Hollinger Report Alleges Stunning Greed

By: Mark Fitzgerald Like a good Russian novel, the "Report of Investigation by the Special Committee of the Board of Directors of Hollinger International Inc." is long (513 pages), sweeping in time and geography, and chronicles the deadly sins of pride, greed -- even a bit of gluttony.

It even has a table of names for all those easily confused characters from Barbara Amiel Black, wife of the epic's tragic hero Conrad M. Black, to Paul Winkler, the former general manager of Kelowna Capital newspaper in British Columbia.

The report, so long as you are not a Hollinger International stockholder or, God forbid, a director, is also a hoot. Whoever wrote this report for the committee headed by former Securities and Exchange Commission head Richard Breeden has the kind of flair that made Spy magazine a must-read in the "Greed is good" era of the 1980s.

"Behind a constant stream of bombast regarding their accomplishments as self-described 'proprietors,' 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 says on page two -- and it's just getting started.

The author nicely sets the scene:

"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."

Don't get distracted the reader is warned: "To fully gauge the level of Black and Radler's disregard for shareholder interests, one must step back from individual transactions and note the myriad of schemes, fiduciary abuses and fraudulent acts that were used to transfer essentially the entire earnings output of Hollinger over a seven-year period to the controlling shareholders. In this case more than most, one must not overlook the forest for the trees."

And, yet, how can one not be distracted, skimming ahead of the all the allegations about straight-faced lying over transactions involving community papers in the empty quarters of Canada to get to the juicy parts?

Consider the section entitled "Personal Expenses." According to the Hollinger report, Black and his wife expensed a dizzying array of consumer goods that even Jayson Blair might have had trouble justifying on his expense account. Among the expenses are $2,463 itemized as "handbags for Mrs. BB," $2,083 in exercise equipment, a $2,057 leather briefcase from T. Anthony Ltd.

Every good Russian novel needs a ball, and the Blacks had several, according to the Hollinger expose. There was a $42,870 dinner at La Grenouille in New York City, and another $212 a plate celebration for 80 guests that included "Beluga caviar, lobster ceviche, and 69 bottles of fine wine." Among the guests were several expensible media types, including, the report says, Peter Jennings, Charlie Rose and Barbara Walters.

"At least Black's choice of venue for his wife's birthday was less expensive than Dennis Kozlowski's party for his wife on Sardinia that was charged in part to Tyco," the report says. Meow!

Perhaps the most breath-taking expense reported by the Breeden committee, though, was for $24,950. The sole explanation in the expense report? "Summer Drinks."

Black, the report suggests, brought some of his same accounting razzle-dazzle that characterized the various irregular "management fees" and "non-compete payments" to his personal expenses.

In 2000, the report says Black and his wife "swapped" their Park Avenue apartment with one owned by Hollinger. Here's how the report describes what it calls "a much more unusual corporate 'expense'":

"The apartment owned by the Blacks (which they had purchased for $499,000 two years earlier) was 'priced' in the swap by crediting it with 70% appreciation from its acquisition cost. The apartment owned by Hollinger (which it had purchased for $3 million six years earlier) that the Blacks were acquiring was "priced" in the swap by crediting it with zero appreciation. Both apartments were in the same building, though the apartment owned by Hollinger was greatly superior due to its size and location on a higher floor. Based on New York City Finance Department data for actual appreciation on Upper East Side properties for the dates in question, the Blacks obtained Hollinger's apartment for $2.5 million below its value due to the rigged appreciation assumed in the deal. The apartment Hollinger took back in the rigged swap was then used to house personal domestic staff for the Blacks, personal friends visiting New York and on occasion visiting executives for corporate purposes."

The report calls Barbara Amiel Black's corporate position a "no-show" job that "paid her over $1.1 million but did not require her to do anything."

Though the author's commentary on this particular section comes very early in the report, it might work as the moral of the tale:

"Black's expense practices evidence his attitude that 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."