Accused

Conrad Black has earned his place in the roll-call of notorious media barons, alongside Robert Maxwell and William Randolph Hearst, if the report into Hollinger International produced by former Securities and Exchange Commission chairman Richard Breedon is correct.

Conrad Black and key associates at Hollinger Inc - the company which owned a minority of share equity but the majority of votes in Hollinger International - are accused of massive fraud, which has already led to civil legal actions being lodged and will possibly result in criminal charges being made against Black and perhaps others.

Breedon's report alleged an astonishing depth of misappropriation. Millions of dollars were awarded to Hollinger International directors without the knowledge of the board, mostly through passing on non-compete fees awarded to the company when it sold media interests - described by Breedon as an 'unusual and offensive practice'. Breedon also charged Black and his Hollinger Inc colleague David Radler with being paid almost $200m in 'unjustifiable management fees'.

'Hollinger wasn't a company where isolated improper and abusive acts took place,' claimed the report. Hollinger was: 'an entity in which ethical corruption was a defining characteristic'.

Although Black and Radler are the primary accused, Richard Perle is also accused of: 'putting his own interests above those of Hollinger's shareholders', and by doing so breaching his responsibility as a supposedly independent director. Perle was a senior adviser to the Pentagon until February this year, assistant secretary of defense under Ronald Reagan and an architect of the decision of the current Bush administration to invade Iraq. His past commercial involvements included being an adviser to the collapsed Global Crossing. The Breedon report, dubbed the 'Hollinger Chronicles', called on Perle to repay $5.4m of fees.

Breedon went on to detail a wide-ranging failure in Hollinger International's corporate governance arrangements. SEC returns contained false information, charitable donations from the company's accounts were given and received as if the personal largesse of Conrad Black and his wife (the well-known columnist Barbara Amiel). The company's plane was regularly used free of charge for private trips by Lord and Lady Black and personal gifts worth many thousands of dollars from Conrad to Barbara were charged to the company accounts, claimed Breedon.

In all, around $400m was wrongly taken from Hollinger International by Black and Radler, alleged the report. Perle is accused of taking performance bonuses of millions of dollars from Hollinger's venture capital arm, which he chaired, while the company was making millions of dollars in losses and of spending large amounts of money on his corporate card for personal items.

The report and the extensive publicity it has attracted is extremely embarrassing and damaging to KPMG, auditors of the Hollinger companies through its US and Canadian practices. Black and Radler are accused of breaching their directors' fiduciary duties and KPMG is accused of failing to alert the audit committee of this. KPMG's ability to act independently for Hollinger International was 'tempered or compromised' by also working for Hollinger Inc and Ravelston, a company used to transmit management fees from Hollinger International to Black and Radler, concluded the report.

KPMG was also criticised by Breedon for failing initially to co-operate in his inquiry - a charge strongly denied by KPMG, which said it had 'co-operated fully in the investigation throughout its entirety'. Hollinger International's legal advisors, Torys, faced similar charges to KPMG of failing to provide the company's audit committee and independent directors with information of possible malpractice.

The 'Hollinger Chronicles' mark a chapter in the saga, not the end of the story. The damning verdict of the report is vindication for Tweedy Browne, the institutional investor and Hollinger International shareholder which has been a steadfast critic of Black and the prime mover for the inquiry. It is reportedly considering launching a legal action on the back of the report. Black is already being sued by Hollinger International for $1.25bn; a class action lawsuit is being launched against both the Hollinger companies on behalf of shareholders; an inspector is to be appointed into the affairs of Hollinger Inc by the Ontario Superior Court; and the SEC is considering the contents of the Breedon report.

Possible criminal action is made more likely as a result of a consent decree signed by Black more than two decades ago after the SEC previously investigated his business dealings. One effect of the decree is to make any further false declarations to the SEC a criminal offence. Lord Black, David Radler and Hollinger Inc all strongly deny all charges and allegations and have said they will defend any legal actions.