The hedge fund that owned the National Enquirer during the period when it became embroiled in hush-money payments that have led to the criminal indictment of Donald Trump, has been charged in an unrelated action with illegally manipulating bond prices for the company that published the supermarket tabloid.
Chatham Asset Management, a New Jersey–based hedge fund, and its founder, Anthony Melchiorre, have agreed to pay a $19.3 million fine for tampering with the sale process for bonds of American Media Inc. in a way that significantly inflated their price, the Securities and Exchange Commission said.
Investigators say that between 2016 and 2018, a client advised by Chatham sold AMI bonds to another Chatham-advised client at prices that had been set by Chatham and Melchiorre that were substantially higher than the market price for similar securities. Those trades accounted for the majority of all trading in AMI bonds for that period, the SEC said.
At that time, Chatham owned 80% of American Media, which published a variety of supermarket tabloids and magazines including the Enquirer, US Magazine, Life & Style and Men’s Journal.
In 2016, the Enquirer played a key role in facilitating the alleged hush-money payments in the months before the presidential election to an adult-film actress and a Playboy bunny who had claimed to have had sexual encounters with Trump.
In one instance, the Enquirer paid $150,000 to former Playboy model Karen McDougal for her story, but then never ran it, a tabloid practice known as a “catch-and-kill.” The magazine later connected porn star Stormy Daniels with Trump’s personal attorney, Michael Cohen, who paid $130,000 for her story.
Cohen, who later pleaded guilty to federal campaign-finance charges for his role in the payoff, said he was reimbursed by the Trump Organization, which accounted for the payment as legal fees. That payment is at the heart of a criminal indictment rendered by a grand jury in Manhattan against Trump last week that is expected to be unsealed on Tuesday.
AMI’s chief executive, David Pecker, who owned approximately 10% of the company, was given a nonprosecution agreement with federal prosecutors to testify against Cohen. Pecker also testified twice before the Manhattan grand jury hearing the case against Trump.
Chatham has long argued that it had no role in editorial decisions or day-to-day oversight of the Enquirer. American Media was later sold to a company called A360 that Chatham also owns a substantial stake in. A360 reached a deal in February to sell the Enquirer and some other publications to a joint venture involving Theodore Farnsworth, the former head of MoviePass, who is facing SEC and federal criminal securities-fraud charges related to the collapse of the film-ticket service. Farnsworth has denied the allegations and pleaded not guilty.
In a statement, Chatham said the fund had followed the advice of a compliance consultant in making the bond trades in question.
“The consultant reviewed Chatham’s trading annually for compliance with applicable laws and did not alert the firm to any issues. Importantly, the trading occurred more than four years ago in funds that have since been closed. The matter has been resolved and we are focused on generating returns for our investors.”
A message left for Melchiorre wasn’t immediately returned.
In 2020, Chatham acquired ownership of the McClatchy newspaper chain, publisher of 30 daily papers including the Kansas City Star, Miami Herald and Sacramento Bee, out of bankruptcy,
The fund also owns a majority stake in Canada’s Postmedia, owner of the National Post, Vancouver Sun and several other publications.
This post was originally published on Market Watch
