Key Takeaways
- • The U.S. Department of Labor is investigating Alden Global Capital, the controlling shareholder of MNG Enterprises, over its management of hundreds of thousands of dollars in pension assets held by newspapers under its control, including The Denver Post and Boston Herald.
- • As much as 90% of some MNG newspapers' pension assets were invested in two hedge funds controlled by Alden during recent years, according to Department of Labor records—a concentration that triggered regulatory scrutiny.
- • Most pension assets have since been transferred out of the Alden-controlled funds, MNG stated, suggesting partial remediation of the arrangement.
- • The investigation surfaces amid MNG's hostile takeover attempt of Gannett (parent company of USA TODAY) at $12 per share, rejected by Gannett's board, which has prompted a proxy fight scheduled for Gannett's May 16th shareholder meeting.
- • Senate Democratic Leader Chuck Schumer has raised concerns about the proposed acquisition's potential impact on newspaper pension plans and staffing, corresponding with Department of Justice and Pension Benefit Guaranty Corp. inquiries.
Summary
The Department of Labor is investigating Alden Global Capital's handling of pension fund assets held by newspapers owned by MNG Enterprises, the hedge fund's operating subsidiary. MNG controls more than 100 local news properties, including The Denver Post and Boston Herald, operating under the MediaNews Group and Digital First Media brands. An unnamed Alden spokesman confirmed the Department of Labor investigation to the Washington Post on Wednesday, April 17, 2019.
The central concern involves concentration risk: Department of Labor records show that as much as 90% of some MNG newspapers' pension assets were invested in two hedge funds controlled by Alden during recent years. This degree of asset concentration within affiliated funds raises fiduciary duty questions, particularly regarding diversification requirements and conflict-of-interest protections under the Employee Retirement Income Security Act (ERISA). MNG has stated that most of those pension assets have since been transferred out of the Alden-controlled funds, indicating partial correction of the arrangement.
The investigation has intensified scrutiny of Alden's broader media strategy at a critical juncture. MNG launched a hostile bid for Gannett Company at $12 per share—a proposal Gannett rejected—and subsequently initiated a proxy fight, nominating six board candidates for Gannett's annual shareholder meeting scheduled for May 16, 2019. This timing has drawn congressional attention: Senate Democratic Leader Chuck Schumer (D-New York) sent Alden a letter in February inquiring how a proposed Gannett acquisition could affect newspaper pension plans and staffing levels. Schumer subsequently wrote to the Department of Justice and the Pension Benefit Guaranty Corp., amplifying regulatory scrutiny beyond the Department of Labor's initial investigation.
The episode underscores governance and fiduciary risk management concerns within media-focused hedge fund operations. While Alden representatives could not be immediately reached for comment, and a Department of Labor spokeswoman declined to respond to inquiries, the investigation's existence signals that regulators are examining whether pension fund management practices met established fiduciary standards.
The central concern involves concentration risk: Department of Labor records show that as much as 90% of some MNG newspapers' pension assets were invested in two hedge funds controlled by Alden during recent years. This degree of asset concentration within affiliated funds raises fiduciary duty questions, particularly regarding diversification requirements and conflict-of-interest protections under the Employee Retirement Income Security Act (ERISA). MNG has stated that most of those pension assets have since been transferred out of the Alden-controlled funds, indicating partial correction of the arrangement.
The investigation has intensified scrutiny of Alden's broader media strategy at a critical juncture. MNG launched a hostile bid for Gannett Company at $12 per share—a proposal Gannett rejected—and subsequently initiated a proxy fight, nominating six board candidates for Gannett's annual shareholder meeting scheduled for May 16, 2019. This timing has drawn congressional attention: Senate Democratic Leader Chuck Schumer (D-New York) sent Alden a letter in February inquiring how a proposed Gannett acquisition could affect newspaper pension plans and staffing levels. Schumer subsequently wrote to the Department of Justice and the Pension Benefit Guaranty Corp., amplifying regulatory scrutiny beyond the Department of Labor's initial investigation.
The episode underscores governance and fiduciary risk management concerns within media-focused hedge fund operations. While Alden representatives could not be immediately reached for comment, and a Department of Labor spokeswoman declined to respond to inquiries, the investigation's existence signals that regulators are examining whether pension fund management practices met established fiduciary standards.
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