From his jail cell in America, Conrad Black, the disgraced, convicted former newspaper magnate who once hankered after Fairfax, has sunk another company. The company that owned the Chicago Sun-Times collapsed overnight, crippled not by bank debt left by the odious Black, but by a huge tax bill left over from his reign: more than $US600 million.

Now into the second year of his six and a half years for fraud and obstruction of justice, Black has been busy lecturing prisoners, writing articles, reviewing books and and trying to rebuild his reputation as he does his time in a Federal clink in the US state of Florida. He told a Toronto paper last month that he has made his time in his ‘Club Fed” intellectually stimulating by teaching other inmates, writing books and articles, reading and learning to play the piano. No mention if he was teaching his fellow inmates to ‘fiddle the books’ as well.

No mention about the mess he left behind either, especially at The Chicago Sun-Times, his main US paper.

The slump in advertising of all kinds has crippled the company’s cash flows, meaning it had no hope of meeting the Black bill, and remaining afloat. So it was forced to file for Chapter 11 bankruptcy, where it has joined its fellow Chicago media giant, The Tribune Co, and at least four other US newspaper and TV groups in the same position.

The Sun-Times Media Group Inc, which owns 58 other newspapers and online websites, said it would continue to operate these papers and Web sites as usual while it improves its cost structure and stabilizes operations.

The latest announcement comes after the closure of the papers in Denver, Seattle (where another daily is threatened), The Christian Science Monitor, which is due to move solely online shortly. Job cuts are hitting the New York Times Company, the Houston Chronicle, the Atlanta Constitution and The Washington Post Company.

According to Paper Cuts, a website that tracks the US newspaper sector, at least 120 newspapers in the United States have shut down since January 2008, and 21,000 jobs at 67 newspapers have gone in that time.

In the statement on the Sun-Times website the company said:

“The significant downturn in the print advertising environment that has affected newspapers across the country has continued to severely impact us,” said Jeremy Halbreich, chairman and interim chief executive of the Sun-Times Media Group. “Unfortunately, this deteriorating economic climate, coupled with a significant, pending IRS tax liability dating back to previous management, has led us to today’s difficult action.

Halbreich said the company would explore the potential sale of assets or new investment in the company to help it remain viable.

Newspapers have struggled to meet challenges posed by changing reader habits, a shifting advertising market, an anemic economy, and the newspaper industry’s own early strategic errors.

The company said in its statement that it had one significant creditor — the Internal Revenue Service. The IRS has said Sun-Times Media Group owes up to $US608 million in back taxes and penalties from past business practices by its former controlling owner, Conrad Black, “now imprisoned for theft from corporate coffers.”

Unlike other newspaper owners that have filed for bankruptcy amid steep falls in advertising, including Chicago-based Tribune Company, Sun-Times Media has no bank debt. But the IRS debt has thwarted attempts to raise new capital from prospective shareholders. Halbreich said in the statement the company will continue talks with the IRS while implementing a new business plan. It has hired Rothschild Inc to find a buyer or buyers for all or some of the assets.

And the Sun Times company has one further Black entanglement that is now open to doubt. Earlier this month we reported than struggling Canadian media group, Canwest (which controls the Ten Network here in Australia), had reached a settlement with the Sun Times group over a disputed payment for newspapers Canwest bought from Black’s Hollinger in 2000. (Sun Times is the modern version of Hollinger). Canwest got just over $US34 million when the debt, agreed to in arbitration, was more than $50 million.

That payment was suggested by Canwest because both companies needed it: Sun Times to get rid of the debt, Canwest, because of its desperate financial position and a need to feed its banks some money to keep them at bay. Canwest got the money on March 12, will the US bankruptcy court look at that payment and perhaps ask for the money back?

Probably not because the payment settled an arbitrated debt, but it’s an unwanted uncertainty for Canwest.