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elkid
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Joined: 18 Nov 2002
Posts: 8353
Location: hiding out in Philly
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 Posted: 11/17/03 - 15:48 Post subject: wow, they have crappy accountants
Press Magnate Black Forced to Step Down (By Adam Pasick and James Paton)
LONDON/NEW YORK (Reuters) - Hollinger International Inc. on Monday said Conrad Black was resigning as chief executive of the media company he controls after an internal probe found $32 million in unauthorized payments to him and other top executives.
Hollinger also said Black's publishing empire -- which includes London's Daily Telegraph, the Chicago Sun-Times and the Jerusalem Post -- could be put up for sale, sending its shares to their highest level since June 2001. "If what has been suggested is true, the whole thing is going to unravel," said one banking source who asked not to be named.
Black, who controls three-quarters of Toronto-based Hollinger Inc. (Toronto:HLGC.TO - news) through a holding company, has faced growing investor anger over a raft of corporate governance issues. Shareholders are particularly angry about the company's complex ownership structure and business deals with companies controlled by its own executives.
Hollinger International said Black would resign as CEO on Nov. 21 but would remain as non-executive chairman and devote his time to pursuing strategic alternatives for the group. Also resigning from Hollinger are President and Chief Operating Officer David Radler and corporate counsel Mark Kipnis, the company said. J.A. Boultbee, an executive vice president, had been terminated after the company failed to reach agreement with him on several matters, it said. Company officials declined further comment.
The company's governance problems "happened through arrogance and ego, in the context of time where greed ruled and the corporate CEO was unchecked ...," said shareholder advocate Herbert Denton, who is advising some institutional investors in Hollinger International.
Black, who renounced his Canadian citizenship to join the British House of Lords, has fiercely defended his practices and denied reports the business is short of funds. However, several recent discussions with private equity groups over a possible cash investment have come to nothing.
UNWINDING WHO OWNS WHAT
Hollinger shares rose as much as 19 percent, their largest one-day gain since April 2000, when the company announced a sale of hundreds of small community newspapers. Black controls more than three-quarters of Hollinger Inc. through his privately held Ravelston Corp. Hollinger owns 30 percent of the equity of Hollinger International, but controls the media company through special class B voting shares.
Hollinger International pays large management fees to Ravelston, which have been at the center of criticism by shareholders. Ravelston uses some of those fees to maintain payments on Hollinger Inc.'s large debt. Hollinger said on Monday the management fees would be terminated as of June, which would leave the Hollinger Inc. debt payments in doubt. As a result, Black could be forced to sell one of his newspapers, or the company's 50 percent stake in West Ferry Printers, Europe's largest news printing operation.
Hollinger's partner in the printing operation, Richard Desmond, owns print properties ranging from the Express newspaper to pornographic magazines, and might be interested in the Telegraph, the banking source said.
But selling the entire company, if it comes to that, may not be easy. "The combination of assets is very difficult to sell, with titles in the U.S., the U.K. and in Canada," said a banking source who declined to be identified. "They have nothing in common. There's no reason for those assets to be together."
UNAUTHORIZED FEES
The company described the unauthorized payments to Black and others as "'non-competition' payments in connection with sales of U.S. community newspaper properties."
About $7.2 million in unauthorized or unaccounted-for payments went to Black and Radler in 2000 and 2001. Black, Radler and another executive have agreed to repay Hollinger the full amount of the unauthorized payments they received, together with interest, the company said.
Non-competition fees have long been a sore point for Hollinger investors. When the company sold the bulk of its Canadian papers to CanWest (Toronto:CGSA.TO - news) in 2000, Black and Ravelston reaped millions in such payments, which shareholders argued should have benefited Hollinger.
Hollinger International shares rose $2.45, or 18 percent, to $15.95 Monday morning on the New York Stock Exchange, after reaching as high as $16.10.
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