[A-List] Conrad Black

["Michael Keaney" <michael.keaney@xxxxxx>]

The high profile of this particular case will work to Tony's advantage,
given that "Lord" Black made a point of giving up his Canadian citizenship
in order to take his seat in the House of Lords as a Conservative. Cue lots
of allegations of sleaze, etc. More interesting is the impact that it will
have on some of Black's pals on the old Hollinger board: Kissinger, Perle,
etc.

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Black 'plundered company to fund his extravagance (and pay his wife's tips)'
By Michael Harrison, Business Editor
The Independent, 11 May 2004

Lord Black of Crossharbour, the proprietor of the Daily Telegraph, used its
parent company, Hollinger International, as a "cash cow", milking its
coffers to subsidise his extravagant lifestyle and that of his wife,
according to a $1.25bn (£700m) lawsuit filed against the newspaper magnate
in New York accusing him of racketeering.

The writ, lodged by Hollinger International, claims that in one instance
Lord Black's wife, Barbara Amiel, a former Telegraph columnist, charged a
tip she paid to the doorman of the luxury New York clothing store
Bergdorf-Goodman to the company. In another example of Lord Black's
"systematic disregard for shareholder interests" Hollinger was billed
$90,000 to refurbish a 1958 Rolls-Royce Silver Wraith so that Lord Black and
his wife "could travel London in classic style without paying for the ride".

But these were mere bagatelles, alleges the document filed in the district
court for the northern district of Illinois. Hollinger also maintained two
corporate jets to transport Lord Black and his wife and the company's former
deputy chairman, David Radler, to their personal residences at a cost of
$4.7m to $6.5m a year. And "Black billed Hollinger for the cost of numerous
personal household staff ­ including chefs, senior butlers, butlers,
under-butlers, chauffeurs, housemen, footmen and security personnel", says
the lawsuit.

Lord Black, his private company Ravelston (through which he owned a
controlling stake in Hollinger), his wife and three former Hollinger
executives are being sued by the company for $484.5m, including interest.
Because the lawsuit also claims that the "Black Group", as it is referred
to, committed federal offences under the Racketeer Influenced and Corrupt
Corporations Act (RICO), the damages could treble to $1.25bn.

The lawsuit alleges that the Blacks and their co-defendants extracted
exorbitant amounts of money from the company in numerous ways, such as:
management fees which bore no relation to the size of the business;
"non-compete" fees charged to other companies which bought assets from
Hollinger; and incentive payments which came from the non-existent profits
of loss-making subsidiaries.

Lord Black and his fellow defendants also transferred Hollinger businesses
to companies they controlled "for tens of millions" less than their
open-market value and set up arrangements with "sham" brokers to extract
more fees from Hollinger.

In addition to the Blacks and Mr Radler, the other defendants are John
Boultbee, Hollinger's former finance director, and Dan Coulson, the chief
executive and deputy chairman of The Daily Telegraph until March this year.

"During a prolonged period, the Black Group used Hollinger as a cash cow to
be milked of every possible drop of cash, often in a manner evidencing
complete disregard for the rights of all Hollinger shareholders," says the
lawsuit.

"The scale of the income diverted by the Black Group into their own pockets
during the period 1997-2003 was largely, if not wholly, without precedent as
a proportion of the operating income of a widely held public corporation."

According to the document, Hollinger paid Lord Black and his associates
$390.7m over the six-year period, equivalent to 72 per cent of the company's
total net income. By contrast, during the same period, the top five
executives of the companies which own The New York Times and The Washington
Post received 4.4 per cent and 1.8 per cent of total net income
respectively.

The lawsuit, which contains 30 counts against Lord Black and the other
defendants, paints an extraordinary picture of the way the newspaper magnate
and his associates viewed Hollinger and controlled it, referring to the
business as "their company" even though Lord Black only owned 30 per cent of
the shares and "manipulating and dominating" the audit committee, which
vetted all payments it made.

One example, according to the lawsuit, was an "incentive plan" set up by
Lord Black and Mr Radler to milk money from a subsidiary company called
Hollinger Digital. Although Hollinger Digital ran up losses of $65m, it paid
out "incentives" of $15.5m, because only the profitable investments, not the
loss-making ones, counted towards the bonus plan. "This is an approach
analogous to computing a baseball player's batting average by considering
only hits and disregarding outs," observes the writ.

Nearly half the $484.5m paid to the Black Group went on management services
"at prices so grossly inflated that they were many times the cost Hollinger
would have incurred in providing those services for itself."