Why does the New York owner of one of America’s largest newspaper chains base its investments in offshore tax havens?

Part of an ongoing series on Alden Global Capital and Digital First Media. You can join our #NewsMatters campaign with one click.


Recently, the Panama Papers showed us how corporations and individuals around the world have used that country’s secrecy laws to hide money and connections.

But Panama isn’t the only “secrecy jurisdiction” that protects corporate identities and levies low or no taxes.

For the past few years, hedge fund sponsor Alden Global Capital has held much of its investments in entities based in the Isle of Jersey and the Cayman Islands, two well-known global tax havens that are part of what investors call “the shadow market.”

Alden corporate officials did not respond to emailed and telephoned requests for comment for this story.

The privately held Alden specializes in distressed businesses, and is the owner of Digital First Media, one of America’s largest newspaper chains.

Under Alden’s stewardship, DFM papers have had budgets slashed and news coverage diminished at unprecedented levels — in the past few years, nearly all DFM papers have sold off their real estate, moved into rented offices, endured years-long wage freezes (or decreases) and escalating staff reductions. It’s a strategy news business analyst Ken Doctor describes as “milking the company as much as possible,” executed in the name of profits for Alden’s mystery investors.

The privately held Alden has a reputation of being especially secretive — its website is accessible only to investors, and its federal filings are sparse on details because it’s not publicly traded. So it’s near-impossible to learn who invests in Alden, or how much profit they’re making.

Despite this already high level of privacy in the United States, the company has enjoyed additional layers of secrecy by headquartering a number of its offshoots in offshore locations.

“Jersey is notorious for banking secrecy procedures, as well as general secrecy in matters of government and justice.”

— Investopedia


The Jersey connection

Although its offices are in New York, Alden itself, under the name Alden Global Capital Limited, was until recently “based” in the English Channel island of Jersey and managed by a law firm named Ogiers.

Ogiers helps set up offshore businesses, similar to the Panamanian firm Mossack Fonseca, whose leaked internal documents became the Panama Papers, although Ogiers has not been linked to any wrongdoing.

(For the record, Mossack Fonseca insists its activities were legal and last week threatened to sue the International Consortium of Investigative Journalists, which is still releasing data leaked from the firm.)

Jersey is located in English Channel, and, as its government website states, “The standard rate of corporate tax in Jersey is 0%.”

The website Investopedia describes it this way: “On the tiny five-by-nine-mile island, each square mile is home to $5 billion of private wealth. Jersey is notorious for banking secrecy procedures, as well as general secrecy in matters of government and justice.”

In late 2014 or early 2015, Alden folded its Jersey headquarters and took on a new name, Alden Global Capital LLC, now based in New York.

This, however, doesn’t mean that Alden has given up its fondness for overseas tax havens.

Of 11 Alden-controlled funds listed in one recent Securities and Exchange Commission filing, three were based in the Cayman Islands.

Where are DFM’s profits?

In a company-wide email sent to employees last month, DFM’s top executive Steve Rossi proclaimed the company’s revenue performance was “at the top of the industry.”

Despite (or because of) the extreme sacrifices employees are making in pay and working conditions, individual DFM papers are still yielding double-digit profit margins.

So where have these profits gone?


Alden’s website, accessible only to investors

While it’s unclear exactly how many people have profited directly from DFM after Alden acquired majority ownership of the chain in 2014, SEC documents show the existence of two funds with “DFM” in their names.

One is the Cayman-based Alden DFM SPV Ltd.

The other is Delaware-based Alden DFM SPV LLC.

It’s likely that SPV stands for “Special Purpose Vehicle,” a term that surfaced during the Enron scandal (they’re also called SPEs, Special Purpose Entities). SPVs are funds that aren’t traded on the open market and owners are usually locked into keeping their money in them, though for a limited period of time. They are sometimes set up to protect the rest of a company’s profits from an especially risky investment. In Enron’s case, they were used to make the company appear more profitable than it was.

The Delaware-based DFM fund’s gross assets are $ 13.3 million, with 49 “beneficial owners,” according to Alden’s SEC filings.

Delaware, by the way, keeps corporate owners’ names secret, though it will turn over such information in criminal cases.

The Cayman-based SVP’s assets are valued at $ 4.5 million, with 23 beneficial owners. Four percent of the Cayman fund’s owners are investors from overseas (non-US), the SEC filings state. Both are administered by Dublin-based Hedgeserv Limited.

So why would a New York corporation controlling a wide swath of America’s newspapers want its investments based in the Caymans?

Taxes, for one thing.

“The Caymans offer a high degree of secrecy as far as who owns the companies based there and how much money they’re making.”


The biggest break of all

Sure, U.S. hedge funds like Alden already benefit greatly from a tax break called the Carried Interest Tax Loophole.

But the Caymans charge zero personal and corporate income tax on revenues earned outside their territory, so headquartering a profitable fund there can further lower the tax impact on companies like Alden — and its investors. This tax break “includes interest or dividends earned on investments, making the Caymans especially popular among hedge fund managers,” states financial website Investopedia.

Of course, privacy is the other benefit. The Caymans offer a high degree of secrecy as far as who owns the companies based there and how much money they’re making. The companies are set up and administered by specialized law firms, like Ogiers or the now-infamous Mossack Fonseca.

“No company really needs to have operations in the Cayman Islands or Jersey,” says international labor researcher Ahmer Qadeer. “There are no big markets or business interests in either jurisdiction. Executives set up companies in secrecy jurisdictions to keep their taxes low and/or for the privacy of shareholders, directors and executives.”

As to how this impacts workers, Qadeer says that basing investments overseas might not directly affect employees, but does reflect a “wider corporate philosophy. Namely that company managers are aloof from where the firm operates, where employees live and the impact of managerial decisions on the communities in which their firms operate.

“Having offices in Jersey and the Cayman Islands suggests to me that management is going to be guided by what will keep tax liability for senior executives lowest and pay less attention to considerations about how decisions may impact other constituents in the company.”

While we may never know for sure why Alden bases certain funds overseas, it could be a matter of time before leaks flow from the other tax havens likely profiting from Panama’s misfortune of having unwillingly gone public.

The day the existence of the Panama Papers was made public, financial pundits opined that companies seeking secrecy would flee to other secrecy havens.

“What about all the other secrecy jurisdictions and all the other law firms and accountants?” asks Bruce Hogarth-Jones for the British tax advisory firm, Plantagenet Partners. He goes on to list law firms in the Cayman Islands, Bermuda and the British Virgin Islands, also naming Ogiers, the firm that set up Alden in Jersey.

“Activity of this nature will certainly continue,” Hogarth-Jones wrote. “The (Panama) revelations are, indeed, the tip of a much larger iceberg.”

Or as Joe DiSetefano writes in the Philadelphia Inquirer, “Since kings and councils first squeezed successful citizens to pay armies and administrators, the rich have hidden fortunes from tax collectors.”