Ebony magazine has been unprofitable for a decade, and ceased its print publication last year.
Photo: clemens bilan/ShutterstockA bruising fight for control of Ebony magazine has put the future of what was once one of America’s most widely distributed and influential Black-owned media brands in doubt.
Ebony Media Holdings LLC on Thursday was forced into involuntary chapter 7 bankruptcy by its creditors, a move that follows the recent ouster of the company’s chief executive for alleged financial malfeasance and competing claims of who is actually in charge.
Accusations have been flying among the stakeholders, including allegations of secret dealings with cannabis companies, smear campaigns and the sudden emergence of a new shareholder whose criminal history has alarmed the company’s lender.
Ebony has been unprofitable for a decade, and ceased its print publication last year. Its sister publication, Jet, went online-only in 2014 and hasn’t published a story in over a year. The company, which once employed more than 300 staffers back in the early 1970s, now has a staff of five, according to Jacob Walthour Jr., the company’s new senior lender who took over as board chairman in May.
In early July, the board ousted Ebony’s chief executive and principal owner, Willard Jackson, accusing him of a number of questionable transactions aimed at wresting control of the company without the board’s knowledge. Mr. Walthour said a law firm has been brought in to investigate.
In an interview, Mr. Jackson said everything he had done was legitimate and aimed at securing new financing to get the lenders out of the picture. “My sole objective through all of this has been to bring in new capital to buy them out and have new operating capital,” he said.
On July 16, a statement put out on Mr. Jackson’s behalf said he remained the company’s rightful owner. In a counter-statement, Ebony Media Holdings said: “Willard Jackson Jr. holds no leadership position or ownership stake in the company.”
Mr. Walthour said he was attempting to force Ebony into chapter 7—which usually results in liquidation—“not to break it up and sell it off in pieces,” but “to get control of the company.”
Messrs. Jackson and Walthour both agree that Ebony didn’t embrace digital media quickly enough to offset heavy declines in print subscription and ad revenue. With little ad revenue left and no digital-subscription model, most of the value that remains is the Ebony brand.
Both camps have said they had plans to leverage the brand to create a podcasting network and streaming channel to promote the work of Black film and television producers. There were also hopes to restart an events business—like its annual Ebony 100 gala—but no immediate plans to relaunch the magazine in print.
The fight, however, has been over a brand that has resonated less and less with younger audiences over the years, having been eclipsed by digital outlets such as the Root, TheGrio and a community of Black Twitter users for influence.
Founded in 1945 by Chicago businessman John H. Johnson, Ebony sold close to 2.5 million copies a month at its peak in the 1980s, focusing on stories of Black empowerment and success, profiling figures from Sidney Poitier and Diana Ross to Barack and Michelle Obama.
“Ebony was groundbreaking and successful when it started, as it served the unique purpose of telling Black stories and those too often not told in the mainstream media,” said Sarah Glover, who was the president of the National Association of Black Journalists from 2015 until 2019.
Mr. Johnson died in 2005 and left his business, Johnson Publishing Co., which also included a lucrative hair-products and cosmetics empire, to his daughter, Linda Johnson Rice.
Linda Johnson Rice, seen in 2001, left the board of Ebony Media Holdings in 2019, saying ‘the last three years did not result in what I envisioned.’
Photo: Ted S. Warren/Associated PressIn 2016, Ebony and Jet were sold for $7.7 million to Clear View Group, a private-equity firm run by Mr. Jackson and his partner, Michael Gibson. About $4 million was borrowed from Parkview Capital Credit LLC, which extended further loans to Clear View in the following years. Mr. Walthour’s Blueprint Capital Advisors LLC took control of Parkview’s portfolio earlier this year. He said the debt now amounts to a little over $12 million.
Trouble for Clear View began in 2017, when it failed to make its first loan payment. Mr. Jackson said Parkview began insisting it make all financial decisions for the struggling company. Layoffs followed.
In 2019, Ms. Johnson Rice, who had remained on the board of Ebony Media Holdings after the sale, left, saying, “despite my hopes, the last three years did not result in what I envisioned.” That year, Johnson Publishing went into liquidation. Its historic Ebony and Jet photo archive was sold at auction for $30 million to a group of philanthropic organizations.
When Blueprint took over earlier this year, it began a review of the company’s books and discovered a number of transactions that had appeared to have been done without the board’s and the lender’s knowledge, Mr. Walthour said.
The most concerning, in Mr. Walthour’s view, was the appearance last year of new shareholder Robert Shumake, a Michigan businessman with a past criminal conviction for fraud. Mr. Shumake said in an interview that he bought 48% of Ebony Media Holdings from Clear View’s Mr. Gibson in August 2019. Mr. Walthour said the board and the lenders were never informed of the transaction and he believes the transfer documents are fraudulent.
Mr. Shumake said the deal was legitimate and that the board did sign off. At the time, the company’s board consisted of Messrs. Jackson and Gibson.
Mr. Gibson, who remains on Ebony’s board, didn’t respond to requests for comment, but told the Chicago Tribune in an article published Thursday that Mr. Walthour speaks for the board. Mr. Jackson said the board did sign off on the deal. Mr. Walthour said the deal to bring in Mr. Shumake was invalid, because Mr. Gibson owned a part of Clear View, not Ebony, and therefore he “had no legal right to sell a portion of Ebony.”
Mr. Shumake pleaded guilty in 2017 in a mortgage-assistance fraud case in Michigan. A decade earlier, he was sued by Fifth Third Bancorp’s FITB 0.70% Fifth Third Bank, which accused him of involvement in an alleged $10 million mortgage-fraud scheme. Mr. Shumake later settled and agreed to pay back $750,000, according to court documents.
Mr. Shumake declined to discuss his past, but a spokeswoman said those instances shouldn’t be held against him. “The unfortunate circumstance in America for many Black men is that if you Google their name, past mistakes come back to haunt them,” she said.
Mr. Walthour said the board discovered Messrs. Shumake and Jackson had created a series of subsidiary companies using the Ebony name, such as Ebony Entertainment LLC, Ebony Capital Partners and the Ebony Foundation, that the lenders had been unaware of and had never approved.
In recent weeks, several cease-and-desist letters have been exchanged between both parties, with the board demanding that Mr. Shumake stop using the Ebony name for his business activities.
Mr. Walthour also said Mr. Jackson had used crowdfunding to raise capital for two cannabis businesses he was launching, and the review of Ebony’s books showed he may have directed some of the money to the company.
Another transaction that raised red flags, Mr. Walthour said, was a failed attempt by Mr. Jackson to secure financing from an Atlanta-based financial institution, using Ebony as a signatory without the board’s knowledge. Mr. Shumake said he was also concerned about the deal and had contacted the FBI to look into it, although a law-enforcement official said no probe was ever opened.
Mr. Jackson said everything he has done has been to help save Ebony.
“We spent a lot of time and capital investing in this brand and now we have this aggressive lender who has gone rogue on us,” he said.
Mr. Walthour said for Mr. Jackson to blame his creditors for his problems was “entirely self-serving.”
Write to Lukas I. Alpert at lukas.alpert@wsj.com and Lee Hawkins at lee.hawkins@wsj.com
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