Why Is The Manhattan DA Looking At Newsweek’s Ties To A Christian University?

Note from the Editors: As we were reporting this story, Newsweek Media Group fired Newsweek Editor Bob Roe, Executive Editor Ken Li and Senior Politics Reporter Celeste Katz for doing their jobs. Reporters Josh Keefe and Josh Saul were targeted for firing before an editor persuaded the company to reverse its decision. As we continued working on the story, we were asked to take part in a review process which, we ultimately learned, involved egregious breaches of confidentiality and journalism ethics. We believe that subjects of the story were shown parts of the draft, if not the entire piece, prior to publication by a company executive who should not have been involved in the process. At an on-the-record interview with the subjects of this story, a company official asked editors to identify confidential sources. On-the-record sources were contacted and questioned about their discussions with Newsweek Media Group reporters. We resisted their efforts to influence the story and, after learning of the review’s ethical failings, the reporters and editors involved in this story felt they would be forced to resign. At that point, a senior Newsweek Media Group executive said the company's owners would ensure independent review and newsroom autonomy going forward. This story was written and edited Tuesday, free of interference from company executives.

Signed: Dayan Candappa, Nancy Cooper, Cristina Silva, Ross Schneiderman, Michael Mishak, Josh Keefe, Josh Saul.

In the summer of 2016, Olivet University, a small, California-based Bible college, was preparing to build a satellite campus in Dover, a town in upstate New York. As the school’s development arm sought tax breaks and construction permits from the town, it made a surprising offer to county officials: Would they like free advertising in Newsweek?

The officials were skeptical, but they soon received emails from the magazine’s ad department with details. “We thought it was awfully odd that someone would say, ‘We would like to provide you with full-page ads,’” Assistant County Executive Ron Hicks recalled in an interview.

County leaders accepted the offer. And over the course of three months last year, Newsweek ran 10 full-page spots — worth about $149,000, according to the publication’s ad rates—promoting Hudson Valley Regional Airport and Dutchess County tourism, all free of charge at a time when the magazine’s parent company was in financial distress.

The previously unreported arrangement provides a window into the relationship between Olivet and Newsweek Media Group, the financial ties of which the Manhattan district attorney’s office is now scrutinizing as part of a long-running fraud probe, according to sources with knowledge of the investigation.

In January, investigators raided the media company’s lower Manhattan headquarters and removed 18 computer servers. The probe, which started more than a year ago, is focused, in part, on loans that the company took out to purchase the computer equipment.

It’s unclear whether DA investigators are looking into other financial transactions by Newsweek Media Group. In recent years, the media company has paid Olivet millions of dollars for licensing and research and development agreements, tax records show. After the raid, Olivet distanced itself from Newsweek Media Group, saying in a statement that its financial ties to the media organization were limited to those deals.

The Dutchess County advertising arrangement, however, raises questions about the extent of those ties. After Newsweek learned of the deal, Johnathan Davis, co-founder of the magazine’s parent company, and his wife, Tracy, who is president of the university, acknowledged the ties were deeper than they had previously stated on the record.

In an interview, Johnathan Davis said he was not personally involved in the ad agreement, but he described it as a “public good.” He characterized Olivet University, where he once served as an academic adviser, as “our friends.”

“Helping each other,” he said, “is not a crime.”

‘An Arm of His Church’?

IBT Media, which bought Newsweek in 2013 and rebranded itself as Newsweek Media Group last year, has long faced questions about its relationship with Olivet.

Founded more than a decade ago, the Bible college has a small student body of just 1,100 and a main campus in Anza, California, as well as several extension sites across the country. It is part of a network of ventures affiliated with David Jang, the president of an evangelical group known as World Olivet Assembly. Jang became controversial in evangelical circles after some of his former followers said they were led to believe he is a messianic figure called the “Second Coming Christ.”

Davis, who is one of five current or former top officials at Newsweek Media Group who have held roles at Olivet, said the school played a key part in the founding of IBT, which launched in 2006, two years after Olivet became a university. Among other things, the school helped set up IBT’s office space and provided a pool of editorial interns to produce content for the fledgling digital publisher. Davis said he partnered with Olivet because it produced “quality graduates” who shared his evangelical worldview. He also said he tapped the college’s professors for advice and consulted Jang as the company grew.

Most importantly for the company, Olivet provided it with its digital publishing and advertising systems. In turn, IBT paid the school more than $2.8 million for research and development and licensing agreements, according to tax records that list the company as a former trustee of Olivet. “We wouldn’t have a company without their help,” Davis said. “We’re re-paying back that technology investment that they gave to us.”

According to a Mother Jones investigation, the media company achieved its early success by employing international Olivet students in the U.S. on student visas to write and translate articles for little pay, a violation of the terms of those visas. (The company denied the allegations in the report, saying it ran an internship program and that no one was allowed to work illegally.) Internal IBT budget documents that Mother Jones obtained also showed that the company made donations to Olivet even as IBT struggled to pay its rent. Tracy Davis acknowledged to the publication that Olivet had received IBT donations.

Over the years, at least one advertiser started asking questions about the relationship. In 2015, advertising company Content.ad sued IBT in California, alleging that IBT failed to deliver on an advertising deal and owed the firm more than $400,000. The suit named Olivet and Jang as co-defendants, claiming that the religious leader intermingles the assets of the school and the media company. “IBT was not formed as a legitimate media company, but rather was set up by Jang to be a for-profit commercial enterprise as an arm of his church,” Content.ad alleged. IBT, which denied the charges, settled the suit in November 2016 for the full amount the advertising company said it was owed, according to court papers.

Dev Pragad, Newsweek Media Group's CEO, along with Johnathan Davis, declined to discuss the lawsuit. Davis, however, said Jang had no “formal” role in the company and served simply as an adviser. “We sought advice everywhere to build the company, and given his background, we valued his advice,” he said. “But the decision-making for the company was ours and ours alone.”

‘Nobody Gives Away Media’

Two summers ago, Olivet and its development arm were seeking permission to begin the first phase of their project in Dutchess County. The school had purchased the site of the defunct Harlem Valley Psychiatric Center for $20 million in 2013, promising to turn the abandoned medical facility into a thriving campus, as well as a retail and technology hub. But some of its development company’s work resulted in large government fines: In 2014, the U.S. Department of Labor said the developer “knowingly failed to take basic safety precautions” and exposed workers to asbestos and lead hazards. The case was settled for $700,000.

By mid-2016, Olivet’s development arm, now called Dover Greens, was seeking construction permits and battling with the town over tax exemptions for hundreds of acres of property. The school and Jang’s affiliated organizations now own at least 2,739 acres in Dover alone, according to the town’s latest tax rolls.

As the bureaucratic skirmishes continued, Dutchess County officials said they received word of free advertising, first from Dover Greens—and then Newsweek. “I had said, ‘Nobody gives away media—there’s no way this is for real,’” said Katherine Saunders of DCI, a New York City marketing firm Dutchess County uses to promote its economic development programs.

Marian Rebro of Dover Greens said his firm’s push for free advertising in Newsweekhad nothing to do with its efforts to secure tax exemptions and permits. The town, the developer pointed out, has final say over those (though the county must review permit applications before anyone gets final approval). The company, Rebro said, simply wanted to help promote a new county initiative called the Think Dutchess Alliance for Business after seeing a presentation by the regional Chamber of Commerce. “I spoke to Etienne,” said Rebro, referring to Etienne Uzac, the co-owner of Newsweek Media Group and former treasurer and vice chairman of Olivet, “and asked him whether there is any way we can support or help this initiative and passed him the ball.”

At the time, Newsweek’s parent company faced significant financial troubles. In 2016, it missed payroll and laid off dozens of staffers. That August, the company fell behind on its rent and utility payments, according to its landlord, which later took the company to court for $450,000 in unpaid bills. (The company countersued and won a temporary restraining order last week.)

Davis defended the ad arrangement, saying Newsweek had little paid print advertising at that time. “If you look at the print ad space, there’s no one running ads. That’s part of the problem,” he said. “So it’s a favor that we can do. And I wasn’t involved in that deal, but why not?”

Regardless, in November 2016, Saunders got an email from a member of Newsweek’s ad sales team. The magazine representative said she’d been directed to follow up by “Etienne and Dev,” an apparent reference to Uzac and Pragad, who was a former academic adviser at Olivet. Pragad declined to comment on the ad deal. Uzac did not respond to requests for comment.

Between March and May 2017, Newsweek ran 10 full-page ads on behalf of Dutchess County. One featured pictures of the Culinary Institute of America and the Franklin D. Roosevelt National Historic Site, with the tagline, “You only live once.” Another, for the area’s executive airport, pictured a luxury jet and the slogan, “When minutes count… Take the newest shortcut to Manhattan.”

The ads came at a tumultuous time for the company. In May, the IRS placed a tax lien on the company for failing to pay more than $400,000 it owed the federal government. (The IRS also hit IBT co-founders Davis and Uzac with tax liens of $3.1 million and $1.2 million, respectively, in late 2017.)

After the final ad appeared, Dover Greens posted a picture on its website of Dutchess County Executive Marc Molinaro seated with two representatives of the developer at the county office in Poughkeepsie, New York. On a coffee table in front of Molinaro is a copy of an issue of Newsweek that featured one of the free full-page ads. The Dover Greens officials brought the magazine to the meeting, which was arranged to discuss the Olivet project and other county issues, according to Dutchess County government spokesperson Colleen Pillus.

For Olivet, whatever good will the ads may have generated with the county did not appear to extend to the town’s government. Dover Greens and the town’s tax assessment board battled over tax exemptions for Olivet land for more than a year, before the developer withdrew its lawsuit. Dover’s assessor, Judy Hyatt, declined to discuss the case.

Meanwhile, Hicks, the assistant county executive, said Dutchess County still showcases the Newsweek ads as part of its economic development work.

“I didn't think we ever sent a thank-you,” he said. “I don't think we knew who to send a thank-you to.”

Celeste Katz contributed reporting to this article before she was fired.