Report alleges Hollinger misled on CanWest

By JOHN PARTRIDGE

Conrad Black and David Radler repeatedly misled Hollinger International Inc.'s shareholders and directors about $51.8-million (U.S.) in non-compete payments in which they shared as part of the $2.1-billion sale of most of the company's Canadian newspapers to CanWest Global Communications Corp. four years ago, the final report from a special Hollinger board committee alleges.

Mr. Radler, Lord Black's chief lieutenant, told the board's audit committee when it was considering the payments in the run-up to the July, 2000, deal that Winnipeg-based CanWest "had insisted on the specific amounts . . . which was simply not true," the report says.

The document was filed with the U.S. Securities and Exchange Commission yesterday, a day after being submitted to a Chicago court.

Lord Black, meanwhile, subsequently told shareholders at Hollinger's annual meeting it had been the company's independent directors who negotiated the amount of the payments, "which also was not true," the report adds.

Instead, the report says, it was Lord Black and Mr. Radler who "unilaterally" determined the size and allocation not only of the CanWest deal's non-compete payments but those associated with other asset sales they orchestrated between 1999 and 2001. In all, more than $90-million in such payments were made to Lord Black, Mr. Radler, Ravelston Corp. Ltd. -- one of Lord Black's holding companies -- and two other Hollinger executives.

CanWest reiterated yesterday that although it had demanded that Lord Black and Mr. Radler, as well as Hollinger, sign non-compete agreements as part of the deal, it had no role in determining how the payments were allocated. "As a practical matter, everything that I've read confirms what we have said about those transactions in the past," CanWest spokesman Geoffrey Elliot said of the report.

The document calls the non-compete payments "probably the most unusual and offensive practice of the Ravelston crew," even though it says "grossly excessive" management fees paid to the group were the "largest source of the cash Black, Radler and their associates improperly took out of Hollinger."

Ravelston issued a statement denouncing the report.

The report says that given that they were continuing to serve as officers of Hollinger, neither Lord Black nor Mr. Radler nor the other Hollinger executives should have received such payments. "These payments," it adds, "were so far off normal practice that it is no wonder Black described them in a letter to Radler as 'the splendid conveyance of the non-competition agreements from which you and I profited so well . . .' "

In addition to the non-compete payments, Lord Black negotiated the payment by CanWest of $39-million into an annuity under which he and Mr. Radler would "indefinitely" receive $3.9-million a year in management fees, it says.

CanWest also agreed to pay Ravelston a $29.1-million penalty if it terminated the fees. This would fall to $14.6-million if Mr. Black decided to end the arrangement.

CanWest's Mr. Elliot said yesterday that the company would decide "as to if and when to terminate that contract . . . based on the best use of capital [and] we haven't taken that decision at this point."

In its report, the committee said "to compound the insult" to shareholders, some witnesses it interviewed in its probe said though Ravelston is being paid the fee, it "is not actually providing significant management services to CanWest."

Mr. Elliot said he had no details about the services for which Ravelston is being paid. However, he added that "clearly, over time it becomes a diminishing asset. It was important at the beginning, because CanWest was not in the newspaper business."