- The Washington Times - Tuesday, August 31, 2004

NEW YORK (AP) — Conrad Black, the former CEO of Hollinger International Inc., conspired with associates to systematically loot the newspaper publishing company of more than $400 million — nearly all of its profits over the past seven years, an internal investigation found.

The report, which was filed with the Securities and Exchange Commission yesterday, was prepared by a special committee of Hollinger’s board, which was formed last year to examine concerns from shareholders about payments made to Mr. Black and others.

Mr. Black has since been forced out as chief executive officer and chairman of Hollinger International as a result of initial findings from the committee that he and others improperly received millions in fees and payments that should have gone to the company.

The committee’s 500-page report makes even more sweeping charges of wrongdoing, accusing Mr. Black and a senior associate, former Chief Operating Officer David Radler, of milking the company to satisfy their “ravenous appetite for cash.”

In an introduction to their report, the three-member committee wrote: “This story is about how Hollinger was systematically manipulated and used by its controlling shareholders for their sole benefit, and in a manner that violated every concept of fiduciary duty.”

A spokesman for Mr. Black did not respond to a request for comment on the committee’s findings. Mr. Radler couldn’t be located for comment.

The report was disclosed a day after Hollinger International’s parent company, Toronto-based Hollinger Inc., disclosed that the SEC’s Midwest regional office planned to recommend civil charges be filed against it for reputed violations of the Securities Exchange Act.

Hollinger International’s special committee is also suing Mr. Black, Mr. Radler and others in federal court in Chicago, seeking $1.25 billion in damages and accusing the group of racketeering. The committee also submitted its final report to that court late Monday.

The three-member committee was made up of outside directors and was advised by Richard Breeden, a former SEC chairman who acted as a bankruptcy monitor for WorldCom Inc.

The report was also critical of the company’s audit committee, which was chaired by former Illinois Gov. James Thompson, saying that the committee’s performance was “ineffective and careless over a prolonged period of time.”

However, the investigators also found that the committee was frequently misled by Mr. Black, Mr. Radler and other insiders, who also withheld important information from them on a regular basis.

The committee also criticized Richard Perle, a former defense adviser and a member of Hollinger International’s board, saying that he “repeatedly breached his fiduciary duties” as a member of the board’s executive committee.

The panel found that Mr. Perle repeatedly signed papers without reading them, including several that cleared the way for several payments to insiders in a way that allowed Mr. Black and Mr. Radler to avoid disclosing them to the board or to its audit committee.

The report describes extensive abuses of power by Mr. Black and his associates, concluding that Hollinger International “went from being an expanding business to becoming a company whose sole preoccupation was generating current cash for the controlling shareholders, with no concern for building future enterprise value or wealth for all shareholders.

“Behind a constant stream of bombast regarding their accomplishments as self-described ‘proprietors,’ Mr. Black and Mr. 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 investigators charged.

The report concluded that the amount of money looted from Hollinger, purportedly by Mr. Black and others over the period of 1997-2003, represented just over 95 percent of the company’s entire earnings during that period.

Mr. Black has already lost two legal battles against Hollinger in Delaware’s Chancery Court, the last of which blocked his effort to call a shareholder vote on the company’s move to sell one of its main assets, the Daily Telegraph of London, to the Barclay brothers of the United Kingdom. An earlier ruling found that he “persistently and seriously” breached his obligations to the company.

Despite his removal from executive posts, Mr. Black retains voting control of Hollinger International through Hollinger Inc., the Toronto-based holding company.

With the sale of the Telegraph, Hollinger International retains the Chicago Sun-Times, several other newspapers in the Chicago area, where the company is based, and the Jerusalem Post.

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