Dabbling in the Black arts

The Company is indebted to RMI as a consequence of the sale of NP Holdings Company and its related tax losses to RMI on July 3, 2002. Prior to the sale, NP Holdings had no significant assets or liabilities except for its losses and an obligation contained in a letter agreement executed by Hollinger Inc purporting to obligate the company to pay CanWest Global Communications Corp Cdn $22.5 million in connection with the sale of the company's remaining 50% interest in the national Post newspaper, which obligation has been treated as having been assumed by NP Holdings...

"As a result of a mistaken under standing that the partial offset had been completed on April 30, 2003, Hollinger Inc's subsidiary did not pay interest on the full principal amount of the debt due to the company and Ravelston did not make a payment of $0.6 million due on June 30, 2003 into a cash collateral account securing the debt...

"In 2003, the company made an investment of US$2.5 million in Trireme Associates LLC which is the general partner of Trireme Partners LP, a venture capital fund. Trireme LLC as general partner of Trireme LP receives 20% of the profits of Trireme LLC Class B units... Richard Perle, a director of the company is also an equity holder in Trireme LLC holding about a 5% interest in the distribution to Trireme LLC... Lord Black and Dr Henry A Kissinger, directors of the company, are members of the Strategic Advisory Board of Trireme LP."

Get any of that? No, that's not surprising. We have got grown men and women in this office studying for their doctorates in the company concerned, and they are also struggling to wrap their heads around the matter.

The above quotation is from three lightly-edited paragraphs from the third quarter results statement from Hollinger International, the New York-listed company which directly owns the newspaper titles in Lord Black's publishing empire.

The information does not make any sense in isolation, and it doesn't make any sense in the published context either. And, as if to ram the point home, the company freely admits that its latest quarterly statement should not be relied upon, since neither the auditors nor the company's chief executive during the period under review (C Black) have signed off the accounts.

Black declined to pick up his pen on the advice of his lawyers, and instead resigned his executive duties on Wednesday. KPMG have not had time to revisit the numbers after the company's admission, late last Friday, that certain matters had been kept from shareholders. So the statement is in breach of SEC rules and the accounts do not comply with the Sarbanes-Oxley Act, brought in post-Enron to align the future freedom of company executives with the integrity of their reported numbers.

That said, Hollinger, with its managerial hotch-potch of independent appointees and Black lackeys, is clearly striving to disclose matters that have been cloaked in secrecy in the past. Unfortunately, every new disclosure, rather than answering questions, simply prompts a whole new series of queries.

Take the above reference to Richard Perle, the former US defence adviser who is said to have shaped much of America's policy towards Iraq and militant Islam.

Earlier this year, while Hollinger was facing an escalating cash crisis which meant that it could not meet its payment obligations to shareholders and certain creditors, the company decided to spend what money it did have buying into a venture capital firm where Perle, a Hollinger non-executive, enjoyed a profit sharing agreement. Oh, and Lord Black, together with another rather well known Hollinger non-exec Henry Kissinger, were also advisers to the venture capital operation in question.

How did that happen? Whose idea was it? What was Hollinger expected to get in return? Who cleared it? Why haven't we heard the details before? What the hell did Black/Perle/Kissinger, or who ever made the decision to invest, think they were doing with money belonging to a publicly quoted company? Oh, and has the investment shown any return?

The Hollinger scandal has a long way to run.

Paper chase


While the concept of "compliance" has yet to percolate into many corners of the business world, the "comedy of compliance" is already well known in financial circles.

Yesterday, one senior stock market player in London was advised by the lawyers to his investment fund that the firm's entire batch of stationery and business cards would have to be reprinted.

The reason? They carried the supposedly misleading statement that the investment company was "regulated by the FSA".

In the money business, FSA means the Financial Services Authority, full stop. But the FSA's rulebook states, in its "general provisions," that the authority's full title must be used by regulated firms so as to avoid any confusion with other FSAs - such as the Food Standards Agency.