New blow for Black's Hollinger as group admits profits were overstated by $17m

Hollinger International, the troubled media group that owns The Daily Telegraph, admitted yesterday that it has overstated its profits by $17m.

The company, chaired by Lord Black of Crossharbour, belatedly released third-quarter results yesterday, which showed a loss of $7m (£4m) for the three months to the end of September. That is before accounting for the $17m discrepancy. The third-quarter figures were not signed off by Lord Black, who was chief executive until earlier this week, as required by law. Neither were the results certified by the company's auditors, KPMG.

The company revealed that, due to a series of unauthorised payments totalling $32.2m revealed earlier this week, which went to Lord Black, three other directors and Hollinger Inc, another company chaired by the Tory peer, company results have not been accurate.

Hollinger International said: "The company believes that the aggregate impact of these payments is an understatement of income taxes payable and an overstatement of retained earnings of approximately $17.0m." The company did not account for this sum in its latest results filing because it said that an internal investigation "is ongoing and additional matters may be raised".

Hollinger had previously committed itself to releasing the third-quarter figures earlier in the week but had to delay that when Lord Black resigned suddenly on Wednesday night. On Monday, the Tory peer had said he would step down as Hollinger's chief executive (while remaining chairman) but not until Friday.

He brought forward his departure after taking legal advice. Reports in the United States said that Lord Black had hired a top lawyer, David Boies, who had told him to immediately give up the chief executive role. Gordon Paris, a former investment bank adviser to Hollinger who had joined the company's board as a non-executive director, has been drafted in as an interim chief executive.

Mr Boies has reportedly told Lord Black to tone down his characteristic bombastic pronouncements, which have continued even after his admission on Monday that he had collected millions of dollars in fees that were never sanctioned by the company's board.

But on Thursday evening, at an event to promote a book he has written, he insisted: "There's been no concealment. And I am convinced that when all of the inquiries are over, it will be seen that what happened was essentially an inadvertency and in any case does not imply any impropriety on my part."

Mr Boies is one of the most high profile lawyers in the US. He represented the US government in its anti-trust lawsuit against Microsoft and Al Gore in his challenge to the result of the 2000 US presidential election. Time magazine, comparing Mr Boies to other well known US lawyers, said he was: "Alan Dershowitz without the pretension, Johnnie Cochran without the preening."

In the third-quarter statement, Hollinger warned that the costs of its internal investigation into financial irregularities at the company were expected to exceed $8m in the current year.

The document also confirmed that Hollinger had invested $2.5m in a venture capital fund partly owned by one of its non-executive directors, Richard Perle.