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Monday, September 06, 2004

Lord Black of Cross Harbour - From Plutocrat to Aristocrat to Kleptocrat

Lord Nonesuch of Cross Harbour, aka Conrad Black, started his business career as run-of-the-mill Toronto plutocrat (for details of Black's career, click here) . Black amassed ill-gotten gains, used them to buy himself a fancy English title, "Lord Black of Cross Harbour" - that would make him an aristocrat. But 10 years ago, Black started raising money in New York using his old Toronto modus operendi. After 10 years American investors found him out and, on Tuesday, issued a report calling Black' a "kleptocrat". The Oxford English Dictionary defines a "kleptocracy" as "an order of thieves". Black should have stayed in Toronto. Toronto's Bay Street loves kleptocrats - the Ontario Securities Commission mollycoddles them - the Supreme Court of Canada makes everything legal.

This week a U.S. based committee of Black's former cash cow, Hollinger International, let loose a report on Lord Black's financial shenanigans and filed it with the U.S. Securities and Exchange Commission (the "SEC"). The committee (click here to read the report), under the direction of former SEC head Richard Breeden accused Black of fee-gouging US$400 million from his companies, spending 95.2% of Hollinger International's profits on himself and his partner, David Radler. Besides detailing Black's fee-gouging in the 500 page report, the committee got into the dirty details of Lord Black's kleptocratic lifestyle, including:

  • Black threw a $46,000 birthday party for wife Barbara Amiel. Investors paid for the party.
  • Investors paid US$2 million to buy an apartment for Black, another US$1million to maintain the apartment.
  • From 1997 to 2003, investors paid US$1.4 million to servants at Black's residences.
  • Investors paid US$2,463 for a handbag for Black's wife.
  • Investors paid US$2.3 million per year for Black's private jet.
  • In 2001, investors paid US$250,000 for a vacation Black and his wife took to Tahiti and Bora Bora
The SEC will likely lay civil charges against Black. The Hollinger International committee has launched a US$1.25 billion class action lawsuit against Black and his confederates. Other investors have asked a Canadian court to kick Black out of his Canadian company, Hollinger Inc. Some observers want Black thrown in jail, have called upon the tax man to step in and tax Black for the millions of dollars of personal benefits he has received from his companies.

Now that his investors are no longer paying the shot, the kleptocratic aristocrat has had to mortgage his Toronto house for $32,000,000. The house is only worth $20,000,000. There's something wrong there. The mortgage company is paying out more than the house is worth. Who's invested in the mortgage company? Who runs the mortgage company?

And what of Hollinger International's former board of directors? As Black looted away to his heart's content, his high falutin' directors, former U.S. Secretary of State/ National Security Council Chair Henry Kissinger, senior U.S. Department of Defense advisor Richard Perle, retired Canadian general and author Richard Rohmer, former Illinois governor Jim Thompson, partied it up with Black, turned a blind eye (Perle participated in the looting - Black paid him US$3 million in shady bonuses). Those directors have scurried off the sinking ship. But are they in trouble? In Canada, of course, the courts would let them off Scot-free. Not U.S. courts - many of the directors are scrambling to reach settlements with investors.



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