Federal prosecutors have charged two former executives of U.S.-based newspaper holding company Hollinger International Inc. and a privately held Canadian company with fraudulently diverting more than $32 million through a complex series of self-dealing transactions.
A seven-count indictment charged F. David Radler, the former publisher of the Chicago Sun-Times; Mark S. Kipnis, the top in-house lawyer for Hollinger International; and The Ravelston Corp. with cheating shareholders in the United States and Canada, as well as Canadian tax authorities, according to an announcement from Patrick J. Fitzgerald, U.S. Attorney for the Northern District of Illinois.
Fitzgerald’s announcement accused the defendants of engaging in a series of secret transactions, in connection with the sale of various newspaper publishing groups in the United States, “designed to enrich certain corporate officers by funneling payments disguised as non-competition fees to a company they controlled, as well as to themselves individually, at the expense of Hollinger’s public shareholders and corporate assets.”
The transactions involved Hollinger International, a Chicago-based holding company, and Toronto-based Hollinger Inc., whose primary asset was its controlling interest in the holding company.
Hollinger International owned and published a number of venerable newspapers throughout the world, including the Chicago Sun-Times, London’s Daily Telegraph, and the Jerusalem Post, as well as many community newspapers in the United States and Canada.
In November, the Securities and Exchange Commission filed a fraud complaint against Radler, former Hollinger International chairman and chief executive officer Conrad Black, and Hollinger Inc. The regulator alleged that from 1999 through 2003, Black, Radler, and Hollinger Inc. illegally diverted to themselves, other corporate insiders, and Hollinger Inc. roughly $85 million of the proceeds from Hollinger International’s sale of newspaper publications through purported “non-competition” payments.
“Black and Radler abused their control of a public company and treated it as their personal piggy bank,” said Stephen M. Cutler, then the director of the commission’s Division of Enforcement, in a statement. “Instead of carrying out their responsibilities to protect the interest of public shareholders, the defendants cheated and defrauded these shareholders through a series of deceptive schemes and misstatements.”
The commission also charged that Black and Radler defrauded shareholders by orchestrating the sale of several Hollinger International newspapers at below-market prices to another privately held company owned and controlled by Black and Radler — including the sale of one publication for just $1.