Corporate Kleptocracy
Why Conrad Black has Hollinger investors seeing red
Black, who strenuously denies the allegations, has long been famous for his ego and flamboyance. And for many years he was also pretty good at publishing. Hollinger began as a family-owned mining company in the 1980s and started buying newspapers a few years later. In 1987, it purchased a controlling interest in the flagging London Daily Telegraph , which Black helped transform into a stable counterpunch to Rupert Murdoch's more liberal Times . Hollinger bought a majority stake in the Jerusalem Post in 1989 and purchased the Chicago Sun-Times in 1994, the same year Black took Hollinger public. Black soon became a social power, even publishing a memoir, A Life in Progress . To soften his image, Black directed Hollinger to donate several million dollars to charities but allegedly took credit for much of the philanthropy.
After Hollinger went public, its revenues rocketed from $422 million to $2.21 billion in 1997. The company owned more than 500 papers, but by then the seeds of corruption were deeply rooted, the report alleges. Black had established a convoluted ownership structure: In addition to their roles at Hollinger, Black and Radler also controlled two entities--Ravelston and HLG--which owned large chunks of Hollinger's voting shares. According to the report, Hollinger began paying "management fees" to the two firms--roughly $218 million in total--virtually all of which allegedly went into the pockets of Black, his wife, Radler, and a handful of others.
Pay plums. In the late '90s, Hollinger began selling many of its smaller publications to reduce debt. That led to so-called noncompete payments to Black and Radler that the report declared to be "nothing more than self-determined bonuses" worth an additional $90.2 million. Other unusual arrangements included allegedly paying Black's wife--an opinion columnist and ambitious socialite--$1.1 million in salary for a "no-show" post. Black and Radler also each had their own corporate jets--a $24 million tab--which mainly ferried them to their various proper-ties. And Hollinger bought nearly $9 million of Franklin D. Roosevelt memorabilia, most of which ended up in Black's homes and helped him write a biography of the former president.
Black issued a statement calling the committee's work a futile effort "that paralyzed Hollinger International, eroded the value of its assets, and persecuted and defamed the men and women who created the value they are now vandalizing." He offered no specifics but promised that he would be exonerated in his litigation with Hollinger, which also includes an $850 million countersuit by Black claiming several Hollinger directors defamed him. Through a spokesman, Radler said the accusations of improper compensation were "baseless" and "false," and pointed out that he has returned some of the noncompete payments as a good-faith gesture and offered to mediate other issues.
Besides, as both men point out, Hollinger's directors--a "renowned and sophisticated" group, in Black's words--approved all major transactions. In addition to Kissinger and Perle, Hollinger boards have included former U.S. Ambassador to the U.S.S.R. Robert Strauss, Limited Brands CEO Leslie Wexner, and former Illinois Gov. Jim Thompson. But they behaved "more like a social club," according to the report, and "were not alert and didn't notice when Black and Radler were driving their bloated fee requests past them." Except for Perle, those former board members get off relatively easy in the report, which noted they routinely received misleading information from the company's honchos.
Black, a war buff fond of military analogies, surely could find one that describes his current predicament. He could be on the hook for millions of dollars, the SEC might censure or fine him or, worse, seek criminal prosecution, and many of his well-connected friends now shun him. Is Black a Napoleon facing his Waterloo? Or a courageous Churchill shaking his fist at the Nazis? Whatever the case, don't look for him to surrender.
With Danielle Knight
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