The federal Pension Benefit Guaranty Corp. sued the former owners of the Orange County Register on Feb. 14 alleging “breach of fiduciary duties” related to the newspaper’s employee pension fund.
PBGC is trustee of the retirement plan for the former Freedom Communications Inc.
The suit, filed in California’s U.S. District Court, Central District, Southern Division, alleges that former owners Eric Spitz and Aaron Kushner made “four ill-advised, highly speculative investments,” via the pension plan that resulted in losses of “tens of millions of dollars.”
Six other defendants—a North Carolina financial consultant, a Kansas life insurance actuary and related firms—are also named.
According to the court filing, alleged moves include buying life insurance policies for Freedom Communication workers then improperly inflating their value to boost the pension plan’s funding status; buying a “portfolio of loans used to finance life insurance for people unrelated” to the company or plan “with no market value;” investing in a “foreign hedge fund … now worthless;” and “causing the pension plan to buy stock in Freedom” when Kushner and Spitz, it says, “knew that the company was in financial distress.”
Not all actions the lawsuit describes are illegal but PBGC alleges all violated duties of private companies under the Employee Retirement Income Security Act of 1974, known as ERISA, and wants $54.7 million from the defendants.
Kushner and Spitz resigned from Freedom Communications in March 2015; Freedom was sold out of bankruptcy a year later for $49.8 million to Digital First Media in Denver, and is now part of Southern California News Group, a regional group of about a dozen newspapers. Digital First is owned by New York hedge fund Alden Global Capital.