The Hindu Business Line : Serial scams

The latest mega-shock to investors comes from the publication a few days ago of the alleged misdeeds of the former chairman, Lord Conrad Black and former deputy chairman, Mr David Radler, of Hollinger International, the owner of well-known papers such as The Telegraph and the Chicago-Sun Times, contained in the 500 page report of an inquiry committee of independent directors headed by a former chairman of the US Securities and Exchange Commission.

The top executives, including Lord Black and Mr Radler, of the company have been sued for the recovery of $1.25 billion for "aggressive looting" lasting for well over seven years. One of the charges in the report is that they operated a private outfit (Ravelston) to which they paid "unjustifiable management fees" of $200 million from the funds of Hollinger and then diverted it to personal accounts.

Lord Black is also said to have misused company money on a large scale for birthday bashes and presents for his wife and for other illegitimate purposes.

Another person accused of taking $40 million of unauthorised payments is Mr Richard Perle, formerly with the National Security Agency of Bush Administration who was apparently the President's favourite speech-writer.

What were the mandatory audit committee and the external audit firm (KPMG) and the legal advisers (Tory's) doing? The findings of the report on their role are simply unbelievable. The audit committee was "ineffective", one reason for its failure being "lack of warnings from any of Hollinger's outside advisers", KPMG and Tory's.

Unmindful of the conflict of interest, they made their services available to both Hollinger and Ravelston and neglected to caution the company's watchdog committee that management fees paid to Ravelston violated their fiduciary duties and standards.

The committee was not also alerted by KPMG, the legal counsel, or "anybody else" about the need to be more vigilant. It was not made aware that the role of KPMG and Torys could be "tempered or compromised" by their work for Hollinger and Ravelston. The report reveals that the KPMG initially "resisted" requests for information, but eventually co-operated.

All those censured in the report have denied any wrong-doing.

Let us wait and see what more horror stories are in the offing

B. S. Raghavan

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