Newsweek’s ex-parent company and ex-CEO hit with money laundery
The former parent company of beleaguered Newsweek ran a $10 million fraud scheme, tricking lenders into loaning out large sums to pay for high-end computer servers they never bought, according to an indictment unsealed Wednesday.
The magazine’s former owners, Christian Media Corp. and IBT Media, and its executives instead diverted the money to pay for day-to-day operations and past financial obligations, Manhattan prosecutors allege.
The indictment comes nearly 10 months after investigators with the Manhattan DA’s office raided Newsweek’s offices for information about the magazine’s computer servers.
A few weeks after the raid, Newsweek sacked its editor in chief and deputy editor and targeted for firing three reporters who were covering the DA’s investigation and a sexual harassment scandal at the magazine.
Several staffers quit not long after.
Those fired included former Daily News reporter Celeste Katz, who co-wrote an expose in Newsweek about its parent company that ran in February, months after she was fired.
“As we were reporting this story, Newsweek Media Group fired Newsweek Editor Bob Roe, Executive Editor Ken Li and Senior Politics Reporter Celeste Katz for doing their jobs,” an editor’s note atop the story read. “Reporters Josh Keefe and Josh Saul were targeted for firing before an editor persuaded the company to reverse its decision.”
The fraud indictment names IBT co-owner Etienne Uzac, former Christian Media CEO William Anderson and Oikos Networks, a computer company that falsely claimed it had sold Dell servers with price tags ranging from $130,000 to $180,000 to the magazine.
In fact, Oikos provided fewer servers than it had claimed, and those servers “were of inferior quality to the high-capacity servers called for in the financing agreements,” the indictment alleges.
Uzac and Anderson created a fake auditing firm, Karen Smith, LLP, complete with a website, a phone number and a Staten Island business address, to gin up false financial statements to trick lenders into thinking the magazine was financially healthy, the indictment alleges.
Uzac on Wednesday said Manhattan DA Cy Vance ordered a “very aggressive investigation” because IBT published a story that “uncovered that the Manhattan District Attorney Cy Vance Jr. declined to press charges against Harvey Weinstein after his attorney paid Vance money.”
“The firestorm that ensued badly bruised the DA’s office, led to his office to be investigated by the New York Attorney General and almost cost him his reelection,” Uzac wrote in a statement on IBT Media’s website. “Within 60 days of IBT publishing the story, the DA ordered that our server room be raided.”
Newsweek’s former parent company, Newsweek Media group, split the magazine off from IBT, according to a statement last month.