Illinois? Res Ipsa Loquitur…

Today in Corporations we covered the Conrad Black scandal.¹ Black was a media baron until his fraud conviction for bad behavior¹ as head of Hollinger International Inc. The wikipedia entry on Black is here, and a news archive is here.

During the conversation, Professor M took a pot-shot at Chicago:
Professor M: “The outside directors on this board were pretty illustrious, you have Henry Kissinger, former diplomats, and one of the board members was a former governor of Illinois…”
(Class chuckles)
Professor M: “You’re right! Illinois…that’s always a bad sign! Res Ipsa Loquitur!”

Some misdeeds after the jump.

¹Black’s misbehavior included:

• Taking $9.5 million of corporate cash in late 2000 without notice to Hollinger’s Board, which was accomplished with falsified closing documents used to provide a pretext for the transfer. Kipnis, the internal lawyer, facilitated the unauthorized transfer of cash with falsified documents and was paid a $100,000 special bonus at Radler’s direction.
• Taking $5.5 million of corporate cash in early 2001 without notice to Hollinger’s Board, which was accomplished by creating fictitious agreements not to compete with one of Hollinger’s wholly owned subsidiaries. The phony payments were then backdated to the prior year which enabled them to be hidden through accounting offsets.
• Diverting to Black and Radler through Ravelston nearly $200 million in excessive and unjustifiable management fees. The requests for such fees were accompanied by misrepresentations and failures to make full disclosure of relevant information to the Audit Committee, grossly inflated charges for personnel costs, and in effect billing the Company for debt service and other costs unrelated to services provided to Hollinger.
• Causing Hollinger to pay more than $90 million in supposed consideration for the execution of non-competition agreements by Black, Radler, Boultbee, Atkinson, Ravelston and HLG in connection with sales of publications belonging to Hollinger. More than $47 million of this amount went directly to Hollinger officers who should not have required any individual compensation to adhere to agreements to which Hollinger was a party, while approximately $26 million went to Ravelston in a duplication of payments that had already been made to Ravelston’s principals individually. All of these payments were made on terms that were unfair to Hollinger and represented unjustifiable waste of assets that rightfully belonged to all Hollinger shareholders.
• Transferring income-generating Hollinger assets to entities secretly controlled by Black and Radler for free, or at prices known to be below market value. This was accomplished by concealing key facts from, or making misrepresentations to, Hollinger’s Audit Committee and Board.

A full account of the hot mess is available at the SEC website.