- WASHINGTON (AFP) -- Media
tycoon Conrad Black and his allies looted the company he created to manage
a global publishing empire of more than 400 million dollars since 1997,
a report prepared for US court and regulators showed.
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- A scathing report submitted to the Securities and Exchange
Commission and a federal court for a lawsuit against Black and his associates
painted a bleak picture of Black, who until last year was chief executive
of Hollinger International, and the firm's chief operating officer, David
Radler.
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- But the report also blamed high-profile members of the
company's board of directors for rubber-stamping Black's efforts and failing
to question dubious payments being made.
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- "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," said
the report prepared by a committee headed by Richard Breeden, a former
SEC chairman.
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- "Not once or twice, but on dozens of occasions Hollinger
was victimized by its controlling shareholders as they transferred to themselves
and their affiliates more than 400 million dollars in the last seven years.
The aggregate cash taken by Hollingers former CEO Conrad M. Black and its
former COO F. David Radler and their associates represented 95.2 percent
of Hollinger's entire adjusted net income during 1997-2003."
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- The report went on to say that Hollinger went from being
an expanding business -- which at the time controlled Britain's Daily Telegraph
as well as the Jersualem Post and Chicago Sun-Times -- "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."
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- The committee "knows of few parallels to Black and
Radler's brand of self-righteous, and aggressive looting of Hollinger to
the exclusion of all other concerns or interests, and irrespective of whether
their actions were remotely fair to shareholders."
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- The media empire created by Black has been in turmoil
for the past year, since Chicago-based Hollinger International dumped him
as chief executive and later removed him from the board in January 2004.
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- Among the many lawsuits in the dispute, the US-based
board is suing Black for 1.25 billion dollars for taking improper payments
and for failing in his fiduciary duties to other shareholders.
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- The board succeeded in blocking Black's attempt to sell
his stake in the holding company, and then worked out a deal to sell the
Telegraph Group of Britain.
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- The committee report said that since the US operating
firm was established as public firm in 1994, Black manipulated it through
a "layered control pyramid" involving his private finance company,
Ravelston, which in turn controlled the Canadian holding company, Hollinger
Inc.
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- "Hollinger wasn't a company where isolated improper
and abusive acts took place. Rather, Hollinger was a company where abusive
practices were inextricably linked to every major development or action,"
the Breeden report said.
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- "At Hollinger, Black as both CEO and controlling
shareholder, together with his associates, created an entity in which ethical
corruption was a defining characteristic of the leadership team."
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- But the report does not let other board members off the
hook, and even suggests they could be open to liability.
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- The report had harsh words for members of the board's
audit committee, especially Richard Perle, a former Pentagon official who
has also headed the Defense Policy Board, an advisory group to the US military.
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- "It is difficult to imagine a more flagrant abdication
of duty than a director rubber-stamping transactions that directly benefit
a controlling shareholder without any thought, comprehension or analysis,"
the report said.
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- "In fact, many of the consents that Perle signed
as an Executive Committee member approved related-party transactions that
unfairly benefited Black and Radler, and cost Hollinger millions."
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- But the report treads more lightly on other board members
including former US secretary of state Henry Kissinger.
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- The report concludes that Kissinger and others "were
acting reasonably in relying on the reports of the Audit Committee."
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- Copyright © 2004 Agence France Presse. All rights
reserved. The information contained in the AFP News report may not be published,
broadcast, rewritten or redistributed without the prior written authority
of Agence France Presse.
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0040831/bs_afp/us_canada_britain_media_company_ethics_040831151952
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