Ex-Sun-Times boss charged with fraud

Former Chicago Sun-Times publisher David Radler, a lawyer for the newspaper's parent company and a media holding company that was controlled until recently by Conrad Black were indicted on federal fraud charges Thursday for allegedly diverting $32 million through a series of bogus deals.

The indictment alleged the three diverted the money through a series of secret deals by disguising it as noncompete fees connected to the sale of newspaper publishing groups.

Radler, Mark S. Kipnis, the former top in-house lawyer for Chicago-based Hollinger International, and Toronto-based Ravelston Corp., a private company owned until this spring by Black, were accused of cheating shareholders in the United States and Canada, as well as Canadian tax authorities.

All three were charged with five counts of mail fraud and two counts of wire fraud. They will be arraigned at a later date.

Fallen media titan Black, the ousted CEO of Hollinger International, was not accused of any wrongdoing.

Prosecutors said Radler, 63, of Vancouver, British Columbia, was cooperating with the government's investigation and was expected to plead guilty at a later date.

"Shareholders in public companies have a right to expect that their monies will be managed properly by officers and directors and that the officers and directors won't steal it," U.S. Attorney Patrick Fitzgerald said in announcing the charges.

Washington, D.C., Nov. 15, 2004 - The Securities and Exchange Commission announced today that it has filed an enforcement action in the U.S. District Court, Northern District of Illinois, against Hollinger International's former Chairman and CEO Conrad M. Black, former Deputy Chairman and COO F. David Radler, and Hollinger, Inc., a Canadian public holding company controlled by Black.

The Commission's complaint alleges that from approximately 1999 through 2003, Black, Radler and Hollinger Inc. engaged in a fraudulent and deceptive scheme to divert cash and assets from Hollinger International, Inc., a U. S. public company and a subsidiary of Hollinger, Inc., and concealed their self-dealing from Hollinger International's public shareholders.

Findings of the Special Committee of the Board of Directors of Hollinger International Inc.

Management fees and other compensation paid to Black and his affiliates and associates were excessive and irrational by any reasonable measure. For example, over the 1997-2003 period, total management fee and other payments made to or for the benefit of Hollinger's senior executives totaled more than $400 million. This represented more than 95% of Hollinger's aggregate adjusted net income for the period. The Special Committee found that Hollinger's relative stock price and operating performance during the years in question were among the worst of its peer group of publicly traded publishing companies.

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Knowing that the Audit Committee was not meaningfully reviewing or negotiating their demands, Black and Radler sharply increased their annual fee from $8.5 million in 1996 to more than $40 million in 1999.

Black caused Hollinger to pay Moffat [Management, a Barbados company] and Black-Amiel [Management, a Barbados company …Barbara Amiel-Black is Conrad's wife] approximately $7 million in management fees between 1998 and 2003. Black caused Hollinger to make these payments even though Moffat and Black-Amiel had no known employees and performed no known services for Hollinger. In addition to these fees, Moffat received a $900,000 payment from Hollinger in August 1999 that was described by a Radler subordinate as "broker fees CNH1." This payment was unauthorized and had no supportable economic basis.

The Blacks and Radlers directed thousands of Hollinger's dollars in contributions to pet charities of their friends and other Hollinger directors, even in years when Hollinger reported a net loss. In return, they often served on charity boards or attended lavish events, particularly in New York. Hollinger never publicly disclosed its charitable donations, and Black and Radler did not present donation requests for Hollinger Audit Committee or Board consideration.

Black directed Hollinger and its subsidiaries to donate at least $445,000 to Toronto's Hospital for Sick Children, to partly fund a pledge made by Black on behalf of his private foundation and the National Post. In return for the donation, the hospital named a major wing of its building the "Black Family Foundation Wing."

At Radler's direction, Hollinger donated $168,000 to his alma mater, Queen's University in Toronto, which named the "Radler Business Wing" in appreciation of "his" contribution. The Jerusalem Post Charitable Fund funded donations for the purchase of medical equipment at Herzog Hospital in Jerusalem, which resulted in the dedication of a "Rona and David Radler" trauma recovery unit.

Radler caused Hollinger and its subsidiaries to donate $110,000 to Haifa University, a university in Israel that bestowed an honorary degree on Radler in May 2002.

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[Richard] Perle repeatedly breached his fiduciary duties as a member of the Executive Committee of the Board. Perle repeatedly signed Unanimous Written Consents without evaluating (or even reading) them, including several that "authorized" many of the unfair related-party transactions discussed in this Report in a manner that enabled Black and Radler to evade full (or any) disclosure to the Audit Committee or the Board….

As Perle knew, he was not an independent Board member, but instead was beholden to Black and other insiders for his compensation. During his tenure as an Executive Committee member, Perle received more than $3 million in bonuses under the Digital Incentive Plan, as well as hundreds of thousands more in Digital and Hollinger compensation. Perle therefore had a motive to abdicate his fiduciary duties as an Executive Committee member so as to accommodate Black and Radler, two of the three members of the Digital compensation committee, which administered the Digital Incentive Plan.

By putting his own interests above those of Hollinger's shareholders, Perle has violated his duties of good faith and loyalty. As a faithless fiduciary, Perle should be required to disgorge all compensation he received from the Company.

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