This story was reported for the San Diego News Network on May 19, 2010.
Mikey Rox, a New York City freelance writer, was owed $600 when he stopped submitting his articles to San Diego’s Gay & Lesbian Times in February 2009. That represented a year’s worth of work.
Rox says he tried contacting the magazine’s publisher Michael Portantino and associate publisher Todd Klein, but received no response. So he created a Facebook page to blast the magazine for nonpayment and poor communication with its writers. Klein got in touch and Rox was paid in full within the week. But writers aren’t alone in having trouble getting paid. Others are still getting the runaround.
An investigation into the local news magazine’s circulation shows a publication struggling to meet its bills. As one CPA put it, documents related to the business provide a snapshot of a company in “severe financial turmoil.”
“I think it’s a joke, and I think Michael and Todd are crooks,” Rox wrote in an e-mail response to SDNN’s questions. “I’m a small business owner too and I run a clean operation. If there’s not enough money in the account to pay vendors, I don’t hire them. Bottom line: I hold the companies with which I do business to the same standard.
“If the GLT can’t pay its content providers then it shouldn’t exist,” Rox continued. “It has become a disgrace to the community it serves. Michael and Todd should be ashamed of themselves.”
The documents obtained by the San Diego News Network and media partner San Diego Gay & Lesbian News — which include printing invoices, business and merchant account bank statements, copies of checks, and state and federal tax records — show that the GLT, one of San Diego’s oldest gay print publications, is struggling to pay vendors, owes back taxes to the IRS, and carried a negative balance in a business bank account for 34 of 38 days in January and February. At this rate, the GLT runs the risk of becoming the next gay magazine to go under in the U.S. as the economics of publishing collapse.
Les Euell, a veteran newspaper publisher who lives in Riverside County, said that the GLT has badly damaged its good name and reputation in the community.
“Credibility is far greater than the sum of money in the bank or the accumulation of debt,” Euell said. “As they say, once you lose it, you don’t have it any more.”
In a joint investigation, SDNN.com and SDGLN.com reported last week that the GLT lied to advertisers about its circulation. Sales people told potential advertisers the magazine prints 15,700 copies each week. Printing invoices show the magazine cut its circulation to 10,000 copies weekly in September 2009 and to 9,000 copies in February and March of this year. Advertisers with contracts were not notified of the steep decline; neither was Rivendell Media, the publication’s national advertising coordinator.
Euell said discovery of the inflated circulation figures are a double whammy for the GLT.
“Over-inflating circulation numbers erodes both advertiser and reader confidence,” Euell said, noting that the fuzzy-math practice is both morally dishonest and legally fraudulent.
“It makes readers mistrust what any publication reports as a paper, which, by its very nature, is a sacred trust,” he added. “But then advertisers, who have placed their advertising dollars into the paper, are buying something that is much less than what they thought they were buying. All of this erodes confidence of readers and advertisers, and gives the industry a bad name.”
According to Thomas Hughes, a local criminal defense attorney, the GLT’s misrepresentation of circulation could violate state law. Prosecutors would have to prove the GLT knowingly and intentionally lied to advertisers for financial gain. The source who provided the supporting documents has filed a complaint against the publication with the San Diego County District Attorney’s office and the Federal Bureau of Investigations.
CPAs who reviewed the documents analyzed them in broad terms. Still, they agreed that the federal tax lien for $45,592.44 is a serious debt and that the IRS often aggressively pursues repayment in such cases. Also, a $124,546.27 outstanding debt to the magazine’s printer demonstrates that the magazine is having trouble paying vendors. The cost of each weekly printing is $4,000 to $7,000. The debt has accrued just since September 2009.
“This is a business that is in trouble,” said Larry Katz, a local CPA who reviewed the documents.
Portantino and Klein did not respond to an e-mail requesting comment.
Financial turmoil
In an April 29 editorial in the GLT, the magazine took a local nonprofit to task for fraud and financial mismanagement. According to the nonprofit’s former employees, the nonprofit lied about how many clients it served and took in $46,000 less in revenue last year than it did the previous year. The GLT editorial pointed out, “Fraud is fraud.”
Taking others to task for financial deception or mismanagement is standard for the magazine. Notably, it raked former District 3 City Councilwoman Toni Atkins over the coals for her role in San Diego’s pension crisis. But the gay community has been slow and hesitant to criticize the magazine for fear of retaliation. Now the publication is facing financial turmoil of its own, a development that has saddened some in the community and given a sense of satisfaction to others.
The criticisms of its business practices are numerous.
A source says Portantino attempted to slow the cashing of vendor checks by asking staff to stamp the company seal over the routing number on checks to Advanced Web Offset, the publication’s printer. Copies of seven checks to AWO show the company seal stamped over the routing number — thus forcing tellers to manually enter the check information and perhaps leaving the money in the account a bit longer.
The federal tax lien mentioned in last week’s story does not appear to have been paid yet. But in an e-mail response to questions last week, Portantino wrote that he has arranged to repay the debt. Still, the tax problem is not new. The GLT continues to do business as Uptown Publications in print and online but, according to the Secretary of State’s website, the DBA was suspended in March 1991 for failure to file a 1989 tax return. There is no indication it was ever reinstated.
A California Bank & Trust business account statement for San Diego Gay Times Inc. shows a negative ending balance of $16,060.33 on Feb. 26, 2010 despite $87,005.00 in deposits in February that same month.
Some transactions in the bank statements appear to be personal expenses — mortgage, car and utility payments, for example.
There are two wire transfers to Barbara Portantino, Portantino’s mother; $1,200 on Feb. 16 from the San Diego Gay Times merchant account, and $1,000 on Jan. 21 from the business account. There is also a $3,870.62 payment to Central Mortgage from the San Diego Gay Times business account on Feb. 5, and three monthly San Diego Gas & Electric charges. There are copies of checks for $7,000 to a second mortgage Portantino has.
Paying personal expenses out of a business account isn’t illegal — as long as every personal expense paid is documented and reported for tax purposes.
In an e-mail to his staff on March 22, though, Portantino wrote, “Please try and keep in mind that I have not taken a salary for three years to try to keep everyone at full salary and benefits, but that seems to have gone unnoticed and unappreciated.”
San Diego News Network staff members Joseph Peña, Hoa Quach and Eric Yates contributed to this report. As a matter of full disclosure, Joseph Peña is a former employee of the Gay & Lesbian Times.