Conrad Black’s failure to start paying back money he owes to Hollinger International on time has sparked negotiations that may lead to his ouster from the company, say sources close to the situation.
Richard Breeden, who is heading an investigation into alleged financial shenanigans at Hollinger International, was outraged yesterday that Black failed to make the first of several payments to the company.
Black was scheduled to repay $850,000 as part of an agreement he reached when he stepped down as CEO in November, sources say. He remains as chairman.
Black, his deputy, David Radler, and Hollinger Inc. – the Toronto-based holding company that Black controls – have agreed to pay back some $32 million in non-compete fees they collected. The board concluded those fees were either not authorized or were improperly disclosed.
One source said Black’s exit as chairman could be imminent. Another confirmed that Black’s stepping down is under review.
A Black spokesman said in a published report that the newspaper baron did not make the payment because he has not completed his own probe into the alleged financial wrongdoing.
Breeden said yesterday: “In the view of the special committee, there is not any doubt whatsoever that the payments in connection with these supposed ‘non-compete’ agreements relating to the sales of U.S. community newspapers were not authorized by Hollinger International’s board, and this issue is not the subject of further review, inquiry or negotiation.”
Breeden also said yesterday that his committee had found fee-related documents that had been backdated to give the appearance of board approval.
The company gave Black a two-week extension to make the initial payment “in connection with ongoing negotiations with him on a range of other issues,” Hollinger said in a statement. The payment had been due Dec. 31.
John Warden, Black’s attorney, said in a statement: “There is substantial additional material relevant to the disputed non-compete payments that has become available to Lord Black’s legal counsel since questions about those payments were first raised in November, and we are reviewing the implications of that information.”
Sources close to the company say Black does not have the money to make the payment, since his wealth is tied up in his Hollinger stake – which the company would object to him selling – and real estate. Black owns opulent properties in New York City, Toronto, Palm Beach and London. Sources say Black has been quietly shopping his London residence for weeks.
Hollinger International operates the London Daily Telegraph, the Chicago Sun-Times and the Jerusalem Post, among other newspapers.
Hollinger International’s board of directors, stocked with Black friends such as Henry Kissinger, former Illinois Gov. Jim Thompson and ex-Pentagon official Richard Perle, has also come under fire for approving exorbitant management fees and the sale of assets to Black-controlled private company with little or no discussion.
A lawsuit unsealed last week by a Delaware Court provided a window into the behind-the-scenes machinations at the company and painted a picture of a board that routinely approved questionable deals with Black and others, often without discussing them outside the presence of management.
The suit, filed by institutional investor and Hollinger shareholder Cardinal Value Equity Partners, was based in part on board minutes obtained by Cardinal.
Yesterday a judge issued a stay in the case – which the company had requested until the Breeden probe is completed.
The special committee investigation was launched last year after Tweedy Browne, another Hollinger shareholder, raised a host of concerns about the financial doings at Hollinger. The probe is expected to be finished in the first quarter of 2004.
The SEC and the Justice Department have opened their own probes.
Living dangerously
Conrad Black has failed to repay money he owes Hollinger International, raising speculation he may be ousted. Details:
* Black was supposed to make a $850,000 payment
* The non-payment outraged Richard Breeden, chairman of a committee probing Hollinger
* Black claims he didn’t pay because his own probe of Hollinger finances isn’t finished