Hollinger Report Slams Silence of Auditors, Lawyers

02 September 2004

Silence of the Lambs? Silence of the Fat Cats, more likely.

So charges the explosive report by the Hollinger International [H-Intl] special committee appointed by the board to investigate alleged malpractice during the reign of Lord Conrad Black and his acolytes [WAMN: 01-Sep-04].

The 500-page document names the company's auditor KPMG and its legal advisor, Canadian law firm Torys which specializes in US-Canadian cross-border business.

It accuses the professional pair of failing to alert the company's audit committee to the plundering of H-Intl's resources by Black and certain of his lieutenants -- notably F David Radler, the company's former chief financial officer.

Two favoured devices to divert cash from the company were so-called 'management fees' charged to H-Intl by Ravelston Management, a private company owned by Black. Ravelston also received 'non-compete' fees paid by third parties which had bought H-Intl assets.

States the report: "Neither KPMG nor Torys told the audit committee that there was an issue of whether the amount and nature of [the management] fees might violate fiduciary standards . . . Similarly, neither KPMG nor Torys expressed any contemporaneous concern with the proposed non-compete agreements."

The report also points out that at the time under scrutiny KPMG's Canadian business was auditor to Ravelston and H-Intl's parent company Hollinger Incorporated. Torys likewise represented these two companies.

The investigation asserts that the H-Intl audit committee should have known, that the views of KPMG and Torys on Hollinger Intl could be "tempered or compromised" by their work for Hollinger Inc and Ravelston.

KPMG's US business emitted a short bleat: "We believe that we co-operated fully in the investigation throughout its entirety." It declined further comment.

The other lamb, Torys, uttered not a single 'baa'.

Data sourced from: Financial Times; additional content by WARC staff