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Report Details 'Kleptocracy' at Newspaper Firm

By Frank Ahrens
Washington Post Staff Writer
Wednesday, September 1, 2004; Page A01

Press tycoon Conrad M. Black and other top Hollinger International Inc. officials pocketed more than $400 million in company money over seven years and Black's handpicked board of directors passively approved many of the transactions, a company investigation concluded.

A report by a special board committee singled out director Richard N. Perle, a former Defense Department official, who received $5.4 million in bonuses and compensation. The report said Perle should return the money to the Chicago company.

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The report also criticized the board's audit committee, which includes former Illinois governor James R. Thompson and former ambassador Richard R. Burt, for failing to question Black's large management fees. It said it was reasonable for former secretary of state Henry Kissinger, another independent director, to rely on the audit committee.

Black's holding company said the report was filled with "outright lies."

Black resigned in November after an internal investigation showed that he and associates, mainly chief operating officer F. David Radler, received money that the company should have kept. Hollinger International is suing Black -- a native of Canada who is now a British citizen -- and others for $1.25 billion in damages for their alleged pillaging of the company, which owns the Chicago Sun-Times, the Jerusalem Post and other newspapers. It recently sold London's Daily Telegraph.

The new report, filed with the Securities and Exchange Commission late Monday, added details of what it called the "corporate kleptocracy" Black and Radler created at Hollinger. It said they treated the company as a "piggybank" and fashion accessory, with Black using the prestige of the newspapers to gain access to the wealthy, powerful and royal.

For example, the report said Black and his wife, Barbara Amiel Black, treated the Hollinger corporate jet as a private shuttle between cities such as Chicago and Toronto and vacation spots. They took frequent trips to Palm Springs and one 33-hour round trip to Bora Bora, which cost the company $530,000, the report said. It also said Black charged the company $90,000 to refurbish a Rolls-Royce and used $8 million in company money to buy memorabilia of President Franklin D. Roosevelt, about whom Black wrote a book.

From 1997 to 2003, the report said, Black, Radler and other controlling shareholders steered 95.2 percent of Hollinger's adjusted net income into their personal accounts. Black's Hollinger Inc. has 68 percent voting control of Hollinger International and 18.2 percent equity interest.

"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," said the report, prepared by Richard C. Breeden, a former SEC chairman. "At Hollinger, Black as both [chief executive] and controlling shareholder, together with his associates, created an entity in which ethical corruption was a defining characteristic of the leadership team."

Ravelston Corp. Ltd., Black's holding company, disputed the findings. "The special committee's report is recycling the same exaggerated claims laced with outright lies that have been peddled in leaks to the media and over-reaching lawsuits since Richard Breeden first began his campaign against the founders of Hollinger International," Ravelston said in a written statement. Black filed a defamation suit against Breeden in February. "The report is full of so many factual and tainting misrepresentations and inaccuracies that it is not practical to address them in their entirety here."

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