acquisitions that are transforming the tabloid news industry.
That creditor backstopping AMI is a New Jersey investment fund called Chatham Asset Management. Its top executive dined with Pecker and Trump at the White House last year, and the fund has both a history of Republican political donations and ties to the administration of former New Jersey Gov. Chris Christie, which awarded it hundreds of millions of dollars in state retirement funds to manage.
AMI's current debts stem from the declining fortunes of the magazine industry and a series of acquisitions. Chatham has kept this number from ballooning further by converting some of the debt it is owed into shares in the company.
The publisher's precarious financials and reliance on Chatham are a backdrop to the publisher's growing entanglement in a federal investigation of allegations of hush money payments and violations of campaign finance laws.
Trump's longtime personal lawyer, Michael Cohen, pleaded guilty last week to criminal violations of campaign laws, accepting prosecutors' claim that he, Trump and the National Enquirer were involved in buying the silence of an adult-film actress and a former Playboy model who claim to have had affairs with Trump. Pecker and his top editorial deputy, Dylan Howard, have both received immunity in exchange for their cooperation. Along with Cohen, they are among the latest longtime Trump loyalists to be swept up in the federal investigations engulfing the president and his inner circle.
Neither AMI nor company officials have been charged in the case.
AMI did not provide an on-the-record response to detailed questions from the AP sent to Howard, Pecker and its outside spokesman. But a confidential financial document obtained by the AP argues that investors should focus on its current cash flows and not its profitability. Over the last two years, it has generated a combined $12 million cash flow from operations even as it has posted $160 million in overall losses.
AMI's brush with a campaign finance probe comes amid its recently announced efforts to refinance as much as $450 million in debt. Despite the company's recent purchases of US Weekly and rival gossip publisher Bauer Media, revenue from AMI's existing publications continues to drop, the financial report obtained by the AP shows.
Pecker has long maintained an aura of absolute control over the Enquirer and its sister publications, boasting of his willingness to spend AMI's money to benefit Trump.
"The guy's a personal friend of mine," he told The New Yorker magazine last summer, explaining why AMI paid former Playmate Karen McDougal $150,000 in a deal that prevented her from going public with her claim that she'd had an affair with Trump.
But Pecker owns only a small fraction of AMI, around 8 percent, according to the company. More than 80 percent of AMI — as well as hundreds of millions of dollars of its debt — belongs to Chatham Asset Management, with billionaire investor Leon Cooperman owning an additional 7 percent.
Chatham declined to address questions about the Enquirer's relationship with Trump or the future of its investment in AMI. But the firm released a statement saying Chatham "has no involvement in the editorial process or the day-to-day business decisions of the company."
David Larcker, a Stanford Business School professor who studies private equity and corporate governance, said it is normal for a firm like Chatham to give a company like AMI a long leash. But the firm would be expected to investigate any time "something large and unexpected happens" at a company it controls on behalf of the investors who are its limited partners. A firm like Chatham "would owe the LPs an explanation," he said.
Among Chatham's largest investors, according to public records, is New Jersey's public pension fund. Chatham manages investment decisions for more than $300 million in pension holdings for the state.
Asked about AMI's alleged involvement with campaign finance law violations and hush money payments, state Treasury spokeswoman Jennifer Sciortino told the AP that "we expect our investment partners to invest in good businesses with strong management teams that follow all applicable laws." She declined to say whether New Jersey had discussed AMI with Chatham, but said, "We are in regular contact with our investment partners regarding underlying portfolio companies and we provide feedback when appropriate."
In an interview last Friday, Cooperman deferred most questions to Chatham and AMI, describing himself as a passive investor and calling his 7 percent stake in the company "negligible." Cooperman didn't offer any thoughts about AMI's alleged involvement with hush money payments, but he expressed confidence in Pecker. "I think he's a very good quality guy, and is doing a good job running the company," he said.
The confidential financial document obtained by the AP states that AMI's $882 million in long-term debt owed to creditors as of March is a competitive disadvantage that may compromise its ability to launch new projects, borrow additional money or even pay for "general corporate requirements."
Cooperman told the AP that AMI has lined up a prominent investment bank to help with its upcoming effort to raise capital and that he expects a prospective deal to be launched after Labor Day. He said he expects AMI to convert more of its debt to shares in the company as part of that refinancing.
While the details of AMI's financial difficulties described in the confidential document haven't been previously reported, the prospect that Pecker and AMI might not protect Trump's secrets forever has long been a concern. Trump and Cohen even discussed the possibility that the ties between Trump and the National Enquirer might someday unravel.
In July, Cohen released an audio recording in which the men discussed plans to buy McDougal's story of an affair with Trump from the National Enquirer. Such a purchase was necessary, they suggested, to prevent Trump from having to permanently rely on a tight relationship with the tabloid.
"You never know where that company — you never know what he's gonna be," Cohen says.
"David gets hit by a truck," Trump says.
"Correct," Cohen replies. "So, I'm all over that."
According to the documents accompanying Cohen's guilty plea last week, Trump's purchase of McDougal's story never occurred.