To whom was the term "corporate kleptocracy" first applied?

By Andrew Beattie AAA
A:

The term "corporate kleptocracy" is believed to have originated in a 2004 report by the Special Committee of the Board of Directors of Hollinger International.

Conrad Black, CEO of Hollinger International, modeled himself after media baron William Randolph Hearst. He set about creating his own empire by buying up newspapers and, when he had acquired enough capital, taking over the holding company - Argus Corporation. Black bought up newspapers and magazines all over Canada and seemed to have the magic touch for turning underperforming assets into cash cows. Soon, Black was buying up newspapers all over the world and, at one time point in the 1990s, owned papers in Australia, Jerusalem, Britain, and the U.S. His company, now called Hollinger International, was a global force that his hero - Hearst - never could have imagined.

Unfortunately, Conrad Black had an equal amount of vice to go with his uncompromising vision. Although his company performed well from its varied businesses and holdings, profits were not increasing. In fact, the company lost more than $200 million in 2003. When shareholders started an inquest, they found that Conrad Black, his friends and his family - who all held high positions in the company - essentially had been looting the company coffers through expense accounts. Worse yet, Black sold off some of the marquee assets to further his own interests.

The shareholders' committee released a report in 2004 that the SEC later made public. The report was full of accusations that would have impressed even Hearst, the father of "yellow journalism". Lady and Lord Black were paid millions in fees for intricately titled activities that shareholders discovered amounted to reading the paper and having lunch. Adding to the already considerable insults, the Blacks' philanthropy often came at the expense of Hollinger International rather than out of their own pockets. The case against Black was shuffled between countries, with Black's native Canada finally sentencing him to 6.5 years in prison on December 10, 2007. Of the hundreds of millions of dollars that Black had consumed, shareholders only received $6.1 million in restitution.

To learn more about corporate rises and falls, check out What Enron Taught Us About Retirement Plans.

This question was answered by Andrew Beattie.

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