All Herald BrandsMart
A week before Thanksgiving, on Thursday, November 21, the Miami Herald ran a rather laudatory story on the front page of its business section. "BRANDSMART EXPANDING" the headline blared above a large picture of the company's smiling president Michael Perlman. Below the picture was a secondary headline: "Thriving chain outgrows flagship store." The piece by business writer Alina Matas focused on the opening of a new BrandsMart superstore near the Palmetto Expressway and paid homage to the company's ability to grow while its competitors struggle. "BrandsMart's growth has continued despite fierce competition in the electronics and appliance retail segment," Matas wrote.
More subtly, though, the story was also a tribute to BrandsMart's ability to manipulate the Herald into giving it free publicity and bully its reporter into making sure that only the most positive aspects of the company's history were highlighted.
Matas refused to comment for this story, but according to several Herald sources, the article was the idea of the paper's executive editor Doug Clifton. While it is certainly Clifton's prerogative to assign stories and dictate coverage, his involvement in a business-related article was unusual, reporters say, because Clifton doesn't normally involve himself in the day-to-day operation of the paper's business section.
Initially, Matas thought that the store's opening merited only a brief notice toward the bottom of the business page. That plan was scrapped, according to those familiar with the decision, because both Matas and Herald business editor Beatrice Garcia believed Clifton would not be satisfied with a mention and would want the story featured more prominently.
When Matas interviewed Perlman for the story, additional problems arose. Perlman apparently did not like the types of questions posed by Matas, especially the one about his father's conviction for tax evasion. Robert Perlman, BrandsMart's founder, pleaded guilty to defrauding the government and was sentenced earlier this year to ten months in prison. A judge also ordered him to pay $6.7 million in back taxes and penalties.
According to Clifton, Matas asked Perlman if the adverse publicity from his father's conviction had any effect on the business. Perlman reportedly went ballistic and told her that he didn't want any mention of the tax charge to appear in the paper. He blustered that his company had spent a fortune on ads in the Herald to promote the opening of the Palmetto store and was now afraid that Matas's story would spoil everything. Then he hung up on her. (Perlman did not return calls seeking his comment for this story.)
Perlman immediately called Herald president Joe Natoli, who in turn called the executive editor. "Perlman was upset, so he called Natoli to complain, which is perfectly within his rights," says Clifton. "People do it all the time. And then Natoli talked to me."
Clifton says he agreed with Perlman that there was no justification for bringing up the tax evasion issue during either the interview or to include it as part of the story itself. "I didn't think it was appropriate to deal with the IRS issue," he argues. "It was extraneous and it didn't have any bearing on the story we were doing."
As a result the Herald story made no mention of Robert Perlman being a tax cheat. However, Clifton's stance on the tax evasion issue had repercussions. It angered Herald employees, many of whom believe that the only reason the paper wrote the BrandsMart story was to appease a major advertiser. "Apparently BrandsMart is such a huge gravy train that even the Herald's executive editor has deemed them a sacred cow," says one Herald reporter. "It's pretty outrageous and will have a chilling effect on the staff. How are we to know how to approach a story about another major advertiser? How will we know what questions Doug Clifton will consider appropriate for us to ask and which ones we'll be criticized for asking?"
This is the second time this year Herald executives have provided cover for BrandsMart. In March New Times reported that Herald president Natoli wrote a letter of support to U.S. District Court Judge Jose Gonzalez on behalf of Robert Perlman just prior to his sentencing on the tax charge.
Indeed, if Matas and the Herald were truly interested in exploring all of the ways that BrandsMart has been able to thrive while its competitors have struggled, Robert Perlman's federal court file would have made interesting background reading. Federal prosecutors alleged that the level of fraud Perlman committed far exceeded mere tax evasion. "From the inception of this tax investigation, the United States has obtained conclusive and overwhelming evidence that the defendant in this case has committed numerous other fraudulent schemes while owning and operating BrandsMart," federal prosecutors wrote in a memorandum filed last year.
In one of those schemes, they alleged, Robert Perlman swindled tens of thousands of dollars from various electronics companies, including Sony, Panasonic, and General Electric. Because their products are featured in BrandsMart ads, those companies had all signed contracts agreeing to reimburse the electronics and appliance chain for a portion of its advertising costs. Prosecutors claimed that BrandsMart officials inflated the advertising costs in order to collect bigger reimbursements from the manufacturers.
"This scheme involved the falsification of Miami Herald invoices by whiting out and inflating the true cost of the advertisement and submitting these false documents to the vendors for reimbursement," the prosecutors wrote, alleging that the fraud took place from 1984 until 1992. For several years, prosecutors claimed, the swindle became highly sophisticated. "Instead of taking the time to white out the invoices, copy them, and then send them to the vendors, Perlman went to various small printing operations over the years and had the stationery of the Miami Herald Publishing Company, the Fort Lauderdale Sun-Sentinel, and the Palm Beach Post fraudulently printed for BrandsMart's use. "The employees at BrandsMart would feed this blank stationery into their computers at BrandsMart to automatically produce fake invoices to send to vendors, with the amounts of the cost more than doubled at times."
Robert Perlman was never charged in connection with the alleged advertising fraud, and his attorneys deny that their client ever falsified any newspaper invoices. Copies of the purportedly bogus invoices, however, were also included in the court file.
BrandsMart's use of the Miami Herald's name to allegedly rip off various companies makes the newspaper's recent fawning coverage of the store even more embarrassing.
"How much BrandsMart spends on advertising should not be relevant to how we cover them," says another reporter. "My concern is that if other retailers realize what BrandsMart has been able to get away with, then they are going to try to do the same thing and try to dictate how we cover them. I've got to think that Clifton isn't interested in giving away his news hole like this on a regular basis," says the staffer. "At least I've got to hope he doesn't."
Clifton stands by his decision to have a story written about the opening of a new BrandsMart, calling it a "standard business profile." And he dismisses the notion that the Herald wrote that story because of all the money BrandsMart spends on advertising. "The Miami Herald did not take a dive for BrandsMart," he says.
If they did, though, the Herald may not have been the only paper on the canvas. As several Herald staffers noted, a similar BrandsMart story ran on the same day in the Fort Lauderdale Sun-Sentinel. "Somehow this store opening was so important that the Sun-Sentinel's business editor wrote the piece," a Herald reporter says sarcastically, adding that the Sun-Sentinel story also refrained from mentioning Robert Perlman's tax troubles.
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