Hollinger International may widen its legal action to include several former directors after a comprehensive report into the management of the publishing group criticised certain board members for failing to prevent looting of its assets by its former chief executive, Lord Black.
Those in the firing line include some of the most high profile figures in business and politics in the US, where Hollinger, which was forced in July to sell its prized asset – The Daily Telegraph – is based.
The report, compiled by Richard Breeden, the former chairman of America’s Securities and Exchange Commission, is highly critical of Hollinger’s entire audit committee. It says it was “inert and ineffective” in the face of what it alleges to be a culture of “corporate kleptocracy” which saw Lord Black and David Radler, Hollinger’s chief operating officer, illegally take $400m (£220m) from the business.
A number of individual Hollinger directors are also criticised, including Richard Perle, the former US deputy defence secretary, who used to sit on Hollinger’s executive committee.
Not only did Mr Perle fail to prevent Lord Black and a number of others from plundering Hollinger’s assets, but, the report contends, he also personally received inappropriately large payments himself, including $3m from his involvement in Hollinger Digital, the company’s now defunct internet investment arm. Matthew Doull, the stepson of Lord Black’s brother, Montegu, also benefited from the bonus scheme at Hollinger Digital.
Among Hollinger’s other senior executives, Dan Colson, the former Telegraph Group chief executive, is also criticised. Mr Colson, formerly Lord Black’s right-hand man, is accused of receiving a $1m unauthorised bonus as a “consolation prize”, after complaining he was not sharing in the windfall of his fellow directors.
Hollinger is already suing Lord Black for $1.25bn for his alleged corrupt reign over the company as its chairman and chief executive. The report, published on Tuesday after more than a year’s investigation, noted the company could seek to increase that figure in the light of the new evidence it has found.
Some of Hollinger’s directors could now also find themselves included in the company’s legal action. Among the most vulnerable could be members of the audit committee, which includes James Thompson, a former governor of Illinois, and Marie-Josee Kravis, an economist.
The report says: “Black and Radler were by far the most culpable people in causing damage to Hollinger and consistently violating their fiduciary duties as they pushed through one unfair transaction after another.”
But it adds that the audit committee failed to challenge Lord Black and the group it terms his “cronies” over the controversial management fees and so-called “non-compete” payments which allowed the Canadian-born peer and Mr Radler to pocket 95 per cent of Hollinger’s profits between 1997 and 2003 for themselves.
In publishing his report, Mr Breeden stressed his specially convened committee still had a lot of work to do in discovering the true extent of the alleged abuse at Hollinger, which is denied in full by Lord Black.