Lord Black isn't ready to sail off into the sunset... but then neither was Napoleon

As his Hollinger empire breaks up, the media baron is showing the bloody-mindedness of his hero, writes Jason Nissé

When Lord Black of Crossharbour stepped out at the Indigo Books & Music store in downtown Toronto on Tuesday, he looked like he had hardly a care in the world.

Yet a little over 24 hours before he had been forced to resign as chief executive of Hollinger International, the owner of The Daily Telegraph and The Sunday Telegraph, among other titles. This came after a special committee of the company's directors found that Hollinger had been a little economical with the truth about the timing and purpose of $32.2m (£19m) of payments to Lord Black, three other directors and a company they controlled. The peer, who had been forced to renounce his Canadian citizenship to accept the honour, made light of the fact that he was paying back $7.2m personally and that Hollinger's shares had gone up in reaction to his resignation.

"I'm still the chairman, I'm still the chairman of the parent company," he said. "I'm still the controlling shareholder. I'm co-director of the strategic process and I'm chairman of the Telegraph. And I made 50 million bucks yesterday. That's a flameout that I can get used to, thank you."

It was a bravura performance from the tall, dominating and fastidious newspaper baron, who fancies himself as an intellectual and was at the bookstore to promote his recently published biography of the former American President Franklin D Roose- velt. But turning on reporters who had amassed at the bookstore, he said: "All you fellows who wrote that I'm finished may not have it right." And it was not the image of FDR he was conjuring up. It was another of his great heroes: Napoleon.

For Lord Black is holding to the line, at least to the world at large, that last week's events are a blip in his career, akin to Napoleon's brief exile to Elba - which soon ended when he escaped to France to regain command of its army.

However, most commentators believe this week will turn out to be Lord Black's Waterloo. And the exile will be the business world's equivalent of Na- poleon's final resting place, St Helena.

Anyone who knows Lord Black knows this is not just a performance. Sure, Hollinger may have hired the merchant bank Lazards to advise on the "strategic process" (code for selling off some, or all, of the prize newspaper assets that the company still owns). Sure, both the US and Canadian financial regulators may have launched investigations into the mis-statements by Lord Black's company, probing alleged offences that could carry a jail sentence as punishment. Sure, after months of battling with shareholders, Lord Black has not managed to pull the financial rabbit out of the hat that he had been promising.

But he was able to fall back on the belief that has sustained him throughout his 34-year business career and has been most to the fore in the 18 years since he struck the deal of the last century, the purchase of a controlling interest in the Telegraph Group for £30m. This is that he is invariably right and everyone else is wrong.

In the City, older fund managers talk with bitterness about the brief career of the Telegraph as a public company. Conrad Black, as he was then, floated that company with a large and impressive board. But on close inspection it emerged that some, such as Sir James Goldsmith, were unable to attend many board meetings for tax reasons. Black angered investors by dealing in shares just before the paper announced a price cut. Then he decided to buy the company back when dealing with British investors became too much of a strain.

That deal simplified the structure for his media empire: instead of being Byzantine, it was merely complex. The Telegraph titles, along with The Spectator, Jerusalem Post, Chicago Sun-Times and a host of regional newspapers, were owned by Hollinger International, a New York-listed company.

Hollinger Inc, listed in Toronto, owned 30 per cent of its shares but managed to control the company because of an archaic voting structure. In turn, Hollinger Inc was controlled by Ravelston Management, a private company owned by Lord Black and three close associates.

The deal that started the unravelling of Lord Black's empire was the C$3.2bn (£1.45bn) sale of Hollinger International's Canadian newspapers to CanWest. This deal - described at the time by Lord Black as "a corporate slicing of the Gordian knot" - prompted a payment of $73m to Ravelston, Lord Black and three other directors.

These payments form just part of the estimated $200m that has gone to Ravelston and its partners over the years from the Hollinger companies.

Shareholders, led by New York fund manager Tweedy, Browne, attacked Lord Black over the payments. He responded by bringing in Richard Breeden, the former head of the US Securities & Exchange Commission, to lead a committee of inquiry. It found that $32.2m of this money was improperly paid, and it has talked about other lapses of financial control.

"This man has got his hands caught squarely in the cookie jar and the board of directors is not doing everything they should to address the situation. How can the board continue to countenance his presence at this public company? It's not Lord Black's company," said Herbert Denton, president of New York-based investment fund Providence Capital, which is giving informal advice to some institutional investors.

Lord Black loyalists were a little more forgiving. "It's all rather unfortunate - an unfortunate administrative cock-up. Everybody, including me, thought that the payments had been authorised by the non-executive directors," Dan Colson, Hollinger's chief operating officer and chief executive of the Telegraph Group, countered.

In the post-Enron era, making false statements in financial filings is not something that can be smoothed over. But things are even worse in Lord Black's empire. The group has been running out of cash. Hollinger International owes more than $700m, including $120m in a very expensive and onerous bond issue.

It emerged last week that the Telegraph Group paid an extraordinarily high dividend of £54.8m to its parent company last year, some £15m more than its pre-tax profits. Without this, Hollinger International could be facing bankruptcy.

Predators as diverse as Richard Desmond, George Soros and Lord Saatchi are now hovering around Lord Black's empire. He looks like he will have to cut another Gordian Knot. And then sail away to an enforced exile.

But nothing in Lord Black's history indicates that he will go quietly.

The peer who started by stealing exam papers

1944: Born in Montreal to a rich brewing executive and an heiress to an insurance fortune.

1952: Invested life savings of $59 to buy a share in General Motors.

1958: Kicked out of a private school in Toronto for selling stolen exam papers.

1965: Graduated from Carleton University, Ottawa with a degree in history and political science.

1966: Made editor of Eastern Townships Advertiser, a weekly paper in Montreal owned by a friend, Peter White.

1969: Bought his first news title, Quebec's Sherbrooke Record, with White and his friend, David Radler.

1978: Took control of Argus Corporation, one of Canada's biggest holding companies with interests in mining, supermarkets and machinery. Married Shirley Gail Hishon.

1979: Became Argus chairman.

1981: Spun out Hollinger from Argus.

1985: Bought 51 per cent of Telegraph Group. Became chairman of Hollinger Inc.

1986: Appointed a member of Bilderberg Meetings, a secretive gathering of influential politicians and businessmen. Converted to Roman Catholic faith.

1987: Became chairman of Telegraph Group.

1988: Bought The Spectator and the Jerusalem Post.

1992: Divorced first wife. Married Barbara Amiel.

1993: Published A Life in Progress, his autobiography.

1994: Bought Chicago Sun-Times for $180m.

1998: Launched National Post to compete with The Globe & Mail in Toronto, after unsuccessful attempts to buy Canada's leading newspaper.

1999: Won UK citizenship. Horizon, a company controlled by Black and Radler, bought 33 titles from Hollinger for $44m, funded by money borrowed from Hollinger.

2000: Sold most of his Canadian newspapers to cable company CanWest for $3.2bn.

2001: Renounced Canadian citizenship after dispute with Prime Minister Jean Chretien, who exercised an obscure law barring Canadians from accepting foreign titles.

Appointed Lord Black of Crossharbour.

Tweedy, Browne, a US fund manager with an 18 per cent stake in Hollinger International, said it was unhappy with the management fees paid to Lord Black and other executives through Ravelston, Lord Black's private company.

2002: Hollinger International reported a loss of $338m in 2001, as advertising collapsed.

2003, May: Tweedy, Browne filed a complaint with the Securities and Exchange Commission, the US financial watchdog, about the payment of $73m in non-compete fees to Lord Black and other executives. The payments were made by companies that bought titles from Hollinger, to prevent Lord Black from launching rival publications.

Lord Black denied receiving improper payments and dismissed his critics as "corporate governance terrorists". He also said he would loosen his grip on Hollinger by selling up to 10 million shares, or 14 per cent of the company, to Southeastern, the largest institutional shareholder.

June: Hollinger's board appointed a committee of independent directors to investigate the allegation of unlawful payments within Lord Black's empire.

Lord Black backed down from his earlier promise, saying he may not give up control of Hollinger.

November: The committee found that Lord Black and three other executives, including Radler, paid themselves $15.6m without the board's knowledge or approval. Another $16.6m of undisclosed payments were made to Hollinger Inc.

Lord Black resigned, along with the other recipients of unauthorised money.

Kotaro Miyata