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 from 1997 through 2003, an internal investigation found.
The report, which was filed with the Securities and Exchange Commission on Tuesday, was prepared by a special committee of Hollinger's board which was formed last year to examine concerns from shareholders about payments made to Black and others.
Black has since been forced out as CEO and chairman of Hollinger International, the parent company of the Chicago Sun-Times and The Jerusalem Post, following initial findings from the committee that he and others improperly received millions in fees and payments that should have gone to the company. He remains the company's controlling shareholder.
The committee's 500-page report makes even more sweeping allegations of wrongdoing, accusing 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."
The report was the latest blow to Black, a flamboyant media tycoon who has been steadily losing his grip on his newspaper empire over the past year. Born in Canada, he renounced his citizenship to accept the title of Lord Black of Crossharbour in the United Kingdom, where he moved in high-level social circles. He also published a widely praised 1,280-page biography of Franklin Delano Roosevelt last fall.
The committee found that Black had Hollinger pay for at least $8.9 million worth of FDR memorabilia while he was working on the book, as well as a number of perquisites for himself, his wife, and other associates that were often not properly disclosed.
From 2000 to 2003, the committee found, the company paid about $390,000 to lease and repair various cars, including a Bentley and Rolls Royce in London. Black also billed the company for $28,480 for three dinners for former secretary of state Henry Kissinger, who is a board member, and his wife; as well as $24,950 for "summer drinks."
Ravelston Corp., a Canadian company 65 percent-owned by Black and the ultimate parent entity of Hollinger International, released a statement saying that the report is "recycling the same exaggerated claims laced with outright lies that have been peddled in leaks to the media and over-reaching lawsuits."
Radler owns 14 percent of Ravelston. Neither Black nor Radler could be reached for further comment beyond the statement.
The three-member committee was made up of outside directors and was advised by Richard Breeden, a former SEC chairman who also acted as a court-appointed bankruptcy monitor for WorldCom Inc.
Hollinger International's special committee is also suing Black, 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 report was disclosed a day after Hollinger International's publicly traded parent company, the Toronto-based holding company Hollinger Inc., disclosed that the SEC's Midwest regional office planned to recommend civil charges be filed against it for alleged violations of the Securities Exchange Act. Black and Radler control Hollinger Inc. through Ravelston.
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 Black, Radler and other insiders, who also withheld important information from them on a regular basis. Thompson declined to comment on the specifics of the report, but acknowledged that he had put his faith in Radler and Black. "I've never been on a board where you start with the presumption that the CEO is a crook," Thompson said in an interview.
The committee also criticized Richard Perle, a member of Hollinger International's board, saying that he "repeatedly breached his fiduciary duties" a member of the board's executive committee. Perle was assistant secretary of defense under President Reagan and a former chairman of the Defense Dept.'s Defense Policy Board in the current Bush administration.
They found that Perle repeatedly signed papers without evaluating or even reading them, including several that cleared the way for payments to insiders in a way that allowed Black and Radler to avoid disclosing them to the board or to its audit committee.
They also found that Perle, together with Black, caused Hollinger International to make an investment in Trireme, an investment fund in which they both held a financial interest, without seeking the required approval from the board's audit committee.
"By putting his own interests above those of Hollinger's shareholders, Perle has violated his duties of good faith and loyalty," the investigators said in their report. "As a faithless fiduciary, Perle should be required disgorge all compensation he received from the company," including more than $3 million he received in bonuses as the former chairman and CEO of the company's digital operation.
An assistant in Perle's office said he was traveling and couldn't be reached for comment.
The report describes extensive abuses of power by 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. ... 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 report concluded that the amount of money looted from Hollinger by Black and others over the period of 1997-2003 represented just over 95 percent of the company's entire earnings during that time.
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.
Following the sale of the Telegraph, Hollinger International retains the Sun-Times, several other newspapers in the Chicago area, where the company is based, and The Jerusalem Post.