Lord Black unable to account for Cayman Free Press dividends

Conrad Black

Monday, January 19, 2004

A committee investigating alleged financial wrongdoing by newspaper baron Conrad Black has been unable to account for dividend payments from Cayman Free Press to a Toronto-based holding company controlled by Black, according to a recent report by the New York Post.

Hollinger Inc, the Toronto-based holding company controlled by Black, has owned a 40 percent stake in Cayman Free Press, which publishes The Caymanian Compass, since 1988, and the company's share of the dividends amounts to roughly $100,000 a year, according to sources familiar with the matter. 

A spokesman for Black said: "Lord Black is confident that there's nothing unusual with Hollinger Inc's dealings with Cayman Free Press. But in any event, this is a Hollinger Inc matter and extends beyond the scope of Hollinger International's special committee review." 

The committee, headed by former Securities and Exchange Commissioner Richard Breeden, was formed last year and has focused on allegedly improper payments made by Hollinger International to Black and other executives. 

The committee has found that payments that were supposed to go to Hollinger Inc cannot be accounted for and is investigating whether the money went straight into the pockets of Black and other executives, sources say. 

Hollinger International is listed on the New York Stock Exchange. Hollinger Inc, while controlled by Black, is listed on the Toronto Stock Exchange. Black and other Hollinger Inc execs own 65 percent of Ravelston, a private Canadian corporation, which in turn owns more than 80 percent of the equity in Hollinger Inc. 

There also seems to be some confusion as to the ownership of the Cayman newspaper. Cayman Free Press is listed as a Hollinger International media property on the company's website but is actually owned by Hollinger Inc.

Conrad Black was born in Montreal, Canada. His father, George Black, was a wealthy brewery executive.

In his 20s, Black began buying small Canadian newspapers and, in 1971, he co-founded the Sterling Newspapers Group. In 1978, he became chair of the Argus Corporation - a position he used as a launch pad to start the Hollinger group. By the 1990s Hollinger controlled 60 per cent of Canadian newspaper titles, as well as hundreds of dailies in the US, England, Australia and Israel. 

Black became known for taking over newspapers and chopping away the fat (and much of the meat as well), resulting in job losses. Criticism aside, these newspapers often turned a profit within a year. So large was his appetite for newspapers that at one point, he was the third-largest newspaper publisher in the world. At its peak in 1999, Hollinger had revenues over $2 billion. 

In 1999, the British government moved to make him Lord Black. This elicited strong opposition from Canadian Prime Minister Jean Chrétien who pointed to the Nickle Resolution of 1919, which ruled that foreign governments could not grant honours to Canadians that carry a title or privilege. Black challenged the ruling unsuccessfully in court. 

Determined to get his title, Black renounced his Canadian citizenship and was officially inducted into the British House of Lords as Lord Black of Crossharbour on October 31, 2001. Crossharbour is the name of a neighbourhood as well as a subway stop on the Docklands light railway, near the Daily Telegraph building. Black owns the newspaper. 

Black later renounced, or rather sold, many of his Canadian media holdings, including the National Post, which he started in 1998 to compete with The Globe and Mail. 

Although today his holdings are a shadow of what they used to be, Black owns the Daily Telegraph and the Spectator newspapers in London, the Jerusalem Post, the Chicago Sun-Times and smaller newspapers in Illinois. He also owns papers in Indiana, Alberta, B.C., Saskatchewan and Manitoba. His companies own more than 200 publications, even after selling off most of his Australian and Canadian interests. 

On November 17, 2003, Black announced he would step down as CEO of newspaper conglomerate Hollinger International. The move followed findings of a special committee that Black and other senior Hollinger executives received $32.15 million in unauthorized payments. 

Parent company Hollinger Inc. is $120 million US in debt, and Black has previously denied rumours that he would give up control of his media empire to get new funding. 

However, in November 2003 there were rumblings that such a sell-off was imminent. Britain's The Times newspaper reported that, according to a Hollinger spokesperson, U.S. financier Nelson Peltz is looking over Hollinger Inc. books, possibly in anticipation of buying.

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