Days of plunder

Conrad Black and other former Hollinger International executives are accused of skimming more than $400 million from the company.


David TeatherJane Martinson
September 1, 2004 5:54PM (UTC)

Conrad Black plundered his former company, Hollinger International, the then owner of the Daily Telegraph, on a vast scale, according to a 500-page report published Tuesday. The document, the result of a yearlong internal investigation, embellishes an earlier $1.25 billion lawsuit against Lord Black and other former executives of the company, accusing them of extraordinary greed.

According to the latest report, Lord Black charged the company almost $43,000 for a birthday party he threw for his wife, Barbara Amiel, at New York's La Grenouille restaurant. Celebrity guests, including Oscar de la Renta, Barbara Walters and Ron Perelman, enjoyed beluga caviar and lobster. The couple also claimed as expenses $2,463 for Lady Black's handbags, $3,530 for silverware for the Blacks' corporate jet and $24,950 for "summer drinks."

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Publication of the long-awaited report could accelerate parallel investigations by U.S. criminal and financial authorities.

Lord Black and a small coterie, including the former deputy chairman of the company, David Radler, have been accused of skimming more than $400 million from the business in the past seven years. The lawsuit, including damages, is for three times that amount. They have been accused of taking excessive compensation and unapproved bonuses, fees and loans, and selling themselves assets from the company at bargain prices, as well as the headline-grabbing personal expenses.

"Black and Radler made it their business to line their pockets at the expense of Hollinger almost every day, in almost every way they could devise," the internal report says. It claims that Lord Black set in place a system "to plunder Hollinger on a vast scale"; that "abusive and unethical practices had become so deeply ingrained in the corporate culture they became commonplace"; and that Lord Black had a "parasitic" relationship with the business.

The report also singles out a former U.S. assistant secretary of defense, Richard Perle, who sat on the Hollinger International board, for particular criticism. It hints that the company may launch a separate legal claim against him to claim back money he earned as a director. Perle is accused of a "head-in-the-sand" mentality, rubber-stamping Lord Black's actions while being awarded a $3 million bonus.

Members of the company's audit committee, who signed off on many of the millions of dollars in fees collected by Lord Black, also came in for criticism. Other high-profile directors, including former U.S. Secretary of State Henry Kissinger, emerged with their reputations intact.

The report is also strongly critical of the outside auditor, KPMG. It claims the accounting firm initially resisted efforts by the investigators, an allegation denied by KPMG. Hollinger International had no comment on whether further lawsuits would be filed. A spokesman for KPMG said yesterday: "We believe that we cooperated fully with the investigation throughout its entirety."

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Hollinger International did suggest, however, that the size of the claim already filed that names Lord Black could go higher still as the company begins the discovery process and gains access to documents held by the fallen tycoon.

Lord Black, who was ousted from the company in January, has vehemently denied any wrongdoing. He has launched a defamation suit against the company alleging that it attempted to turn him into a "loathsome laughingstock." A statement from Lord Black's privately held Ravelston Group said the report was "recycling the same exaggerated claims laced with outright lies" and said the accused would be exonerated in court.

The first mutterings of financial scandal at Hollinger International were heard last summer when a shareholder complained of "noncompete" bonuses paid to Lord Black and other executives when the company sold some of its assets. That set in motion one of the ugliest internecine battles seen, even in the newspaper business.

Hollinger engaged Richard Breeden, a former head of the U.S. financial watchdog the Securities and Exchange Commission, to investigate. Initial findings last November suggested that at least $32 million had been misappropriated, a figure that grew as the investigation continued. The committee led by Breeden interviewed more than 60 witnesses and reviewed nearly 750,000 pages of documents in the course of the investigation.

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David Teather

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Jane Martinson

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