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U.S. Defense Dept. tops other bidders, buys domestic Stars and Stripes

Wednesday, May 22, 2002

By Dan Fitzpatrick, Post-Gazette Staff Writer

The U.S. Department of Defense, bidding anonymously, walked away from a court-supervised auction yesterday with the assets of Downtown-based Stars and Stripes Omnimedia Inc., a Civil War-era publication that filed for bankruptcy in August 2001.

It paid $85,000.

The Defense Department, represented by Indianapolis attorney William Gardiner, outbid New York businessman Dennis O'Neill and Minnesota-based Star Broadcasting Inc., which provides radio broadcasts to military bases overseas. Former Stars and Stripes publisher Howard Haugerud was in the U.S. Steel Tower courtroom but did not make a bid.

For $85,000, the federal government took title to the trademark, the archives and the Web site address of Stars and Stripes Omnimedia, which at one time circulated to 23,000 military personnel and veterans in the United States. The Defense Department, in purchasing the Stars and Stripes name, also eliminated a decades-long debate about the differences between the domestic version of Stars and Stripes and a separate, government-owned Stars and Stripes newspaper distributed to military personnel stationed overseas.

Both papers claimed to be the true successors to the original Stars and Stripes put out by Union soldiers in the Civil War.

"It was creating a lot of confusion," said Thomas Kelsch, publisher of the government-owned European and Pacific Stars and Stripes.

When asked what the Defense Department planned to do with the domestic version of Stars and Stripes, Kelsch said, "We have no intention of publishing a veterans magazine or newspaper in the U.S. We will look at all our options and maybe it will come to that, but I doubt it.

"I don't think there is a profitable market for it."

But one option, Kelsch said, is for the Defense Department to distribute Stars and Stripes "transition guides" to U.S. military personnel due to make a trip overseas. Also, the Defense Department may pursue "cooperative ventures" with local newspapers looking for news about foreign military bases.

"But that is all in the future," Kelsch said. "We really have not come to grips with any stateside uses at this point."

Yesterday's outcome came as a surprise to several people inside and outside the courtroom, including Stars and Stripes Omnimedia co-founder and chairman Jack Colletti.

"It is a shame that a private investor or group did not win the rights to continue to publish that name," he said. "It is definitely a service that veterans and active duty [soldiers] liked and benefited from."

Before he filed for bankruptcy in August, Colletti said the Defense Department had been negotiating for the Stars and Stripes trademark, the department even offering $1 million. In paying $85,000 for the same assets yesterday, the Defense Department "accomplished what they were trying to do for years -- grab that intellectual property and stamp it out. ... It really did not hit me until I got home today and realized everything they set out to do, they achieved and at a very low cost."

But Kelsch denied ever offering $1 million for Stars and Stripes Omnimedia.

"It never reached that stage," he said.

Still, it is clear that some acrimony remains between the two sides. Kelsch, when asked about the confusion between the two newspapers, said his overseas newspaper was the version of Stars and Stripes that "had the reputation, and someone else had the trademark," referring to Colletti's domestic version of Stars and Stripes. The executives running Stars and Stripes Omnimedia "were feeding off of our reputation," Kelsch said.

The overseas edition of Stars and Stripes, which will continue, sells for 50 cents a copy, has a daily circulation of 45,000 and circulates in 20 countries. It receives about one-third of its annual $35 million budget, or $12 million, from the federal government, but the Defense Department is not allowed to censor material that appears in the newspaper.

"We often publish material that does not make them look good," Kelsch said.

The "friction" between the two versions of Stars and Stripes dates back to the 1940s, Colletti said, when the federal government and Washington, D.C.-based National Tribune Corp., which had been publishing Stars and Stripes since 1877, reached an informal agreement allowing the Pentagon to use the same name for overseas publications.

National Tribune Corp., which owned the rights to the same publication launched by Union soldiers during the Civil War, eventually sold that name to a small Pittsburgh-based start-up called iServed.com in May 2000. The start-up changed its name to Stars & Stripes Omnimedia and announced an ambitious strategy to use the historic Stars and Stripes name to offer a full complement of military news and online veterans services, despite inheriting only a four-person operation and a biweekly paper with a circulation of about 15,000 -- a fraction of the military-sponsored newspaper published under the same name at foreign bases.

Stars and Stripes Omnimedia executives hoped the Stars and Stripes name had enough cachet to build, in Colletti's words, "military content on steroids." He bolstered his staff with accomplished journalists and hired former Steelers running back Rocky Bleier and Miss America Heather French Henry as columnists. But Stars and Stripes eventually ran out of cash and never became profitable. It filed for bankruptcy in August.

Ed Offley, former Washington bureau chief for the paper, called yesterday's action "the last nail in the coffin."

"It's real sad," he said.

Offley, now editor of an online publication called DefenseWatch, said the domestic version of Stars and Stripes was on the verge of a distribution agreement putting the paper in more than 200 sites nationwide. "We were just reaching for the end zone when the organization ran out of gas."

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