Detroit — Detroit’s largest African-American media company is seeking to hand over its headquarters building to a city pension fund to resolve a complicated financing arrangement linked to a bribery scandal involving Kwame Kilpatrick.
The General Retirement System is expected to discuss the proposal from Real Times Media CEO Hiram Jackson at its Wednesday meeting.
The company first shared the plan with the pension fund last month to conclude the transaction that began with $15.5 million in loans provided to the media firm in 2007-08 to consolidate debt and fund its growth strategy.
Real Times repaid about $3 million before the company and pension board agreed to convert the outstanding balance to equity. The revised deal gave the fund an ownership stake in Real Times.
The multimedia empire includes some of the country’s largest black-owned newspapers and the Detroit-based Michigan Chronicle.
The loans, approved under a prior GRS board, allegedly lost the pension fund $13.3 million and were referenced in a federal bribery and kickback case involving former Detroit mayor Kwame Kilpatrick, Kilpatrick’s fraternity brother and ex-Detroit Treasurer Jeffrey Beasley and three others.
Real Times has not been charged in the indictment, nor are any company officials.
Jackson said the company’s current building — located within a half-block of the future site of a new Red Wings hockey arena and entertainment district — is estimated to be worth about $1.5 million.
He added Real Times no longer has use for its current building. The company purchased a building on Randolph last year and plans to relocate its employees to the new, three-story headquarters by the end of the year.
In addition to its building, the company is also proposing to increase the fund’s 35 percent stake in the business by 5 percent.
The offer, if accepted, allows Real Times to pay off a preferred stock it created for the pension fund, in addition to providing the fund a stake in the company after the debt was converted. The firm has valued the stock at $3.5 million.
“We think it’s a fair deal,” Jackson said , adding a resolution will allow the company to move forward and continue its growth. “The company is strong. We want to make it stronger.”
Tina Bassett, a spokeswoman for the GRS fund, said Tuesday that she expects the Real Times proposal will be discussed. It’s unclear when the board will vote on the plan.
“Real Times Media is our partner. We invested in them because we believe in their future and they are doing the things they said they were going to do,” she said. “We stand by them.”
If the board chooses not to take the building from Real Times, the company is prepared to pursue a sale on its own and turn the proceeds over to the fund, Jackson said.
During the recent presentation to GRS trustees, Jackson noted that his multimedia firm has worked to transform from a traditional newspaper to national multimedia company.
The firm, known for its extensive archive of rare African-American images, has become leaner and brought in profit in its last eight quarters, he said.
The company is negotiating to acquire two major multicultural media firms, Jackson said.
“We have a very strong opportunity to develop a great business,” Jackson said Tuesday.
In the federal bribery indictment, prosecutors claimed Real Times was among several companies that allegedly gave funds to Kilpatrick’s nonprofit group, the Kilpatrick Civic Fund, in exchange for favorable treatment from Beasley and city pension funds.
The indictment did not identify Real Times by name. Instead, the firm is called “Company I,” but interviews with sources, dates listed in the indictment and pension fund meeting minutes indicated that the firm was Real Times.
According to federal court records and pension fund meeting minutes, Real Times received the loan after the firm and its unnamed consultant allegedly gave $45,000 to Kilpatrick’s nonprofit.
Officials representing the company have denied any link between the loans and money given to the civic fund. Jackson on Tuesday reiterated that position.
“We put a legitimate proposal in front of the pension board,” he said, in reference to the loans he says were negotiated with staff, not pension trustees. “There’s absolutely no ties to the civic fund and our votes with the pension board.”
The ex-mayor was found guilty last year of defrauding the group’s donors and spending money on personal expenses. The indictment alleged Beasley pressured those who dealt with the retirement systems to contribute money to the Kilpatrick Civic Fund in return for his support.