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September 01, 2004

MORE RICHARD PERLE AND HOLLINGER MEDIA

Was there ever a board as irresponsible as the one at Hollinger International?

A special report of a committee of that board - a panel made up of new directors who were not around when Conrad M. Black and his associates were running the company as a "corporate kleptocracy," according to the report - certainly weighs that case.

The Hollinger board was studded with political heavyweights chosen by Lord Black, a Canadian who became a British peer after Hollinger took control of the Telegraph newspapers in London.

Among them were Henry A. Kissinger, the former secretary of state, and Richard N. Perle, who was assistant secretary of defense under President Ronald Reagan and is the former chairman of a Pentagon advisory board. Democrats were not left out, with the board including Robert S. Strauss, a former chairman of the Democratic National Committee and ambassador to the Soviet Union, and Richard R. Burt, a former United States ambassador to Germany.

The report lets most of the directors off with little more than a mild rebuke for not having shown much curiosity in how the business was run. The members of the audit committee during the years when Lord Black was taking out hundreds of millions of dollars in cash draw harsher criticism for their passiveness, but the director who is excoriated in the strongest terms is Mr. Perle.

His many and varied roles at Hollinger seem to have aroused questions even from Lord Black - a man who knew conflicts of interest if anyone did. In one case, Lord Black is said to have sent a letter to Mr. Perle, questioning the conflicts. There is no record of whether Mr. Perle answered the letter, the report says, and nothing seems to have been done about the issue.

Mr. Perle was chairman of Hollinger's Internet investing subsidiary, which lost lots of money. But he and other insiders had an unusual deal that gave them a share of profits from good investments without requiring those amounts to be offset by losses from bad investments.

Mr. Perle collected $3.1 million through that deal - payments that the committee said were not fully disclosed to shareholders, as they should have been. By the committee's account, Mr. Perle was responsible for $63.6 million in Hollinger investments, on which the company lost a net $49 million.

After the Internet boom collapsed, Mr. Perle persuaded Hollinger to invest in Trireme Partners, a venture capital firm that he helped found. He even signed, on Hollinger's behalf, the commitment letter for the investment.

The committee said that such an investment should have been approved by the audit committee or by independent directors, but no such approval was sought. It was Mr. Perle's dual status as an employee of Trireme and a Hollinger director that led to Lord Black's questions.

Both Lord Black and Mr. Kissinger sat on a strategic advisory board for Trireme.

Mr. Perle was one of three members of Hollinger's executive committee, and the closest thing to an outsider on that committee. The other two members were Lord Black and F. David Radler, Hollinger's chief operating officer at the time.

"Perle's own description of his performance on the executive committee was stunning," the report states. For example, he said the committee never met but that from time to time he would get a package of documents to sign. He also said he never discussed the documents with the other committee members and often did not bother to read them before signing.

"It is difficult to imagine a more flagrant abdication of duty than a director rubber-stamping transactions that directly benefit a controlling shareholder without any thought, comprehension or analysis," the committee report says. "In fact, many of the consents that Perle signed as an executive committee member approved related-party transactions that unfairly benefited Black and Radler, and cost Hollinger millions."

Posted by brent at September 1, 2004 07:34 PM | TrackBack