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Newsweek’s former owner is charged in US$10m fraud

[NEW YORK] Newsweek magazine, the onetime media powerhouse, was at the center of a multimillion-dollar fraud and money-laundering conspiracy, according to an indictment by Manhattan prosecutors that was unsealed Wednesday.

Two publishing companies, IBT Media, which owned the magazine, and Christian Media, a faith-based online publisher in Washington, were charged with trying to defraud lenders by pretending to borrow money for sophisticated computing services.

Instead, most of the money was funneled back to accounts controlled by the two media companies and their principals — Etienne Uzac, a co-founder of IBT, and William Anderson, Christian Media's former chief executive and publisher — and unnamed co-conspirators, the indictment said. It said some of the money had been used to cover the magazine's operating expenses.

The men were charged with misrepresenting Newsweek's financial health and creating a fictitious accounting firm, Karen Smith LLP, along with a series of fake financial statements to dupe lenders into putting up millions of dollars in 2015 and 2016. Oikos Networks, a computer company, was also named in the indictment, charged with providing fewer, lower-quality computers than the expensive ones on invoices.

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The Manhattan district attorney's office brought the charges after an extended investigation into the companies' financial dealings that included a raid of IBT's Manhattan offices in January. Top editors and reporters at Newsweek were fired after they, too, started delving into the company's accounts and the owners' connections to Olivet University, an evangelical Christian college in New York. Several other magazine employees soon resigned.

Uzac defended himself Wednesday on IBT's website, accusing the Manhattan district attorney, Cyrus Vance Jr, of retaliating against his news organisation for reporting last fall on a campaign contribution to Mr Vance from the lawyer for Harvey Weinstein, the powerful film producer.

Uzac added: "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 re-election."

In May, Mr Vance brought charges of rape and criminal sexual acts against Weinstein in cases involving two women.

Uzac's lawyer, Marc Agnifilo, said in a statement that his client "strongly denies these baseless charges."

"It is undisputed that no one lost money," he added. "We contend no one was defrauded and the DA's case is made up, untrue and will be soundly repudiated."

Anderson's lawyer, Andrew Lanker, denied that his client had engaged in wrongdoing.

"We are disturbed that once again, the Manhattan district attorney's office is initiating a case where the victim has suffered no financial harm — it is Abacus all over again," he said, referring to a mortgage fraud case that the office brought in 2012 that resulted in the acquittal of two bank officials.

"The notion that my client has engaged in conspiratorial or money-laundering behavior is absurd," Mr Lanker added. "We will vigorously defend these charges."

IBT bought Newsweek in 2013. Last year, the company changed its name to Newsweek Media Group.

After the indictment was unsealed late Wednesday afternoon, the magazine issued a statement noting that Newsweek Media Group had split into two separate companies — Newsweek, which controls the print and digital versions, and IBT Media, which runs the International Business Times, Fashion Times, Medical Daily and other publications.

NYTIMES