Alden Global Capital, a prominent hedge fund that controls more than 100 newspapers, moved nearly $250 million of employee pension savings into its own accounts in recent years, an unusual move that is now triggering federal scrutiny.
The hedge fund, which is the controlling owner of such newspapers as the Denver Post and Boston Herald under the brand MediaNews Group, in some cases moved 90 percent of retirees' savings into two funds it controlled, according to public records filed with the Labor Department. Most of the money has now been moved back out of the hedge funds.
Federal law generally requires that pension managers avoid conflicts of interest and avoid taking excessive risks with the assets they manage, experts said, though some exemptions are allowed.
Alden is being investigated by the Department of Labor for management of its pensions, a hedge fund spokesman confirmed. The specific nature of the investigation is unclear, but one person familiar with the agency's inquiry, speaking on the condition of anonymity because the investigation is confidential, said the department issued subpoenas to Alden and its partners last year.
The inquiry could become a factor in Alden's effort to acquire what is now the nation's largest chain of daily newspapers, Gannett, including USA Today, as at least one prominent lawmaker raises questions about how it would manage the company's pensions. Alden has faced criticism for its stewardship of newspapers the company has purchased. Research shows it cuts jobs more rapidly than other owners.
Its subsidiary MediaNews Group, formerly known as Digital First Media, buys newspapers, often reduces jobs and sells off the buildings. For three months, MediaNews Group has been trying to acquire McLean, Va.-based Gannett and its more than 100 newspapers.
A spokesman for MediaNews Group, Hugh Burns, confirmed the Labor Department's investigation and issued a statement denying any violations of the federal law protecting private pension holders, the Employee Retirement Income Security Act.
"[MediaNews Group] believes that Alden's management of the pension plan assets for which it provided management services has at all times complied with all legal requirements, including [the Employee Retirement Income Security Act]," he said in a statement.
He said that Alden routinely manages pension money for clients, that the funds performed well during the time they were invested with Alden and that less than 1 percent of money in MediaNews Group pensions now remains with Alden funds.
"In 2017, consistent with its return of other outside capital, Alden began winding down its management of these pension plan assets, making regular cash distributions to the [MediaNews Group] pension plan investors," he said.
Burns said Alden did not accept any fees for its work on the pensions.
Heath Freeman, Alden's president, did not respond to a request for comment. A Labor Department spokesman declined to comment. Aon, the firm that provided actuarial services for the pensions, and Prudential Retirement, which serves as trustee and manager, both declined to comment.
The Employee Retirement Income Security Act, which was passed into law in 1974, requires that pensions be invested solely on behalf of retirees and not in a way that could benefit the pension managers themselves.
The law also requires that the managers be "prudent" in making investments according to the statute's language, generally by diversifying funds to minimize the risk of large losses.
Experts say Alden may have run afoul of either or both of those requirements by investing large majorities of pensions in hedge funds that it controlled.
Beginning in 2013, public records show that 90 percent or more of some MediaNews Group pensions was invested in two Alden funds based in the Cayman Islands. At the San Jose Mercury News (now the Mercury News) $107 million out of the pension's $119 million in 2015 was invested in the Alden funds, according to Labor Department records.
At the Denver Post, $47 million, or 91 percent of the pension's total in 2015, was invested in the same two Alden funds, according to Labor Department filings. That year, $248.5 million of pension savings for current and former employees of MediaNews Group papers was placed into the two Alden funds, according to court filings in an unrelated case.
Business on 04/18/2019