New York Post Woes Mount p.

By: George Garneau

SEC accuses prospective buyer Steven Hoffenberg of using
inflated financial statements to peddle securities to investors sp.

COMPOUNDING THE NEW York Post's daunting woes, the Securities and Exchange Commission has accused its prospective buyer, Steven Hoffenberg, of using inflated financial statements to peddle fraudulently more than $215 million worth of securities to investors.
A federal judge in New York City refused the SEC's request for an immediate freeze on Hoffenberg's assets but set a hearing for Feb. 24. Hoffenberg is chairman of the Towers Financial Corp. debt-collection company.
"We intend to defend against it," said Hoffenberg's attorney, Ira Lee Sorkin.
Sorkin said an asset freeze would have "a very serious, if not terminal, effect on the Post" because Towers is the paper's only source of capital. He said he hoped that the suit would not affect the transfer of ownership.
The Post came within days of closing before employees agreed to 20% pay cuts and the paper raised its price a dime to 50?.
Hoffenberg put up more than $2.5 million to take control of the paper late in January and on Feb. 6 signed a contract to buy it. The deal was expected to close Feb. 19.
The current owner, Peter Kalikow, is in personal bankruptcy and planned to close the Post, one of the nation's oldest papers, after Banker's Trust shut off its credit.
The SEC filed suit in U.S. District Court in New York City, charging Hoffenberg and two other Towers officials with selling $215 million in unregistered securities to 2,800 investors since 1989 and with misrepresenting Towers' financial condition. It also charges that Hoffenberg illegally earned $1.6 million by insider trading on 200,000 shares of Towers stock.
The SEC case says Towers' actual losses grew steadily from 1988 to $60 million in 1991, despite the company's reporting increasing profits.
Further, the SEC says Towers unlawfully sold $215 million worth of promissory notes to unqualified investors and used the money to fund "staggering" expenses or misappropriated it, leaving much "unaccounted for to this day."
The SEC also accused Hoffenberg of violating a 1988 settlement in which he agreed to comply with securities laws.
The agency is seeking more than $200 million from the defendants, including Towers vice chairman Mitchell Brater and Arthur J. Ferro, an outside accountant.
Columnists were comparing Towers to a classic Ponzi, or pyramid, scheme, in which money from new investors pays the obligations to earlier investors?a charge Sorkin denied.
In some instances, the suit says, in order to make sales, brokers inflated the value of widows' and retirees' assets to meet the $1 million minimum required for the risky investments.
The SEC is seeking more than $200 million in "ill-gotten gains."
News of the suit sent prices of Towers stock plunging on the unlisted over-the-counter market to $2 a share.

Hearing on raiding

In other developments, Hoffenberg pressed in hearings in state court for an injunction barring Mortimer Zuckerman's Daily News from raiding the Post's newsroom.
Zuckerman has hired Post editor Lou Colasuonno, managing editor James Lynch, metro editor Richard Gooding and columnists Mike McAlary and Amy Pagnozzi. McAlary worked at the News before defecting to the Post during a strike two years ago.
Hoffenberg accused Colasuonno and McAlary of breaching their contracts. Colasuonno was earning $200,000 a year and was slated to make $300,000 in 1994, according to contracts disclosed as part of the suit. McAlary, who was earning $275,000, was due for a raise to $300,000 this fall.
McAlary testified that he felt the Post had breached the contract by cutting his pay and bouncing his paycheck. He also said he had no faith in Hoffenberg. He cited a former Hoffenberg associate who told the columnist that Hoffenberg had backed out of obligations and had used racial slurs.
McAlary also testified that Hoffenberg had asked Colasuonno to ask local politicians to "pressure" the Post's banker to extend loans.

Daily News staffers stay

At the Daily News, several prominent editorial staffers withdrew plans to take buyouts. They include organized crime columnist Jerry Capeci, metro columnist Juan Gonzalez, education writer LyNell Hancock and reporters Sonia Reyes and Ellen Tumposky.
Capeci said he opted to hold his job while continuing to press Zuckerman for a contract with the Newspaper Guild local.
The Guild is leading a boycott of the News and Zuckerman's other holdings because he fired 180 Guild workers and left the union without a contract, despite contracts with nine other unions, when he acquired it from bankruptcy last month.
In a column, Gonzalez lamented the Guild's "major labor defeat" and the loss of union solidarity.
"Knowing that a union is nothing if not people sticking together, we decided to stay at the News, seek the best contract we can for those who remain and the best settlement possible for those who may never come back," he wrote.
In other developments, the Post named Seth E. Jones photo editor.
Press reports said other potential buyers have expressed interest in the Post, including cosmetics company heir and Republican political hopeful Ronald Lauder, former New York Deputy Mayor Kenneth Lipper and Broadway producer James Nederlander.