Under heavy pressure from investors, Conrad Black will step down as chief executive of Hollinger International Inc, publisher of newspapers in the US, Britain and Israel, and the company may be sold after an internal investigation found that fees had been improperly paid to Black and other senior executives.
Several other executives are also leaving Hollinger as part of a management shakeup the company announced early on Monday. David Radler resigned as the company's president and as publisher of the Chicago Sun-Times, and Mark Kipnis resigned as general counsel.
Black will officially retire as of Friday and remain non-executive chairman of Hollinger to oversee a sale or other initiatives. He will also continue as chairman of The Telegraph Group Ltd, a wholly owned Hollinger subsidiary, and as head of Hollinger Inc, the Toronto-based parent company of Hollinger International.
Hollinger said it has retained the investment bank Lazard LLC to explore a sale of the company or one or more of its newspapers. In addition to the Sun-Times, the company publishes The Daily Telegraph in London and The Jerusalem Post.
Board member James Thompson, a former Illinois governor, said Lazard will explore whether Hollinger should "sell its assets, recapitalize, sell the whole company or stay as we are."
He said no decision is likely for several months.
Hollinger acknowledged that an ongoing internal review revealed that Hollinger's parent company, Black, Radler and two other executives received a total of US$32.15 million in unauthorized payments in connection with the sale of several community newspapers.
All of the executives except one have agreed to repay Hollinger what they owe, with interest, the company said. The fourth, executive vice president J.A. Boultbee, was fired, Hollinger said.
According to the company, Black and Radler each received about US$7.2 million in unauthorized payments; executive vice presidents Peter Atkinson and Boultbee each received about US$600,000. The executives could not be reached for comment.
The company said Black has also agreed to seek the repayment of US$16.55 million paid to Hollinger Inc, where he is the majority shareholder.
Black's office in Toronto referred calls to vice chairman Daniel Colson, who did not return a call seeking further comment. In a statement, Black said that "the present structure of the group clearly must be renovated." Black said he would cooperate with Hollinger's investigative committee to "resolve corporate governance concerns."
Black has been under pressure from investors for months over the fees, which were described as "non-competition" payments made as part of the sale of several newspa-pers in the US and Canada.
Black has defended the fees, which are intended to ensure that a seller will not re-enter the markets of the properties he is selling. But shareholders have questioned why the payments went directly to the executives rather than the company. Black clashed with angry shareholders at the company's annual meeting in May as they criticized Hollinger's management and executive pay.
"Like all fads, corporate governance has its zealots, and its tendency to excess," Black said at the time.
Investors welcomed news of the shakeup, pushing Hollinger International's shares up US$2.23 to US$15.73 in unusually heavy volume on the New York Stock Exchange.
Last Friday, Hollinger informed the US Securities and Exchange Commission that it could not file its quarterly report on time, because it was investigating questions raised by shareholders.
In its statement, Hollinger said that a pair of committees had found that some of the payments had been unauthorized and that the company's public disclosures about them had been "incomplete or inaccurate in some respects."
Hollinger also owns The Spectator magazine in Britain and a large number of community newspapers in the Chicago area.
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