The Setting Sun-Times

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Ramping up the unease, the paper moved into leased space a few blocks over on the Chicago River. Hollinger sold the paper's home, a rundown place once celebrated as a grand example of the 1950s International Style, to Donald Trump for his hotel and condo tower, netting $44.2 million before taxes on the sale of its half interest in the venture. Ironically, Radler and Trump are now in litigation over a condo Radler bought in a cut-rate deal for early buyers. Trump recently killed such deals, saying all buyers should pay full price.

Barely a month after the last Sun-Times staffers left the old building in late 2004, federal authorities moved on Black and Radler. An SEC complaint said the pair "abused their control of a public company and treated it as their personal piggy bank." The alleged take: $85 million for themselves, other insiders, and their Canadian company.

That was just a warm-up. By summer 2005, a grand jury in Chicago indicted Radler and a colleague for diverting more than $32 million, focusing on gains they reaped by selling their U.S.-based publications. Breaking with his partner of 36 years, Radler pleaded guilty to fraud and helped the feds, later testifying against Black. Black and several colleagues were indicted in November, accused of looting $80 million. And at yearend, prosecutors added charges of racketeering and obstruction of justice against Black, partly because he spirited boxes of documents out of company offices ahead of SEC probers.

Meanwhile, things moved from bad to worse at Hollinger. On an operating basis, the Sun-Times' parent lost $9.9 million in 2005 on revenue of $459.3 million. The operating loss widened to $39 million in 2006, as revenue slid to $420.4 million. And last year, the operating red ink more than tripled, to $140.2 million, as revenue skidded nearly 13%, to $372.3 million. The company turned a net profit of $271.6 million in 2007 only because of a favorable Canadian tax ruling. Shares have now plunged to about 85¢ each.

Managers have seemed helpless to stem circulation declines at the Sun-Times, down at last count in late 2005 to 350,000 daily and 281,000 on Sunday. Ad revenues have dived, dropping 11% last year. Clouding matters further is a tax bill that could approach $600 million, stemming from an IRS audit that is another legacy of the Black years. Last year, it burned through $44 million in cash, making its $142.5 million cushion troublingly thin.

No wonder blood is running on the floors again. Companywide in 2006, STMG slashed its full-time workforce by 10%, then cut more after that. With shareholders pushing for a sale, Chief Executive Gordon A. Paris stepped down in 2006, and the company moved its base to Chicago from New York. Director Cyrus F. Freidheim Jr., now 72, took over as CEO and last fall added the title of Sun-Times publisher when Cruickshank left for a media job in Toronto. Freidheim, derided by Black and a former Sun-Times columnist as a "septuagenarian banana marketer," formerly headed Chiquita Brands International. He declined to comment for this story, as did Black and Radler.

When Black got his comeuppance last year, there was little joy in the newsroom. After a four-month trial, he was convicted in July of mail fraud and obstruction of justice, and he began a 6½-year sentence on March 3. Found guilty of stealing $6.1 million—a far cry from what investigators claimed­—he insists on his innocence and is appealing. Radler, who apologized, paid the company $63 million and on Feb. 25 began serving 29 months. So far, STMG has shelled out $108 million in defense costs for Black and others and is trying to recover more than $60 million. It also has sued Black and others for $542 million.

Still a scourge of the high and mighty, the paper nowadays is partial to shrill headlines and gotcha journalism. It recently badgered Governor Rod R. Blagojevich, for instance, into saying he'll deliver on an ill-advised promise to give $1 million in state money to help the historic Pilgrim Baptist Church, badly burned in 2006. The money had been routed mistakenly to a school that leased space there, as aides fretted about church-and-state separation issues. Less momentously—and with more self-interest—it is laboring to embarrass Tribune CEO Zell with a contest offering $1,000 to a reader who sends in a winning music video attacking his plans to sell naming rights to Tribune-owned Wrigley Field. Its columnists and editorialists alike are in full cry against Zell, whom one bluntly called a "loon."

The paper is wrestling with an industry downturn that recently "moved faster and fell further than anyone in the industry dared imagine," CEO Freidheim said in a Mar. 11 conference call with investors. To help lower annual operating costs by $50 million, the Sun-Times in February outsourced most ad production to an Elgin company. The paper is also an inch smaller now, saving newsprint. And most copies are delivered by Tribune trucks—a prelude, some shareholders hope, probably in vain, for Tribune to buy the paper. "We have accomplished a lot, but we recognize we must do a lot more," Freidheim said on his call, adding that STMG is "working toward profitability" and aims to provide shareholders with a "business as strong as its journalism."

Based on its share price, STMG is worth about $70 million. Abner Kurtin of K Capital Partners, a Boston-based shareholder, figures there's value in its 70 papers outside Chicago, such as the Pioneer Press weeklies and daily SouthtownStar. The Sun-Times alone might fetch between "zero and $50 million," he says, adding that a big-hearted local buyer might fancy it as a "community asset or vanity asset." Of course, Marshall Field III may once have seen the paper that way. The Sun-Times has been poorer for the lack of a backer like him, but the city will be poorer still if the lights go out at the Bright One.

Weber is BusinessWeek's chief of correspondents .