Black Quits CEO Post as Hollinger Considers Sale

18 November 2003

Media group Hollinger International may put itself up for sale after Lord Conrad Black dramatically quit the ceo position amid news of multimillion-dollar accounting irregularities.

The US-listed group -- owner of Britain's Daily Telegraph, the Chicago Sun-Times in the US and the Jerusalem Post in Israel -- announced the departure of Black and other senior managers on Monday. Late last week it admitted an investigation into its corporate governance had uncovered "inaccuracies in prior public filings of the company."

The "inaccuracies" in question involve $32.2 million (€27.3m; £19.1m) in "non-compete" payments to Black and other executives. These were not fully disclosed, nor were they approved by the company's board or audit committee. The discovery means the release of the firm's quarterly results, due Wednesday, will be delayed.

News of the accounting errors emerged as cash-strapped Hollinger begins a review of its strategic options. One possibility is a sale -- news of which is said to have caught the interest of rival media groups such as America's Washington Post Company and the UK's Daily Mail & General Trust.

Black will stay on as non-executive chairman of Hollinger -- in which role he will focus on the group's strategic direction -- and as chairman of British subsidiary The Telegraph Group. However, the Canadian-born peer will on Friday relinquish the ceo position, which will be filled on a temporary basis by recently elected board member Gordon Paris.

Three other top executives are also leaving. President/chief operating officer David Radler and vice president/corporate counsel Mark Kipnis have both resigned, and Hollinger has terminated the contract of vice president Jack Boultbee.

The funding and governance of the media giant have come under intense scrutiny in recent months. After pressure from shareholder Tweedy Browne -- a US investment bank that holds an 18% stake -- Black was forced to set up a special committee of independent directors to investigate certain management fees.

And it was this committee that unearthed the unauthorised payments. Of these, $7.2m each went to Black and Radler, with $0.6m each to Boultbee and executive vp Peter Atkinson. The quartet have promised to repay the fees with interest by June next year.

Hollinger's annual report in March disclosed these payouts -- totalling $15.6m -- but mistakenly claimed they had been approved by independent directors. A further $16.55m payment, however, was not publicly revealed at all, either in financial statements or in filings with America's Securities & Exchange Commission.

Black has until now maintained control over Hollinger through a labyrinthine ownership structure involving parent Hollinger Inc and Ravelston, the peer's privately held company.

But Hollinger has decided to overhaul its corporate structure in light of recent events. This includes the cancellation of a deal to pay Ravelston $24m in management fees next year.

"The present structure of the group clearly must be renovated," Black conceded. "As the strategic process proceeds we will continue to cooperate entirely with the special committee to resolve corporate governance concerns."

A marked change of heart for a media tycoon who once dismissed the drive for better corporate governance as little more than a "fad".

Data sourced from: multiple sources; additional content by WARC staff