Federal regulators have deepened their investigation into Chicago Sun-Times owner Hollinger International Inc., zeroing in on unauthorized “non-compete” fees paid to former Chief Executive Conrad Black and his chief deputy, David Radler.
Sources close to the investigation said the Securities and Exchange Commission has issued subpoenas to at least three companies that bought newspapers from Hollinger International in the late 1990s, 2000 and 2001.
The Chicago office of the Federal Bureau of Investigation, working on behalf of the SEC, served subpoenas to Paducah, Ky.-based Paxton Media Group, Fargo, N.D.-based Forum Communications and Birmingham, Ala.-based Community Newspaper Holdings Inc., seeking documents related to their purchases of community papers from Hollinger International.
Sources say the SEC is investigating whether the three companies ever sought non-compete agreements from individual Hollinger International executives. In most cases, the buyer requests an agreement barring the seller from competing in the markets where it is buying the newspapers.
Most non-compete agreements are between companies, including the top executives, making individual deals unnecessary, media executives say.
Hollinger International has accused Black, Radler and two other executives of collectively pocketing more than $10 million in non-compete payments from CNHI, Forum and Paxton.
Black and Radler were forced to resign in November after a special committee of Hollinger International’s board revealed that the executives had accepted more than $32 million in payments that had not been approved or revealed to the board.
None of the companies believed to have received the subpoenas would discuss them Wednesday. The FBI, the SEC and spokesmen for Black and Radler also declined to comment.
Though the SEC launched an investigation into Hollinger International in November, it secured only a partial civil judgment against the company in January after alleging that its SEC filings contained misstatements and omissions regarding the transfer of corporate assets to Hollinger International insiders and related parties.
The SEC has said it could add to those charges if it uncovered additional evidence. Though SEC investigations usually revolve around civil actions, its work with the FBI in this case isn’t necessarily out of the ordinary. The SEC’s enforcement division works closely with various criminal law enforcement agencies when the alleged misconduct could warrant more severe action, according to the SEC.
The latest step suggests that the troubles for Black and Radler may be far from over. Besides the SEC investigation, the special committee at Hollinger International is expected to disclose more details soon about controversial sales of the company’s papers to firms owned by Black and Radler.
A lawsuit by shareholder Cardinal Capital Management alleges that Hollinger International sold newspapers to Horizon Publications Inc., a company owned by Black and Radler, for only $1.
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Stop tattooing Leo: New Leo Burnett Co. President Tom Bernardin wants to stop dressing up founder Leo Burnett–literally. In his first memo to the staff, Bernardin acknowledged that the agency has an image problem and said he has made it his goal to fix it. “How could it be that the same agency that built brands like Kellogg’s, Hallmark, Philip Morris, Procter & Gamble and McDonald’s had let their own brand become so sleepy?” he asks in the memo, which was sitting on each desk at the company’s 35 W. Wacker Drive headquarters Wednesday morning. “Well, we do need to change, and we need to change now,” he wrote.
Immediately, he said, he wants to put an end to creatives dressing up founder Leo Burnett in new-business pitches, saying that tattooing and piercing Leo demeans the founder.
“And let me begin the discussion by saying I think it’s about time we put Leo in the right perspective. God knows he’s earned it. We should carry his passion in our hearts. We should turn to his writing for inspiration. But more importantly, we should continually earn the right to have his name on our door by showing some respect. Let’s quit playing Dress Up Leo every time we make a presentation,” Bernardin wrote. “Let’s not pierce him, tattoo him or in any way degrade his image ever again. If anyone can appreciate anything from the Great Beyond, I think he’d appreciate that. I know I would.”
A poster of a tattooed Burnett has been hanging prominently in one executive’s office at the agency. The agency used the image in its successful pitch to win the Gateway computer account.