Conrad Black Is Ready For His Comeback
By Barney Gimbel

(FORTUNE Magazine) – ASIDE FROM A HOUSE IN TORONTO, there's not much left for Lord Conrad Black to, well, lord over. His mansion in London has been sold, and he's ready to sell his Palm Beach pad. Hollinger, the newspaper company he built, is out of his control, and the SEC wants to make an example of him for allegedly looting his company of millions. But we haven't heard the last of him. "I have no doubt that mothers in America use my name to frighten their children into finishing their vegetables," Black told FORTUNE in his first interview in almost two years. "But this is not a permanent state of affairs."

Black and his partners are hoping that in the next year or two they'll be back in control of the Hollinger media empire and out of the public eye. Their plan is simple: Take the company private. But it won't be easy.

To understand Black's former empire, imagine him wearing a big trench coat with pockets everywhere. One outside pocket is Hollinger International, a Chicago media company that once grossed $2.1 billion from hundreds of newspapers worldwide. Through a series of ever-changing arrangements, some of its profits were paid in the form of "management fees" to the coat's other outside pocket (and majority shareholder), Hollinger Inc., in Toronto. And after 1998, "management fees" drifted from Hollinger International to various private holding companies, including Ravelston Corp., inside the coat. (Black controlled Ravelston, which owned the majority of voting shares of Hollinger Inc.) Confused yet?

Last summer an independent panel of Hollinger International directors concluded Black was guilty of "corporate kleptocracy" by essentially pickpocketing more than $400 million from Hollinger International in management fees, lavish expenses, and murky noncompete payments. Black denies the report and the claims of subsequent lawsuits, saying he's a "victim of corporate governance terrorists" who are using the public's distrust of CEOs to wage a media campaign that enables them to profit from the breakup of Hollinger's assets. Two years after the investigation began, he says, there have been "mountains of salacious headlines but no actual findings of wrongdoing by any regulator or court of law."

Well, except for the Delaware Court of Chancery, which ruled last year that Black "had persistently and seriously" breached his fiduciary responsibilities to Hollinger International, forcing him to repay $8.7 million. And investigators aren't finished yet. Last month the Chicago office of the SEC was poised to sign a settlement deal with Hollinger Inc. that dropped most charges, only to have it torn up by superiors in Washington. (The SEC declined to comment.)

Meanwhile Black, through his Ravelston entity, tried buying out the remaining minority shareholders of Hollinger Inc. in March, only to be thwarted by Canadian authorities. Since then his predicament has gotten worse. The day after the privatization bid failed, the independent directors who run Hollinger Inc., led by chairman Gordon Walker, filed a $500 million suit against Black and Ravelston for "acting in bad faith and in a manner calculated to benefit themselves to the detriment of Hollinger." And in April an Ontario judge appointed a receiver to take over cash-poor Ravelston.

Black and his partners still own Ravelston, which still controls the majority of Hollinger Inc. Yet they're effectively powerless while Ravelston is in receivership (the Canadian version of Chapter 11). But Peter White, Black's longtime partner and a Hollinger Inc. board member, speculates Ravelston's receiver may take Hollinger Inc. private by the end of the year. And if Ravelston emerges from receivership, Black and his partners may once again control Ravelston and thus the Hollinger empire. This scenario, of course, assumes U.S. and Canadian authorities won't throw a wrench in the deal by prosecuting him anew.

Even if Black does get his company back--which is a long shot--that doesn't mean he will stay in the newspaper business. "It's not a growth industry," he says. "But when we get to that happy day, I will throw myself like a college freshman on orientation day into finding new ventures and opportunities." -- Barney Gimbel