In today's Vancouver Sun, two articles appeared side by side, that could not exemplify more the contrast between what is right and what is wrong with our current state of capitalism. One story was about deceit and fraud and the other was about philanthropy and good deeds. One story was about stealing money and the other about giving it away. So here they are for you to exlpore yourself, and we could aptly title this blog entry; The Corporate Criminal vs The Enlightened Capitalist:
Radler, Hollinger lawyer charged with $32m fraud
Wire fraud, mail fraud charges laid; Radler said to be cooperating with investigators
Peter Brieger and Theresa Tedesco
National Post, with files from the Ottawa Citizen and Bloomberg
August 19, 2005
In the first criminal charges laid in the scandal of Conrad Black's fallen newspaper empire, David Radler, the former president of Hollinger International Inc., was indicted on fraud charges Thursday along with the company's top lawyer and Black's private holding company.
At a news conference in Chicago Thursday, the U.S. Department of Justice accused Radler and Mark Kipnis, former in-house lawyer at Hollinger International Inc., of siphoning $32 million US away from the U.S. newspaper company to holding companies controlled by Black and his top lieutenants, including Radler.
The announcement resulted from a two-year probe into business dealings at the media empire, which followed a scandal that began four years ago when an institutional investor started asking questions about management fees paid to Hollinger executives.
"This was a systematic fraud on shareholders," Patrick Fitzgerald, U.S. Attorney for the Northern District of Illinois, said Thursday.
Black himself wasn't named in the indictment, and Fitzgerald sidestepped questions about whether Black will face charges.
"I'm not going to comment on any individuals who haven't been named today," he said. "All I can tell you is the investigation continues and charges will be laid if they're warranted."
Fitzgerald said Radler is cooperating with an ongoing federal investigation. It's also expected, he said, that Radler, 63, will plead guilty at a later date -- a revelation that raises the speculation he will offer testimony against his longtime business ally and friend.
"If Radler is cooperating, it's very significant and is the worst possible news for Conrad Black," Richard Breeden, a former SEC chairman who advised Hollinger International on its civil suit, told Bloomberg News. "The evidence here is overwhelming, and in Radler they've got a very knowledgeable and articulate witness."
Along with Radler and Kipnis, Ravelston was also charged Thursday with seven counts of fraud after a federal grand jury recommended charges be laid, the Justice Department said.
Radler and Kipnis could face a maximum penalty of five years in prison and a $250,000 US fine on each count.
Ravelston, which faces a $500,000 US fine for each count in the indictment, filed for bankruptcy protection in April -- a request granted by a Toronto judge who demanded that neither Black nor Radler play any role in running the company.
Last year, a special committee appointed by Hollinger International accused Black, Radler and other senior company executives of siphoning more than $400 million US from the newspaper giant, which has sued Black and his top associates for $542 million.
Hollinger International, based in Chicago, declined to comment on the charges.
In March, Hollinger Inc. launched its own $636-million lawsuit against Black and other past Hollinger executives.
The case against Radler and Kipnis centres on six separate sales of Hollinger International newspaper assets between January 1999 and May 2001 and payments made to the company so it wouldn't open rival publications, known as non-compete fees.
When Hollinger sold Community Newspaper Holdings Inc. for $472 million US in 1999, Radler and other Ravelston "agents" earmarked $50 million US of the proceeds as non-compete payments, $12 million US of which was "fraudulently" transferred to Hollinger Inc., the charges allege.
Four Hollinger International executives, including Radler and Kipnis, paid themselves a bonus in 2001 of $5.5 million US each, which they described as non-compete payments to win tax breaks, defrauding Canadian tax collectors, the charges allege.
In another case, the Hollinger executives paid themselves not to compete with a company that they owned.
"The fraud became more brazen and bold over time," Fitzgerald alleges. "They decided among themselves to pay themselves not to compete with themselves."
The charges come as Black, Radler and others face securities fraud probes in the United States and Canada.
Land records indicate that David Radler transferred ownership of his West Vancouver home to his wife, Rona Radler, last November.
The home has an assessed value of $2 million.
When Hollinger sold Community Newspaper Holdings Inc. for $472 million US in 1999, Radler and other Ravelston "agents" earmarked $50 million US of the proceeds as non-compete payments, $12 million US of which was "fraudulently" transferred to Hollinger Inc., the charges allege.
Four Hollinger International executives, including Radler and Kipnis, paid themselves a bonus in 2001 of $5.5 million US each, which they described as non-compete payments to win tax breaks, defrauding Canadian tax collectors, the charges allege.
In another case, the Hollinger executives paid themselves not to compete with a company that they owned.
"The fraud became more brazen and bold over time," Fitzgerald alleges. "They decided among themselves to pay themselves not to compete with themselves."
The charges come as Black, Radler and others face securities fraud probes in the United States and Canada.
Land records indicate that David Radler transferred ownership of his West Vancouver home to his wife, Rona Radler, last November.
The home has an assessed value of $2 million.
- - -
THE ACCUSER
U.S. Attorney Patrick Fitzgerald
THE ACCUSED
David Radler
Vancouver-based former president of Hollinger International Inc.
ALSO ACCUSED
Mark Kipnis
Hollinger International's former in-house lawyer
Ravelston Corp. Ltd.
The private Toronto company that controlled Hollinger's global publishing empire.
THE ALLEGATIONS
It's alleged that Radler, Kipnis and Ravelston diverted $32 million US through a series of secret deals by disguising the money as noncompete fees connected to the sale of U.S. newspapers to other companies.
THE CHARGES
All three are charged with five counts of mail fraud and two counts of wire fraud. Radler and Kipnis face five years in prison on each count.
WESTCOAST NEWS
Hidden philanthropist ready to help others follow her lead
Nicholas Read
Vancouver Sun
August 19, 2005
Carol Newell is coming clean.
She is, and has been for more than a decade, one of Vancouver's most influential citizens, funding environmentally forward-looking charities and businesses with her personal wealth.
It's just that few people knew it.
That is about to change.
Newell, 49, is getting ready to tell her story to anyone willing to listen in the hope that other people with fortunes comparable to hers will realize that money is only worth something if it is spent to improve the world.
As one of the family heirs of the small U.S. company that went on to become the Newell Rubbermaid Corporation, the New York-born Newell came into a personal windfall of more than $25 million 15 years ago, not long after she emigrated to Canada. But instead of spending the money on herself, or using it to amass an even bigger fortune, she has, she says, spent it on building a culture that is "simpler, sustainable for all, and linked to the land."
In other words, apart from a modest amount she has set aside to live on, all her money has gone into furthering environmental and social-justice concerns. In six years most of it will be gone.
Principally, she's done it in two ways. First, in 1992 she created the Endswell Foundation, which grants money to environmental and social justice charities.
And second, with her business partner Joel Solomon, himself a $5-million US heir to a Tennessee development fortune, she set up in 1994 the Renewal Partners Company which provides venture capital, through loans and/or equity investments, to fledgling companies with a vision for a better B.C.
Included among the 50 or so firms her seed money has helped nurture are Capers Community Markets, Happy Planet Foods, Small Potatoes Urban Delivery (SPUD), Communicopia Web Design, Hollyhock Retreat Centre and New Society Publishers. Eighteen of them have failed -- an unacceptably high percentage in the eyes of most financial institutions, but a risk Renewal is prepared to take for the sake of its ideals.
But she's done it without a breath of publicity. When Shauna Sylvester received funding from Endswell to start the Institute for Media Policy and Civil Societies, an organization that does communications work for charities, it was two years before she learned who Newell was -- even that she existed. "I didn't know Carol," Sylvester says. "She was an anonymous donor. In those days, she just wanted her money to be anonymous."
Not any more. Newell is now ready to come forward and, she hopes, set an example to other wealthy people interested in seeing their money make a difference. "I think those of us who have extraordinary wealth have an opportunity to leverage that wealth to stimulate a just and sustainable economy," she told The Vancouver Sun in her first-ever interview with a daily newspaper. "I know it goes against the grain, but I know it's possible. It's just about deciding what kind of choices we want to make."
She's kept her work so secret that neither the Vancouver Board of Trade, the B.C. Business Council nor the Canadian Venture Capital Association has heard of her.
But Vancity CEO Dave Mowat calls Newell's "a one-of-a-kind organization. There are probably individuals around with a similar mindset, but Renewal has staff. They have full-time people working on this. I would say they're unique in that regard for sure."
What also makes Renewal unique in B.C., Mowat says, is that when it is considering investing in a new business, the most important criterion on which it bases its decision is not whether the business will make money -- though that is important -- but how it will contribute to the greater good.
"We are about mission and purpose first," confirms Solomon. "And that is unusual."
Yes, Renewal wants to see the business plan, he says, but only if it includes a real vision for addressing environmental and social concerns, and if it is going to make a real contribution towards creating a more sustainable and just society.
"We first want to know what the purpose of the enterprise is in addition to creating a successful business," Solomon says.
Money can be provided either in the form of a loan, for which interest is eventually required, or as an equity investment. Terms are negotiated according to the entrepreneur and the type of deal suggested.
The point, says Solomon, is not to have a prescribed exit strategy. The point is to help these companies remain in business as long as possible. And 12 years into it, he and Newell are pretty much committed. No matter how many people may come knocking from now on, they're not in a position to hand out much more.
That's why Newell has also helped set up the Tides Canada Foundation, another giving arm that will, thanks to the help of other investors, operate in a more traditional way and give away only the money it earns.
However, like Endswell and because of Newell's involvement, most of Tides' gifts are made to environmental and social-justice causes, says executive director Tim Draimin. "[Newell] was the instigator of us being here," Draimin says. "She's the founder."
But Endswell was meant to be different, Solomon says. Newell wanted to see her money spent well in her lifetime, and had she tied it up in a traditional foundation, that wouldn't have happened.
David Van Seters, who, in the last seven years, has turned SPUD into a $7.5-million organic food delivery service, says Renewal's help was crucial to his company's survival and success.
"They helped in providing some much-needed funding for SPUD in its early days, and they've continued to support us as we've grown with additional funding," Van Seters says. "They have been a true strategic partner for us in every sense of the word."
And now SPUD is in a position to give to charitable organizations with complementary missions. Capers does the same.
Randal Ius, who helped establish Happy Planet Foods with recently elected NDP MLA Gregor Robertson, agrees that without Renewal's interest and help, Happy Planet wouldn't be what it is today, the largest fresh and organic juice and smoothie manufacturer in Canada.
Their influence financially was important, but their influence by bringing a lot of excellent sales consultants on board and introducing us to excellent business contacts both in the U.S. and Canada was every bit as important," Ius says.
Jason Mogus, CEO of Communicopia Internet Inc., an online strategy and design firm for sustainability companies and non-profit organizations, will do almost $1.5 million in business this year, and, as such, will be in a position for the first time in 12 years to repay some of Renewal's investment in him in hard cash.
No other venture-capital company would have been as patient, he says. "They helped us at a time before social and environmental responsibility was known," Mogus explains. "Their approach to supporting me as an entrepreneur with business values was unprecedented and incredible. They are absolutely critical to my success and our company's success. But they would never say that they did that."
For her part, Newell says none of her clients has disappointed her. "That's remarkable," she admits. "And as I say that, it almost brings tears to my eyes. But in one way or another I feel so good about the investments and the philanthropic contributions I've made. I'm so happy that that money is out there working."
nread@png.canwest.com
Buddha says; "There are four bases of sympathy: charity, kind speech, doing a good turn and treating all alike. Happy indeed are the men-of-worth, in them no craving'seen. The "I" conceit is rooted up; delusion's net is burst."
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