By: Mark Fitzgerald
Sun-Times Media Group (STMG) CEO Cyrus Freidheim breached his fiduciary duty by not disclosing he was investigated by a grand jury while heading another company, the Chicago newspaper chain said in a filing with the U.S. Securities and Exchange Commission (SEC) late Monday.
But the filing added its board of directors — in an apparently divided vote — decided not to fire the turnaround expert.
Freidheim was CEO at Chiquita Brands from 2002 to 2004, a time when the banana company made payments to the a right-wing paramilitary, according to a federal grand jury investigation. In a March plea agreement provisionally accepted by a federal court, Chiquita pleaded guilty to a single count of making payments to a terrorist organization, and agreed to pay a $25 million fine.
According to the SEC filing, Freidheim had been informed that he was a subject of the investigation, which probed payments by Chiquita between 1997 and 2004. Freidheim also testified twice before the grand jury, the filing said.
The Sun-Times Media Group board launched its own inquiry into how the matter might affect the chain, which publishes the Chicago Sun-Times and dozens of other area newspapers.
The board determined that Freidheim should have disclosed the fact that he was under investigation and had testified, the filing, an amendment to STMG’s annual report, said.
“The board determined that such disclosure should have been made to the company’s board at the time when he was elected to the board and later when he had a fiduciary duty as a director and was elected as president and CEO,” the filing said. “Although the board concluded that Mr. Freidheim breached his duty to disclose this matter to the company, a majority of the board concluded that, in its business judgment, Mr. Freidheim’s continued leadership as president and chief executive officer at this time is in the best interests of the company.”
STMG has suffered financial losses as it recovers from the effects of alleged pilfering of millions by its ousted chairman Conrad Black and his lieutenant David Radler, plus the fallout from a circulation scandal at its flagship tabloid. Black is on trial in federal court in Chicago on charges related to the alleged looting. Radler reached a plea bargain in the matter and is scheduled soon to testify against Black and three other former executives of the company, which was then known as Hollinger International.
Freidheim, who has built a reputation turning around troubled companies, was named CEO in November. STMG has scheduled a May 16 conference call to outline its business plan to analysts.
Neither Freidheim nor a company spokesperson could be reached late Monday.