However one characterizes it — criminal or just the way the capitalist system works — Hollinger’s last chapter is a fitting end for the newspaper empire once run by convicted felons Conrad Black and David Radler.
In this end to the story of what was once the dominant newspaper chain in Canada, controlled by Lord Black of Crossharbour who currently resides in a Florida prison, $43 million is “diverted” from the pockets of retired workers to shareholders and no one (so far) goes to jail.
Here’s the short version of what happened:
In July 2000, Canwest purchased most of the Canadian newspapers once owned by Hollinger, but as part of the deal Hollinger continued to pay for pensions and benefits for those former employees who had already retired and all payments for people then on long-term disability.
In January 2006 Hollinger sold the rest of its assets to the company now known as Glacier Media. Once the sale was completed Hollinger had no ongoing business activity.
However, it continued to administer post-employment, post-retirement and pension benefits for approximately 3,000 former employees of the Southam/Hollinger newspaper chain. At that time Hollinger had assets of well over $150 million to pay for its responsibilities to retirees and disabled employees.
On December 10, 2009 Hollinger (as Hollinger Canadian Publishing Holdings Co.) filed for protection from its creditors under the Companies’ Creditors Arrangement Act (CCAA) claiming liabilities of $94.4 million and assets of $32.6 million.
What caused Hollinger’s assets to shrink from over $150 million to $32.6 million in less than four years?
On Nov. 1, 2006, Hollinger loaned its parent, the Sun-Times Company, $50 million (US).
Hollinger held $48.2 million (US) in Asset Backed Commercial Paper (ABCP) when the market froze in August 2007. According to court documents $28 million (US) of these were sold for $21 million (US) and of the remaining $20.2 million (US), $7.1 million (Can.) may be recovered.
In January 2008, the Sun-Times Company was notified by the IRS (U.S. taxman) that it had reassessed the company’s tax bill in light of the fraudulent activity of Conrad Black and David Radler. The Sun-Times now owed hundreds of millions of dollars in back taxes. It was widely speculated at the time that the company would be forced into bankruptcy. (It did file for bankruptcy protection on March 31, 2009.)
Despite this, in October 2008, Hollinger made a dividend payment to its shareholders of $43 million.
“Hollinger paid out $43 million to its shareholders at a time when it should have been apparent that this would have an adverse impact on the rights and entitlements of retirees,” said Peter Murdoch, vice-president media for the Communications, Energy and Paperworkers Union of Canada CEP.
Documents filed in the Hollinger CCAA proceedings just before Christmas show that this $43 million dividend was issued on the basis that Hollinger had sufficient remaining assets to satisfy all of its obligations, including its obligations to Southam/Hollinger retirees. However, Hollinger’s single biggest “asset” was the $50 million (US) loan made to its parent company, the Sun-Times Company, which would prove worthless a few months later upon the Sun-Times bankruptcy filing in the U.S.
“The timing of these transactions raise serious questions that require investigation,” said Murdoch. “It is unconscionable that a company which should have seen the writing on the wall decided to pay off its shareholders and thereafter abandoned its pensioners. If it isn’t illegal, it should be.”
Gary Engler
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