The company that publishes the Morning Sentinel is accusing its former chief executive of misusing more than $500,000 in company money.

Richard L. Connor, who ran MaineToday Media from June 2009 until he left for undisclosed reasons in October 2011, gave himself unauthorized salary increases, according to a memo released to company employees on Wednesday by Lisa DeSisto, MTM’s current publisher.  Connor also used company funds to pay for personal expenses, including credit card bills, a new SUV and vacation home rentals, DeSisto said.

In the letter to employees, DeSisto disclosed that Travelers Casualty & Surety Co. has paid MaineToday Media $537,988.68 – minus a $50,000 deductible – under the company’s employee theft insurance policy, to recoup money that the company says Connor took for unauthorized personal use. The payment took place in December.

“It has taken several independent forensic accounting reviews and almost a year, but today I’m sharing the results of those reviews with you,” DeSisto wrote.

She said the money would be reinvested in the company.

In an interview Wednesday, Connor said he is being wrongly accused. He said he tried to clear up financial questions with MaineToday Media before his departure but that the company wouldn’t cooperate. Most of the expenses that MaineToday Media claims were misused were legitimate, Connor said, and he’s prepared to work with Travelers to sort things out.

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“They’re wrong, and they’re lying,” he said of the details disclosed in the memo. “It’s going to get resolved, and get resolved in my favor.”

In her letter, DeSisto also raised “the possibility of further legal action on these issues,” but in an interview she declined to elaborate.

Tom Fitzpatrick, an attorney representing MaineToday Media, didn’t rule out legal action but said the company wants to “move on and put Rich Connor behind it.” Fitzpatrick said the company decided to seek recovery through its insurance policy, rather than court action, because it seemed to be a more reliable way to recoup money.

But it remains possible that the matter could result in some form of litigation.

Connor isn’t disputing that he spent the money, but he is denying that most of it was spent for unauthorized personal use, according to Peter Bennett, a lawyer representing Connor. Bennett said his client is contesting the “spin” put on the charges.

“We have contemplated taking action because we believe there are people out there unfairly trying to destroy Rich Connor’s reputation,” Bennett said.

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He didn’t elaborate on what action might be considered.

The company’s disclosure, and Connor’s denials, raise fresh questions about how Maine’s leading media company found itself on the brink of bankruptcy in 2011, when it was forced to make deep staff cuts and was unable to pay some of its creditors.

While details are in dispute, Fitzpatrick said it’s clear that the company was in “extreme economic distress” during a period that Connor allegedly was misusing a large sum of company money. Asked if the $537,988.68 paid by Travelers represents a full accounting of the alleged misused money, Fitzpatrick said it’s the amount that the insurance company identified under its definition of employee theft.

“Travelers has no dog in the hunt,” Fitzpatrick said. “They determined he took $537,988 that didn’t belong to him.”  

In her letter to employees, DeSisto listed several expenses that made up the $487,988.68 that the company ended up with after the deductible.

The expenses include:

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 $287,224.78 in unauthorized salary increases and bonuses.

 $90,381.32 in unauthorized personal expenses charged to company credit cards.

 $70,352.49 in unauthorized payment of personal American Express card bills with company funds.

 $36,089.74 in unauthorized compensation for and use of company automobiles, including the purchase of a new Chevrolet Suburban for his son three days after Connor started at MaineToday Media.

 $22,940.35 in unauthorized hand-written checks drafted by or at the direction of Connor, for items including home landscaping, personal dental work and a $6,000 Camden vacation rental.

 $16,000 in unauthorized use of company funds to pay for another Camden vacation rental.

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 $10,000 in an unauthorized wire transfer to Richard Connor.

 $5,000 in claim expenses.

DeSisto said in her letter that Connor was able to conceal his activity because managers who had financial oversight at the company were frequently replaced. She noted that MaineToday Media had four chief financial officers in just over two years.

“When the former board of directors finally selected and installed its own, trusted CFO (chief financial officer) it was only a matter of a few months before Mr. Connor’s financial self-dealing was uncovered and he was out as CEO,” she wrote.

DeSisto also pointed to a lawsuit in Pennsylvania as another example of Connor’s spending patterns.

Last spring, Connor was sued by Wilkes-Barre Publishing LLC in federal court in Pennsylvania. At issue were allegations that Connor had used money from that company for personal expenses, including credit cards, and failed to repay more than $250,000. Connor subsequently claimed that, because of The Times Leader newspaper’s financial problems, he had an agreement that allowed him to offset the spending to equal his voluntary pay cut, unpaid bonuses and unused vacation time.

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In an interview Wednesday, Connor blamed the issue in Wilkes-Barre on poor accounting and the sharing of expenses between the Maine and Pennsylvania newspapers. He said he was working to resolve the lawsuit there.

In response to some of DeSisto’s charges, Connor summarized his reasons for the purchase of the new Chevrolet Suburban and the Camden vacation rentals.

The SUV was purchased right away to provide transportation for six or so consultants, including his son, who were working on the purchase transition. Buying the vehicle actually saved money, he said, compared to renting a car.

Connor said the Camden vacation property was used as temporary housing for his family over the summer of 2009, when he was looking for a home. Connor and his family currently live in a home in Falmouth Foreside that was valued in 2011 at roughly $2.4 million. Last October, Connor and his wife, Deborah, transferred ownership of the property to a trust in which his wife is the sole trustee, town records show.

Connor entered the Maine media market as a white knight in 2009. Struggling with debt brought on by the recession and by the payment of an elevated purchase price for the Press Herald and other properties in 1998, the Seattle Times Co. sold its media holdings in Maine to an investment group headed by Connor. The sale in June 2009 capped a 15-month effort to find a buyer and revive Maine’s largest media company, which had been diminished by cutbacks.

Connor lined up private equity and bank financing with the promise that Maine advertisers would support community-minded newspapers that featured strong local news coverage. He also capitalized on buying the company’s valuable real estate at bargain prices, and selling most of the buildings early on to pay down loans.

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The formula seemed to work at first, and Connor was widely praised in Portland’s business community for saving the city’s newspapers. In 2010 he received the President’s Award from the Portland Regional Chamber of Commerce.

“Rich Connor’s purchase and leadership has revitalized these newspapers,” Godfrey Wood, the chamber’s former CEO, said at the time.

But the optimism soon waned. Early in October 2011, the Press Herald suffered 61 layoffs, mostly in the newsroom. Connor blamed a decline in ad sales for the cuts. The layoffs were linked to mounting financial problems that left MaineToday Media insolvent and negotiating with creditors.

A few weeks later, Connor announced that he was resigning as CEO of MaineToday Media. He cited personal reasons and a round-the-clock work schedule. He also announced that he was resigning as CEO of the parent company of The Times Leader in Wilkes-Barre.

Last July, Connor was named CEO of Foster’s Daily Democrat in Dover, N.H. He continues to hold that position as a part-time consultant, he said.

“We’ve worked very well together,” said Patrice Foster, president and publisher. “We’ve had a very positive relationship so far.”

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Since last March, MaineToday Media has been owned mostly by S. Donald Sussman, a financier and husband of U.S. Rep. Chellie Pingree, D-Maine. Sussman’s office said he had no comment and referred questions to the company’s public relations firm and Fitzpatrick.

Asked about the company’s current financial health, DeSisto declined to say whether MTM is profitable but said it met budget projections for the first three months of the year. She defined 2013 as “an investment year,” with various projects under way, including computer upgrades and new management systems for content and circulation, and further staff additions.

The company’s memo was welcomed by workers who felt they were betrayed by Connor, according to Tom Bell, president of the News Guild of Maine, which represents 200 employees at the Press Herald and Morning Sentinel in Waterville. Workers agreed to a 10 percent pay cut and pension freeze in 2009, with the understanding that Connor would turn the newspaper around, Bell said. Two years later, it was in worse shape with little investment, he said.

“Our members have been very angry about what Rich Connor did,” Bell said. “We trusted him. We’re angry that there wasn’t any accountability for what he did. This memo is very gratifying to our members. We want to get word out about what he did.”


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