Report says Lord Black took $600m of Hollinger money

1.00pm - By KATHERINE GRIFFITHS

NEW YORK - Lord Black of Crossharbour, the former chief executive of the publishing giant Hollinger International, and his associates ransacked more than US$400m ($609m) from his former empire in an astonishing display of "corporate kleptocracy", according to a report published yesterday.

Lord Black, whose downfall forced Hollinger to sell its prized British newspaper asset, The Daily Telegraph, to the Barclay brothers last month, illegally took the money to fund lavish parties, expensive possessions and massive salaries for himself and his friends, the report says.

The findings, compiled by a former chairman of America's Securities and Exchange Commission, Richard Breeden, will further damage the reputation of Lord Black.

Until recently, he was one of the world's most powerful media barons, with an empire including the Chicago Sun-Times and the Jerusalem Post.

He was ousted as chairman of Hollinger in January and is already being sued by his former company for US$1.25 billion through Chicago's courts based on an initial internal inquiry into the way the Canadian-born publisher, its controlling shareholder, ran the business.

Yesterday's far more detailed report, also commissioned by Hollinger, says Lord Black and his chief operating officer, David Radler, engaged in "self-righteous and aggressive looting" of Hollinger so extensive there are few parallels in corporate history.

Such was their "ravenous" desire to strip the company of its profits for their own personal gain, Lord Black and his circle "aggressively manipulated" the other major shareholders in Hollinger during a number of years from the late 1990s, Mr Breeden and his team found.

Most shocking is likely to be the way Lord Black, who was already a multi-millionaire, put the considerable living expenses for himself and his wife, media commentator Barbara Amiel Black, on the company account.

Bills that Hollinger ended up paying included US$1.4m for private staff for the Blacks' residences, plus the cost of running a Rolls-Royce and a private jet.

The couple also pulled off an extraordinary property deal where they swapped their apartment in New York's well-to-do Upper East Side for one owned by Hollinger.

Without apparently giving an explanation, the deal saw the Blacks' flat valued at its current market price - more than they had paid for it - while the Hollinger apartment was frozen at the price the company had paid for it six years before.

The transaction, in effect, netted the Blacks US$2.5m, the report says.

Another example of the Blacks' seemingly endless desire to plunder Hollinger's coffers was their direction that the company should donate about US$6m to charitable causes of their choosing.

Yet it was the Blacks who were credited with the donations, with a wing of a Toronto children's hospital being named after them in recognition of their generosity.

While Hollinger's finances weakened, Lord Black and his lieutenant Mr Radler masterminded an extraordinary strategy for running Hollinger which enabled them to collect millions of dollars in illegal management fees and other bonuses when Hollinger agreed to deals with rivals, known as "non-compete fees", the report alleges.

The existence of the non-compete fees, amounting to US$32m for Lord Black and his allies, have caused particular outrage because they were frequently paid to Lord Black and his allies personally, rather than to Hollinger.

The conclusion of Mr Breeden's year-long investigation was that Lord Black and his circle had transferred to themselves more than US$400m in the past seven years, dramatically up on initial suspicions that they had helped themselves to just over US$30m in illegitimate fees from the company.

In fact, the report says, the culture of "corporate kleptocracy" created by Lord Black was such that the total cash taken by him and his friends was equal to 95 per cent of Hollinger's profits between 1997 and 2003.

While the existing lawsuit launched in May in the United States, where Hollinger is headquartered, exposed some details of Lord Black's attitude to Hollinger as his personal fiefdom, the latest document spells out in detail how he thought "there was no need to distinguish between what belonged to the company and what belonged to the Blacks".

"In Hollinger's world, everything belonged to the Blacks", the report says.

Based on the new details unearthed by Mr Breeden, Hollinger may increase the sum it is suing Lord Black for through Chicago's courts, the report notes.

Lord Black denies any wrongdoing and is challenging the company in the courts.

Mr Breeden will continue to investigate the myriad of complex financial transactions of Lord Black, and is likely to try to force the man himself to give evidence to his committee.

- INDEPENDENT