Boris
12-04-2003, 07:35 PM
From the Wall Street Jounral....
Hollinger Investments Are Linked
To Board's Perle and Kissinger
By ROBERT FRANK and ELENA CHERNEY
Staff Reporters of THE WALL STREET JOURNAL
Hollinger International Inc. invested in a venture-capital fund and a conservative magazine linked to outside directors Richard N. Perle and Henry A. Kissinger, raising new questions about the board's independence in the wake of a widening financial scandal.
According to company filings and people familiar with the situation, Hollinger invested $2.5 million in a venture-capital firm that was co-managed by Mr. Perle and listed Mr. Kissinger as a board member.
Hollinger, a Chicago-based media company that owns the U.K.'s Telegraph Group, the Chicago Sun-Times and the Jerusalem Post, also invested $14 million in a British technology company that includes Mr. Perle and his business partner as shareholders. In addition, Hollinger gave $200,000 a year to the National Interest, a conservative publication that includes Mr. Perle, Mr. Kissinger and Hollinger's former chief executive, Conrad Black, as advisers.
There isn't any indication that any of the directors, including Messrs. Perle and Kissinger, did anything illegal. And neither Mr. Perle nor Mr. Kissinger served on Hollinger's audit or compensation committees. But the payments highlight the subtle financial relationships between companies and otherwise independent directors. And the payments take on a starker light in the wake of investor accusations that the board stood by while Hollinger made large payments to Lord Black, who resigned as CEO last month, despite the company's flagging share price.
Mr. Perle didn't return calls or e-mail messages seeking comment. Mr. Kissinger's office didn't return repeated calls for comment. Through a spokesman, Lord Black declined to comment.
Gordon Paris, the company's interim CEO and chairman of a special board committee looking into the dealings, said through a spokeswoman: "A primary focus of the special committee's investigation is related-party transactions." He added: "We will be reviewing the appropriateness of such transactions as well as processes undertaken by the board in reviewing and approving them."
As part of the special-committee inquiry, Hollinger has hired outside attorneys to conduct a wide-ranging examination of the company's finances. The investigation uncovered $32.15 million in unauthorized payments to Lord Black and other executives. The Securities and Exchange Commission also is investigating. Lord Black, a high-profile press baron known for his plush lifestyle and conservative politics, has agreed to pay back $7.2 million.
According to the special committee investigators, the independent directors of the board didn't authorize $15.6 million paid by Hollinger to Lord Black and other executives and didn't authorize a separate $16.6 million payment to the Toronto holding company, Hollinger Inc.
Yet investigators are looking at a number of transactions that posed potential conflicts for the company's board members, who were expected to be the company's watchdogs. While the board says it didn't approve the $15.6 million payment, the fee was disclosed in a March 2002 SEC filing that said the payment had been approved by the board. The board didn't dispute that until investigators started looking into the payments.
What's more, investigators are looking into the role played by independent board members in approving $53 million in noncompete payments to Lord Black and others related to the sale of Hollinger's Canadian papers in 2000. Shareholders say the financial dealings between the board members and Hollinger raise questions about their independence.
"This board has ties that were never disclosed," said Laura Jereski, an analyst with Tweedy Browne Co., a minority shareholder that spurred the special committee investigation. Tweedy Browne might have taken a different tack in its campaign for reform at the company had it known the extent of Mr. Kissinger's ties to the company. Said Ms. Jereski: "If we had known this, we would have said a preponderance of the board was not independent."
At the center of the business dealings are Messrs. Perle and Kissinger, both prominent conservative strategists in Washington. Mr. Perle, a former assistant defense secretary, serves on the Pentagon's Defense Policy Board, but resigned as the group's chairman in March after a controversy surrounding his consulting work for Global Crossing Ltd. Mr. Kissinger, who served as secretary of state under President Nixon, chose to resign last year from the commission investigating the Sept. 11, 2001, terrorist attacks rather than disclose his list of consulting clients.
According to company SEC filings, Hollinger made an investment of $2.5 million in Trireme Associates LLC. The company is the general partner of Trireme Partners LP, a venture-capital fund co-managed by Mr. Perle and Gerald P. Hillman, who also served on the Defense Policy Board. Mr. Hillman says Trireme invests mainly in electronic-security and encryption technology. Mr. Perle holds a 5% stake in Trireme LLC and Lord Black is a member of Trireme's strategic advisory board. Mr. Kissinger served on the advisory board until this year, when he resigned because he reached the firm's mandatory retirement age, according to Mr. Hillman.
Mr. Black, through a spokesman, says the investment was appropriate and fully disclosed. In the past, Mr. Kissinger has said he has no financial interest in Trireme and has never received any payment from it. He has also stressed that the Trireme board had never met.
Hollinger's internal investigators are also looking at an investment by Hollinger's digital unit in a company that included Mr. Perle as a shareholder. According to people familiar with the matter, Hollinger Digital invested $14 million in a U.K. based technology firm called Cambridge Display Technology. Mr. Perle was a co-chairman of Hollinger Digital and was paid a salary by the company to help find investments.
The investment was part of a syndicate led by Kelso Co. and Hillman Capital that acquired control of Cambridge for about $130 million. Mr. Hillman confirmed that Mr. Perle also bought a stake in Cambridge Technology.
Hollinger took a $48 million write-down in 2001 and a $40.5 million write-down the following year, according to filings. A portion of the write-downs was related to investments in the technology sector, according to a person familiar with the matter. The 2002 write-down included $6 million on the Cambridge Display investment, which Lord Black told shareholders at the May meeting was "a straight case of the accounting profession overreacting. ... We didn't judge it appropriate to fight these [write-down] issues with them."
Lord Black assured shareholders that Mr. Perle believed "this was a quite unjustified write-down on the venture-capital side of an asset that, in fact, we are very confident we're going to have a very sizable gain on." Mr. Perle's salary as Hollinger Digital chairman wasn't disclosed.
Mr. Hillman said the investments weren't a conflict and were part of Lord Black's strategic effort to bring Hollinger into the digital age. He said Lord Black has strong interest in security and digital displays because they both related to the future of newspapers and advertising. The Cambridge investment, he said, "gave him a window into everything that's changing in ubiquitous displays."
Along with the financial investments, Hollinger also made contributions to political causes linked to directors. Hollinger contributed $200,000 annually for an undisclosed number of years to National Interest, a foreign affairs quarterly that's produced jointly by Hollinger and the Nixon Center, a think tank that's a division of the Richard Nixon Library and Birthplace Foundation. The Nixon Center lists Mr. Kissinger as its honorary chairman and Lord Black as a board member. Lord Black and Mr. Kissinger are co-chairmen of the editorial board of the National Interest, which is described on its masthead as a "nonprofit partnership between Hollinger International Inc. and the Nixon Center." Hollinger has never disclosed its role in publishing the National Interest or its annual funding of the periodical.
In addition to supporting the National Interest, Hollinger also gave up to $375,000 a year to the International Institute for Strategic Studies, a London-based think tank of which Lord Black is a member. Hollinger also sponsored a library at Arundel House, where the Institute's offices are housed, called the Hollinger-Telegraph Library.
Hollinger is no longer donating annually to the institute. The company is reviewing its support for the National Interest as part of a review of all corporate costs to "ensure that all expenditures have an appropriate and valid business purpose," Mr. Paris said through a spokeswoman.
Write to Robert Frank at robert.frank@wsj.com and Elena Cherney at elena.cherney@wsj.com
Hollinger Investments Are Linked
To Board's Perle and Kissinger
By ROBERT FRANK and ELENA CHERNEY
Staff Reporters of THE WALL STREET JOURNAL
Hollinger International Inc. invested in a venture-capital fund and a conservative magazine linked to outside directors Richard N. Perle and Henry A. Kissinger, raising new questions about the board's independence in the wake of a widening financial scandal.
According to company filings and people familiar with the situation, Hollinger invested $2.5 million in a venture-capital firm that was co-managed by Mr. Perle and listed Mr. Kissinger as a board member.
Hollinger, a Chicago-based media company that owns the U.K.'s Telegraph Group, the Chicago Sun-Times and the Jerusalem Post, also invested $14 million in a British technology company that includes Mr. Perle and his business partner as shareholders. In addition, Hollinger gave $200,000 a year to the National Interest, a conservative publication that includes Mr. Perle, Mr. Kissinger and Hollinger's former chief executive, Conrad Black, as advisers.
There isn't any indication that any of the directors, including Messrs. Perle and Kissinger, did anything illegal. And neither Mr. Perle nor Mr. Kissinger served on Hollinger's audit or compensation committees. But the payments highlight the subtle financial relationships between companies and otherwise independent directors. And the payments take on a starker light in the wake of investor accusations that the board stood by while Hollinger made large payments to Lord Black, who resigned as CEO last month, despite the company's flagging share price.
Mr. Perle didn't return calls or e-mail messages seeking comment. Mr. Kissinger's office didn't return repeated calls for comment. Through a spokesman, Lord Black declined to comment.
Gordon Paris, the company's interim CEO and chairman of a special board committee looking into the dealings, said through a spokeswoman: "A primary focus of the special committee's investigation is related-party transactions." He added: "We will be reviewing the appropriateness of such transactions as well as processes undertaken by the board in reviewing and approving them."
As part of the special-committee inquiry, Hollinger has hired outside attorneys to conduct a wide-ranging examination of the company's finances. The investigation uncovered $32.15 million in unauthorized payments to Lord Black and other executives. The Securities and Exchange Commission also is investigating. Lord Black, a high-profile press baron known for his plush lifestyle and conservative politics, has agreed to pay back $7.2 million.
According to the special committee investigators, the independent directors of the board didn't authorize $15.6 million paid by Hollinger to Lord Black and other executives and didn't authorize a separate $16.6 million payment to the Toronto holding company, Hollinger Inc.
Yet investigators are looking at a number of transactions that posed potential conflicts for the company's board members, who were expected to be the company's watchdogs. While the board says it didn't approve the $15.6 million payment, the fee was disclosed in a March 2002 SEC filing that said the payment had been approved by the board. The board didn't dispute that until investigators started looking into the payments.
What's more, investigators are looking into the role played by independent board members in approving $53 million in noncompete payments to Lord Black and others related to the sale of Hollinger's Canadian papers in 2000. Shareholders say the financial dealings between the board members and Hollinger raise questions about their independence.
"This board has ties that were never disclosed," said Laura Jereski, an analyst with Tweedy Browne Co., a minority shareholder that spurred the special committee investigation. Tweedy Browne might have taken a different tack in its campaign for reform at the company had it known the extent of Mr. Kissinger's ties to the company. Said Ms. Jereski: "If we had known this, we would have said a preponderance of the board was not independent."
At the center of the business dealings are Messrs. Perle and Kissinger, both prominent conservative strategists in Washington. Mr. Perle, a former assistant defense secretary, serves on the Pentagon's Defense Policy Board, but resigned as the group's chairman in March after a controversy surrounding his consulting work for Global Crossing Ltd. Mr. Kissinger, who served as secretary of state under President Nixon, chose to resign last year from the commission investigating the Sept. 11, 2001, terrorist attacks rather than disclose his list of consulting clients.
According to company SEC filings, Hollinger made an investment of $2.5 million in Trireme Associates LLC. The company is the general partner of Trireme Partners LP, a venture-capital fund co-managed by Mr. Perle and Gerald P. Hillman, who also served on the Defense Policy Board. Mr. Hillman says Trireme invests mainly in electronic-security and encryption technology. Mr. Perle holds a 5% stake in Trireme LLC and Lord Black is a member of Trireme's strategic advisory board. Mr. Kissinger served on the advisory board until this year, when he resigned because he reached the firm's mandatory retirement age, according to Mr. Hillman.
Mr. Black, through a spokesman, says the investment was appropriate and fully disclosed. In the past, Mr. Kissinger has said he has no financial interest in Trireme and has never received any payment from it. He has also stressed that the Trireme board had never met.
Hollinger's internal investigators are also looking at an investment by Hollinger's digital unit in a company that included Mr. Perle as a shareholder. According to people familiar with the matter, Hollinger Digital invested $14 million in a U.K. based technology firm called Cambridge Display Technology. Mr. Perle was a co-chairman of Hollinger Digital and was paid a salary by the company to help find investments.
The investment was part of a syndicate led by Kelso Co. and Hillman Capital that acquired control of Cambridge for about $130 million. Mr. Hillman confirmed that Mr. Perle also bought a stake in Cambridge Technology.
Hollinger took a $48 million write-down in 2001 and a $40.5 million write-down the following year, according to filings. A portion of the write-downs was related to investments in the technology sector, according to a person familiar with the matter. The 2002 write-down included $6 million on the Cambridge Display investment, which Lord Black told shareholders at the May meeting was "a straight case of the accounting profession overreacting. ... We didn't judge it appropriate to fight these [write-down] issues with them."
Lord Black assured shareholders that Mr. Perle believed "this was a quite unjustified write-down on the venture-capital side of an asset that, in fact, we are very confident we're going to have a very sizable gain on." Mr. Perle's salary as Hollinger Digital chairman wasn't disclosed.
Mr. Hillman said the investments weren't a conflict and were part of Lord Black's strategic effort to bring Hollinger into the digital age. He said Lord Black has strong interest in security and digital displays because they both related to the future of newspapers and advertising. The Cambridge investment, he said, "gave him a window into everything that's changing in ubiquitous displays."
Along with the financial investments, Hollinger also made contributions to political causes linked to directors. Hollinger contributed $200,000 annually for an undisclosed number of years to National Interest, a foreign affairs quarterly that's produced jointly by Hollinger and the Nixon Center, a think tank that's a division of the Richard Nixon Library and Birthplace Foundation. The Nixon Center lists Mr. Kissinger as its honorary chairman and Lord Black as a board member. Lord Black and Mr. Kissinger are co-chairmen of the editorial board of the National Interest, which is described on its masthead as a "nonprofit partnership between Hollinger International Inc. and the Nixon Center." Hollinger has never disclosed its role in publishing the National Interest or its annual funding of the periodical.
In addition to supporting the National Interest, Hollinger also gave up to $375,000 a year to the International Institute for Strategic Studies, a London-based think tank of which Lord Black is a member. Hollinger also sponsored a library at Arundel House, where the Institute's offices are housed, called the Hollinger-Telegraph Library.
Hollinger is no longer donating annually to the institute. The company is reviewing its support for the National Interest as part of a review of all corporate costs to "ensure that all expenditures have an appropriate and valid business purpose," Mr. Paris said through a spokeswoman.
Write to Robert Frank at robert.frank@wsj.com and Elena Cherney at elena.cherney@wsj.com