BLACK FACES CANADIAN OWNERSHIP RULE

By: Mark Fitzgerald Hollinger Ponders Citizenship Renouncement


CHICAGO -- Judging by their letters to the editor in Canadian
papers last week, many Canadians regard Hollinger Inc. Chairman
Conrad Black's announcement that he is renouncing his Canadian
citizenship to accept an appointment as a British lord as just
another opportunity to mock his Anglophile pomposity.

But Black's decision has potential business consequences that are
taken seriously inside Hollinger -- and even more so by
competitors of the National Post, the nationwide paper
that the mogul created in 1998. Section 19 of Canada's tax code
effectively bans foreign ownership of newspapers by allowing
advertisers to deduct from their tax bills the full cost of an ad
in a Canadian paper. For a paper to be considered Canadian, the
chairperson or presiding officer -- as Black is of the
National Post -- must be Canadian and at least three-
quarters of the board of directors must be Canadian. Canadians
must also own at least a three-quarters stake in the paper.

With Hollinger's intricate corporate structure, it isn't clear
just how much of an interest Black holds in the National
Post. Last November, Hollinger sold a 50% stake in the paper
to CanWest Global Communications Corp. as part of a blockbuster
deal in which the chain sold all its other Canadian papers. But
Hollinger International Executive Vice President Jack Boultbee
confirmed in a telephone interview last week that Black's shares,
combined with the stakes of other foreigners, would disqualify it
as a Canadian-owned paper.

So what does that mean for advertisers in the money-losing
National Post? "Nothing," Boultbee said flatly. He notes
that the quirky ownership restraints would not kick in until at
least 12 months after Black drops his citizenship. "In that year,
we would fix the problem," Boultbee said. The simplest change
under consideration, he said, is for Black to transfer his stake
to his wife Barbara Amiel, the Canadian conservative commentator.
"Then there are some corporate reorganizational things we could
do that I'm not going to get into," he said.

No advertisers have been spooked by the citizenship move,
Boultbee said. Canada's tax agency does not expect the paper to
have a problem. "The odds of us having to penalize advertisers,
well, I find it hard to believe," Canada Revenue spokesman Michel
Proulx said. But the Post's national competitors gleefully
emphasize the possible tax complication in their coverage.

There is one immediate consequence for the Post, though. A
couple of weeks ago at Hollinger's annual meeting, Black mused
about buying back CanWest's half of the newspaper. Forget it,
Boultbee said: "It would be twice the complications." But with no
debt to speak of, and an estimated $3 billion available for
acquisition, Black may be turning his gaze south of the border.
"The likelihood is that we'd be more interested in a large
metropolitan daily rather than in a chain of regionals, at least
in the U.S.," Hollinger Vice Chairman Dan Colson told The
Globe and Mail last week.

And in the United States, of course, there are no inconvenient
citizenship requirements for newspaper ownership.

Americas Extra Roundup

Chilean President Ricardo Lagos signed a new press law
that repeals much of the infamous State Security Law that made it
a crime to insult high officials, even with truthful information.
One big flaw is that the law protects only journalists with a
journalism degree or other official recognition, according to the
New York-based Committee to Protect Journalists. "We are dismayed
by the new law's attempt to create a legal distinction between
journalists who may protect their sources and journalists who may
not," Executive Director Ann K. Cooper said.

In a month unusually violent even for Colombia, a radio
reporter, Edgar Tavera Gaona, 38, was found dead in the rural
north May 18, apparently killed by the left-wing FARC guerrilla
group. Four journalists for the Bogota daily El Tiempo --
editors Orlando Gamboa, Martha Elvira Soto, and Sergio Ocampo as
well as national reporter Carlos Pulgarin -- were threatened with
death between May 17 and 20 and warned to leave the country
within a month. A 550-pound car bomb was disarmed outside the
offices of the Communist Party paper La Voz May 21.

A rash of mysterious break-ins at the homes of
journalists, including Roberto Augsten of the daily Ultima
Hora, who are investigating the $11-million heist of an
armored car in Asuncion, Paraguay, prompted the Paris-based
Reporters Without Borders to ask authorities to extend police
protection to the reporters.

Five months after Wilson Cabrera, founder of the El
Observador newspaper in Ecuador's Amazon region, went into
hiding after being sentenced to three months in prison for
publishing "serious nonslanderous insults," three of the judges
who brought the case against him have been disciplined for
corruption, the Lima, Peru-based Institute for Press and Society
noted in a May 7 alert.



Mark Fitzgerald (mfitzgerald@editorandpublisher.com) is editor at large for E&P.



Copyright 2001, Editor & Publisher.