Black's six deals to 'milk' Hollinger

LORD (Conrad) Black and his lieutenants thought up no fewer than six extraordinary financial deals to take over local American newspapers and deprive shareholders of the profits, according to a detailed examination of the writ issued by his former company Hollinger International.

Lord Black and former executives used his publishing empire in a succession of deals in which they sold newspapers to themselves at knockdown prices, it is alleged.

The lawsuit claiming $1.25bn (£700m) from Black, his companies, his wife Barbara Amiel and former Hollinger executives including chief operating officer David Radler, lists a litany of deals, contracts and even perks the defendants kept secret from Hollinger International shareholders.

It goes through, in breath-taking detail, no fewer than six deals in which Hollinger sold newspaper businesses to companies that turned out to be controlled by Black, who in some cases sold them on at considerable profit.

It accuses Black and Radler of concealing from the rest of the board rival bids that were in fact better than his. Five of these deals came under the names Horizon I through to V and the sixth was called Bradford.

Under Horizon I, which was a package of 33 US newspapers, and Bradford, which covered three newspapers, the defendants are alleged to have 'manipulated the earnings and multiples of the Hollinger newspapers to pay nearly $30m less for the properties than what other third parties would have paid'.

In Horizon III and V they paid a nominal $1 for the newspapers which had attracted six and seven-figure offers that Black and others concealed from the board.

In Horizon II they made instant profits of $2m by swapping papers worth $6m from Hollinger to Horizon in return for papers worth $4m.

In Horizon IV Black and Radler avoided any independent review of a deal that was 'several million dollars below market value' by making it appear that the papers had been sold to a third party before being bought by Horizon.

Black wrote to a potential Horizon investor: 'We have bought and sold hundreds of these little American newspapers and have never failed to make handsome profits on them. We sold them a few years ago to clear the debt of our public company and are buying them back, knowing their profit potential intimately.'

Key claims of the filing

Total damages plus interest sought by Hollinger International are $484.5m.

Under racketeering laws, these damages are trebled to $1.25bn.

Claims against Conrad Black total at least $156.8m.

Claims against Barbara Amiel Black total $1.14m.

Claims against David Radler total $47m.

Lifestyle of 'extravagance knows no bounds'

CONRAD Black and his wife, Barbara Amiel, used Hollinger to fund their lavish lifestyle, according to the lawsuit. The writ states: 'The Black group used Hollinger as a cash cow to be milked of every possible drop of cash.

'The group's systematic disregard for shareholder interests manifested itself on both large matters like transferring to themselves more than $88m in 'non-compete' fees and on small matters such as Amiel-Black charging Hollinger to tip the doorman of Bergdorf-Goodman, a luxury clothing store in New York.

'For example, from 2000-03, Hollinger was billed approximately $90,000 to refurbish a 1958 Silver Wraith Rolls-Royce limousine, apparently so Black and Amiel-Black could travel in London in classic style without paying for the ride.'

It claims Black billed Hollinger for the cost of 'numerous' personal staff, including chefs, butlers, chauffeurs, housemen and security personnel. Charitable donations were made in the name of Black or Amiel-Black but paid for by Hollinger.

The lawsuit states: 'Black and Amiel-Black used corporate funds to subsidise a lifestyle that reflects, in Amiel-Black's own words 'an extravagance that knows no bounds'.'

Amiel was paid $1.14m between 1999 and 2003 as vice president of Hollinger International. 'During this time she performed little if any work for the company,' the lawsuit claims.