The Department of Labor is investigating a media-owning hedge fund on charges of channeling employee pension plan money into fund-affiliated investment vehicles.
Alden Global Capital, a controlling stakeholder of MediaNews Group (MNG, formerly known as Digital First Media), allegedly took almost $250 million in employee pension assets and shunted the money into its own accounts over the past several years. This caught the eye of the DOL, which issued subpoenas to the firm and its partners last year, reports The Washington Post.
The business consists of more than 100 local news and information websites which include The Los Angeles Daily News, The Denver Post, and The Know.
The Labor Department is targeting investment decisions of Alden’s pension management, which falls under the Employee Retirement Income Security Act (ERISA) laws aimed at protecting pension assets. The law requires that retirement funds be invested with the best interest of the retiree in mind, not the fund’s managers.
Labor Department filings dating back to 2013 show that pension assets from various MNG publications have been invested in two of Alden’s Cayman Islands-based funds, the Post writes.
Alden has owned a majority stake in the publisher since 2010, when it was emerging from bankruptcy.
The investigation also creates a problem for the hedge fund’s current plans to acquire Gannett, the largest daily newspaper company in the US. Gannett’s 100-plus brands include USA Today and the Courier News in New Jersey. Gannett opposes the buyout offer. MNG has launched a proxy fight to win seats on the Gannett board.
The firm has faced criticism about its reputation for buying a publication, only to quickly cut jobs and sell the real estate.
In its annual meeting letter, Gannett said MNG wants to buy the business though a “problematic, two-pronged approach.” First, it “demanded that Gannett sell itself to MNG.” Then it wants “a control slate of candidates, all of whom are affiliated with MNG and/or Alden, to stand for election to the Gannett board.”
Reminiscent of how “Star Wars” character Lando Calrissian laments on how his deal with Darth Vader is “getting worse all the time,” Gannett said the overhanging media company’s stipulations “exhibit obvious and significant conflicts of interest.”
MNG representatives have denied any wrongdoing in relation to the pension pickle.