Hollinger Says Filings Had Inaccuracies

TORONTO, Nov. 14 - Hollinger International, publisher of The Chicago Sun-Times, disclosed Friday that a committee of independent directors looking into its corporate governance practices had found inaccuracies in some regulatory filings. It said the filings were related to payments made to Conrad Black, the controlling shareholder, and his partners.

Explaining a delay in submitting a filing to the Securities and Exchange Commission, Hollinger said that the inaccuracies involved the amount, authorization and purpose of what it said were "characterized as noncompete payments."

Lord Black, three partners and the Ravelston Corporation, a company he controls, received $73.7 million in 2000 and 2001 for agreeing not to compete with the buyers of Hollinger's Canadian newspapers. Hollinger is based in Toronto.

Hollinger named the special committee in June in response to complaints from shareholders. In the filing, Hollinger said that the committee's investigation of the payments "and other concerns" was continuing and that the audit committee of its board was joining the investigation.

Institutional investors have questioned $203 million in management fees paid by Hollinger over the last seven years to Lord Black and his partners. They have also criticized Hollinger's delay in disclosing sales of assets to other companies controlled by Lord Black and his partners.

According to recent reports, Lord Black is considering the sale of at least part of his stake in Hollinger.

The Globe and Mail reported Friday night that it had received an e-mail message from Lord Black saying that an announcement on a financial restructuring would likely be made on Monday.

RELATED STORY

Hollinger examines Perle investments
Financial Times | 11/12/2003 | Stephanie Kirchgaessner

Hollinger examines Perle investments By Stephanie Kirchgaessner Published: November 12 2003 21:57 | Last Updated: November 12 2003 21:57

Hollinger International is examining investments that were made by Richard Perle, a director on the publisher's board and prominent defense advisor, on behalf of the company.

The investigation is part of a wider internal probe at the publisher of the Daily Telegraph and Chicago Sun-Times into some of the company's corporate governance practices, including the payment of nearly $300m in management fees to Conrad Black, chief executive and chairman, and his deputies.

That probe, which is being lead by former Securities and Exchange Commission chairman Richard Breeden, is wide-ranging and involves close scrutiny of so-called "related-party transactions", or deals in which members of Hollinger's board or executives personally benefited from deals the publisher agreed with other companies.

One transaction that caught the attention of some Hollinger investors was a $2.5m investment earlier this year in Trireme Partners, a venture capital company in which Mr Perle, an independent director, is a managing partner.

Mr Perle has also played a prominent role in the late 1990's and early 2000 in directing investments in other companies through Hollinger Digital, Hollinger's investment arm.

Under review is a $14m investment the company made under Mr Perle's direction through Hillman Capital, a venture capital group controlled by Gerald Hillman - who has since become a partner at Trireme and is a member of the Defense Policy Board, as is Mr Perle.

The $14m investment contributed to a fund used by Hillman Capital to acquire - with another private equity group - more than 70 per cent of Cambridge Display Technology, a UK-based technology group that holds a patent in light-emitting polymers, in 1999.

Early investors in CDT included Lord Young, a former business adviser of Baroness Thatcher's.

Mr Perle has been criticised in the past over perceived conflicts of interest in his business dealings.

Mr Perle resigned as chairman of the Defense Policy Board earlier this year after he was criticised for having a $750,000 contract with Global Crossing, the bankrupt telecoms group. Global Crossing was at the time seeking to overcome Defense Department objections on its sale to Hutchison Whampoa, a Chinese-controlled company.

Paul Healy, head of investor relations at Hollinger, refused to comment. Mr Perle and Mr Hillman were unavailable for comment.

CONRAD'S BLACK EYE / By TIM ARANGO / NY POST

November 15, 2003 -- Newspaper baron Conrad Black's Hollinger has filed false financial statements with the Securities and Exchange Commission - a disclosure that could trigger an SEC investigation and increase pressure on Black to step down.

The company was due to file its quarterly report yesterday but instead filed for a three-day extension as it tries to clean up its books.

The inaccuracies, the company said, stem from the amount of money in non-compete fees Hollinger reported from a deal in 2000 to sell most of the company's Canadian newspapers to CanWest.

As part of that deal, as previously reported, Black and his top executives personally received roughly $50 million in fees, raising the ire of shareholders, who noted that typically such fees go to the company's coffers.

The company's disclosure yesterday indicates those payments could be higher.

The company filed a brief statement with the SEC saying "there are inaccuracies in prior public filings of the company involving the amount, authorization and purpose of such payments, among other things."

"It's unbelievable," said one Hollinger investor. "This should spark an SEC investigation."

In June, the company announced that it had formed a special committee to investigate allegations of financial shenanigans raised by shareholders, including compensation for Black and other top executives.

The probe, headed by former SEC Chairman Richard Breeden, is not expected to be completed until early next year.

Black has defended the payments, saying they were initiated by the papers' new owners and subsequently approved by Hollinger International's audit committee.

One of the audit committee members, Marie-Josee Kravis, the wife of billionaire financier Henry Kravis, resigned Oct. 6. Sources said her resignation was related to ongoing problems at the company, but Black said she left because her husband's firm, Kohlberg Kravis Roberts, was bidding for a rival newspaper company.

U.S. financier Nelson Peltz said negotiating to take over Black's Hollinger
Tue Nov 11, 9:03 PM ET

LONDON (CP) - American financier Nelson Peltz is in negotiations to take control of Conrad Black's troubled Hollinger newspaper group, the Times reported Wednesday.

The newspaper quoted a Hollinger spokesman as saying there have been "no substantive talks," but it reported that Peltz "is understood to be conducting due diligence on the debt-laden newspaper publisher." It did not identify its sources. Peltz, said to be worth $950 million US, is chairman and CEO of Triarc, the company behind Arby's fast-food restaurants. In 2000, he sold Snapple to Cadbury Schweppes for just over one billion pounds, almost quintuple what he had paid Quaker Oats for the juice and tea company three years earlier.

Before Triarc, Peltz built Triangle Industries into the world's largest packaging company.

Peltz was not available for comment.

Hollinger International, assembled by the Canadian-born Black, now Lord Black of Crossharbour, is controlled through Toronto-based holding company Hollinger Inc. (TSX:HLG.C - news).

The group has been seeking private equity investments to meet a $92-million-Cdn debt payment next spring.

In addition to the Telegraph of London, Hollinger owns the Chicago Sun-Times and the Jerusalem Post. Formerly Canada's largest newspaper proprietor, it sold the Southam media group to CanWest Global Communications and now owns only a few small Canadian publications.

Black has been under pressure to straighten out the company's finances, improve its share-price performance and upgrade its corporate governance.

Hollinger Inc. has been able to meet its interest payments only with help from Black's personal investment company, Ravelston Corp. However, Ravelston depends for much of its income on a management fee - $21.4 million US last year - paid by Hollinger International to Black and his associates.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.