According to the Wall Street Journal the former parent company of Newsweek has been charged with defrauding lenders in order to try and keep the financially challenged media company afloat.
Newsweek’s former parent company has been charged by Manhattan prosecutors with carrying out a complex scheme to defraud lenders out of millions of dollars as part of an effort to keep the struggling media organization afloat.
The indictment follows a more than yearlong fraud probe by the Manhattan District Attorney’s Office that has also been examining possible advertising abuses at IBT Media and its connections to Olivet University, a bible college in California, according to people briefed on the investigation.
IBT Media owned Newsweek during the period of the alleged fraud; the company said Wednesday it completed a spinoff of Newsweek into a separate entity.
Prosecutors allege IBT was joined in the fraud scheme by the Christian Media Corp., a faith-based online publisher based in Washington, D.C.
Together, the top executives from the two companies created phony financial statements approved by a fictitious auditor and used them to secure around $10 million in loans from three financial institutions, ostensibly to buy high-end computer servers, according to prosecutors. The money was then laundered through corporate bank accounts and used to support day-to-day operations at the media organization, prosecutors alleged.
IBT denied the allegations and said they would fight the charges in court according to a statement. Th company no longer owns Newsweek having spun it off last month according to a press release.
Completing the strategic structural changes initially announced in March, Newsweek Media Group has spun off into two separate companies — Newsweek and IBT Media.
Newsweek will be comprised of the US print and digital versions of the magazine, as well as the international editions in EMEA and Asia and the website Newsweek.com. IBT Media will consist of the International Business Times, Player.One, Latin Times, Fashion Times and Medical Daily.
Newsweek will be owned by Johnathan Davis and Dev Pragad, with Pragad serving as CEO overseeing all of Newsweek’s operations.
Ownership of IBT Media will remain with CEO Johnathan Davis and Etienne Uzac. Neither Davis, a Newsweek shareholder, or Uzac have operational roles at Newsweek.
The two companies have agreed on a brief transitionary phase to separate the operations and shared services. All of Newsweek’s operations will transition into the new company.
“This separation of the two companies will allow Newsweek and IBT Media brands to maximize their potential, providing them with the independence and freedom to evolve and develop according to their respective strengths,” said Pragad. “Our focus will be on strengthening the iconic magazine—the centerpiece of the company. In addition, we plan to expand into new ventures focused on non-advertising revenue streams.”
“We have been working on making this structural change for several months and it is exciting to see it coming to fruition,” said Davis. “I am thrilled to take the International Business Times, and its sister publications to the next level. We will build on our global reach and continue to develop meaningful relationships with advertisers around the world.”
Newsweek, which as formerly owned by The Washington Post was sold to audio pioneer Sidney Harman for $1 plus assumed liabilities in 2010 and was later merged into The Daily Beast in an effort to save the struggling publication. The magazine itself stopped publishing in 2012 and returned to print after IBT purchased it in 2013. Last year the company was renamed Newsweek Media but reverted back to IBT as plans were made to spin off the financially failing Newsweek.