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Last Updated: Wednesday, 7 April, 2004, 09:06 GMT 10:06 UK
The rise and fall of Citizen Black
By Georgina Davies
The Money Programme

Conrad Black
Hollinger accused Black of siphoning millions from the company
Conrad Black, one of the world's greatest press barons faces ruin and disgrace. His media empire once stretched half way around the globe with 500 newspaper titles, including the prestigious Telegraph, but now he stands to lose everything.

In November last year Lord Black was forced to resign as chief executive of Hollinger International.

He was accused by the Hollinger Board of Directors of siphoning millions of dollars in unauthorised payments from the company's coffers and into his own pockets.

Lawsuits, claiming a total of $500m (272.3m), are now stacking up against him.

Herb Denton, a Wall Street financier started investigating Hollinger's finances on behalf of shareholders and he discovered that between 1995 and 2003 Lord Black and his close associates were paid a total of $224m (122m) in management fees.

Andrew Neil
The judgement basically accused him of being a crook, of trousering millions of dollars that weren't his
Andrew Neil, Scotsman Editor-in-Chief
Herb Denton told the Money Programme: "Hollinger's net profit margins are about two thirds lower than the industry average. It seems very obvious that part of the reason why the margins are so low is that the management's been taking more than their fair share out of the company."


Between 1999 and 2001 Lord Black and his associates also took $90m (49m) from Hollinger International in non-compete fees.

In one particular case in 2000 Hollinger International sold a number of Canadian newspapers including the National Post to CanWest - Canada's biggest media empire.

CanWest wanted a non-compete clause to prevent Hollinger from re-entering the market and setting up new papers in competition with the ones it had just sold.

The deal was worth $2.3bn (1.25bn) but Conrad Black allocated $53m(28.87m) in non-compete payments to himself and his associates.

Barclay Brothers at Buckingham Palace
Black tried to sell the Telegraph to the Barclay Brothers
Not a single cent went to Hollinger International.

Jay Eisenhofer is a corporate lawyer in Delaware. His law firm has been examining Hollinger's affairs on behalf of minority shareholders.

He said: "In many instances these non-competes weren't disclosed for many years and in many cases weren't disclosed at all.

"So for instance when the sale of a group of newspapers was announced for several hundred million dollars, investors in Hollinger were led to believe that Hollinger was receiving all of that money.

"What they didn't know was that some significant portion of that money was actually going to Conrad Black and his cronies".

Secret plans

Herb Denton said: "In my 30 years on Wall Street I have never seen a non-compete paid to the executives as opposed to the corporation."

I think Conrad Black's going to be right up there on the Mount Rushmore of corporate mis-governance. I think he's going to be remembered as somebody who misunderstood what corporate governance was all about.
Lawyer Jay Eisenhofer
Faced with mounting and potentially expensive threats from lawyers, Conrad Black hatched a secret plan to solve his financial and business troubles.

He would sell his shareholding in the company which owned the Telegraph titles behind Hollinger's back.

On 17 January he announced his plan to sell the papers to UK billionaire twins, and owners of the Scotsman group of newspapers - the Barclay Brothers.

Hollinger's directors were outraged. With Black on the sidelines, they had forged their own plan for the company - to raise money by selling if off bit by bit to the highest bidders.

But Conrad Black had now broken an earlier promise to let them get on with it. By selling his controlling shares to the Barclays, he had wrecked the board's strategy.

Andrew Neil, Editor-in-Chief of the Scotsman said of the deal: "It would have given Black a fighting chance. It would have given him money.

"For the Barclays themselves, the reason why the deal was a stroke of genius is it would have given them control of this wonderful huge newspaper publishing empire for about $450m (245.1m). So it would have been the deal of the decade"


However, a recent court ruling in Delaware in the US stopped the deal from going through.

Conrad Black
A Delaware judge was highly critical of Mr Black's business dealings
The judge was highly critical of Black's actions, saying: "I found Conrad Black evasive and unreliable... His explanations do not have the ring of truth... At worst, the board was duped and there was fraud on the board."

But more importantly the court ruling tarnished Conrad Black's business reputation branding him a liar, and bringing an end to his control over the Hollinger media empire.

"The judgement basically accused him of being a crook, of trousering millions of dollars that weren't his", said Andrew Neil.

Delaware lawyer Jay Eisenhofer told the Money Programme: "I think he's going to be right up there on the Mount Rushmore of corporate mis-governance.

"I think he's going to be remembered as somebody who misunderstood what corporate governance was all about.

"A person who just didn't get it, who just thought he really was a king, who thought that shareholders were terrorists as opposed to people who were entrusting him with their money."

The Money Programme's The Rise And Fall Of Citizen Black was broadcast at 2150 GMT on Tuesday 6 April on BBC Two.


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