Canadian Community
Newspapers Association
Hollinger's troubles reach Kelowna papers
Capital News & Daily Courier have links to controversy
Friday, October 01, 2004
KELOWNA (BC) CAPITAL NEWS
A local connection to the biggest
business story being played out in the world’s newspapers this week—that
newspaper baron Conrad Black and his executives plundered assets of
publicly-held Hollinger International—is a story that up to now has never
appeared in Kelowna’s newspapers.
Under normal circumstances, a story of this magnitude wouldn’t garner local coverage if Kelowna was unaffected by it, but the exceptional fact is that Kelowna’s two newspapers have been directly involved in this unfolding scandal.The corporate shenanigans of former owners of this newspaper and the current and former owners of the Kelowna Daily Courier—at times the same owners hidden behind a veil of corporate secrecy only recently revealed to its full extent—helped bring about a shareholder revolt within the Hollinger International shareholder ranks that has toppled Hollinger executives and may ultimately see them face criminal charges.
A report released this week by a special investigative committee of Hollinger International’s board of directors laid out in detail the alleged incestuous ownership of the two Kelowna newspapers that many people at the Capital News suspected for years.
But the Hollinger investigative committee’s report has shed more light on the local newspaper transactions.
While the investigative committee’s report contains allegations that have yet to be proven in court, they have created a public relations nightmare for Conrad Black.
Black’s private company, Ravelston Corp., has issued a statement dismissing the report as "recycling the same exaggerated claims laced with outright lies that have been peddled in leaks to the media and over-reaching lawsuits."
The Kelowna aspect of Hollinger’s downward spiral began in 1999 when the Daily Courier was sold by Thomson Newspapers to Horizon Operations, a private company fronted by Todd Vogt, a former executive at Hollinger’s Chicago office.
But it became clear to anyone doing business with the newspapers that Vogt was not far removed from his former bosses—the same bosses who owned the Capital News.The Hollinger investigative report released Tuesday said Horizon was, and still is, owned by Black and his long-time business partner David Radler, ownership Radler admitted during a court case in Kelowna.
According to the report, while in control of a company, Hollinger, owned by thousands of shareholders, Black and Radler dealt Hollinger newspaper holdings to a private company they both had a significant ownership stake in, that being Horizon Operations.
Shareholders now allege that in the Kelowna transactions—and dozens of others—Radler and Black sacrificed Hollinger interests in favour of their own.
"The special committee has determined that there were numerous fiduciary duty breaches surrounding certain Horizon-related transactions in Kelowna," the report says.
"These transactions provide a vivid illustration of the manner in which Black’s and Radler’s conflicting loyalties to Hollinger and Horizon damaged Hollinger even when the company was not selling newspaper assets directly to Horizon."
The Canadian Competition Bureau was involved in the Horizon acquisition of the Daily Courier nearly from the beginning after being tipped off by former Capital News publisher Paul Winkler, but the bureau’s involvement had little effect for another year.
Winkler’s relationship with Hollinger (through subsidiary Lower Mainland Publishing Ltd.) soured in the uncomfortable situation that developed in what was supposed to be a competitive market.
Winkler was ousted and he eventually filed a wrongful dismissal lawsuit, which he not only won, but which also created a snowball that built into an avalanche of disaster for Black.
Radler was forced to testify at the trial in Kelowna and admitted under oath that he and Black own just under 50 per cent of Horizon. By admitting the percentage of ownership—which the Hollinger report says was under-stated—he confirmed allegations that he was doing business on behalf of shareholders with a company he owned.
His admission, coupled with Winkler’s dogged campaign against his former bosses by alerting anyone who would listen to his cause, also alerted Hollinger shareholders to the double-dealing.
If this has all evolved into a coup for shareholder rights on a grand scale, the effect felt here in Kelowna between the two newspapers has been minimal.
Alistair Waters, Capital News assistant editor, said the ownership situation had little effect on newsroom operations at the time. "Once that part came out (in the Winkler trial), I don’t think a lot of people were that surprised," he said. "But I also don’t think many people outside the industry really cared.
"I don’t think the general public cared. As long as they were getting the news and could place their ads, it had little effect."
He recalled only once when the conflicted ownership affected the news content—and also made the ties blatantly clear.
In January 2000, Shannon Murrin was acquitted of the murder of eight-year-old Mindy Tran.
The Capital News was working closely with the Vancouver Sun to cover the story, a competitive advantage over the Daily Courier because the Capital News and the Sun were affiliated through Southam Newspapers, which Hollinger was a major shareholder of at the time.
The Sun had an exclusive photograph of Murrin leaving court after his acquittal and it was prepared to share it with just one newspaper—the Capital News. The Daily Courier also wanted the photo but the Sun refused to share it with the Kelowna daily.
"Todd (Vogt) was angry and he phoned Radler, who phoned the Sun and the next thing we knew, they sent the photo to (the Daily Courier) as well," said Waters.
Eventually, Winkler’s complaints to the Competition Bureau raised some eye brows and prompted action.
He tipped off the Capital News as well about the Competition Bureau’s involvement.
Hollinger’s report says the bureau actively reviewed the ownership situation and concluded "this common ownership raised a serious likelihood of substantially lessening or preventing competition in the market for print advertising in Kelowna."
In 2001, it received a commitment from the owner to sell of one of the newspapers, the Capital News, to an arms-length purchaser.
Radler resisted offers from rival newspaper owner David Black (no relationship to Conrad Black) ostensibly because they competed in other markets.
Instead, he accepted an offer from West Partners, a group of investors that included Bruce Hamilton, owner of the Kelowna Rockets hockey team and Dave Dakers, general manager of Prospera Place. It was later learned that a third, and majority shareholder, was Darryl Laurent, Vogt’s stepfather.
Alan Monk, manager of the Capital News Real Estate Weekly, recalls Hamilton addressing staff after the purchase and vowing that it was business as usual and there were no links to the ownership of the Daily Courier.
The family connection between Laurent and Vogt was cause for much speculation and left some doubting that assertion, said Monk.
But Monk added that despite the bizarre dealings of ownership—the sale was a complicated deal arranged by the owner of the competing paper—it had little effect on day-to-day business.
There was even speculation the Capital News would be ordered to publish the Daily Courier in the event of a strike at the daily (an unlikely scenario under B.C. labour law) and the encouraging of an advertising company to choose one newspaper over the other.
But it wasn’t a serious detriment to market competition. Ad rates stayed static or fluctuated on the strength of the market alone.
But Monk recalls that the struggles and divided allegiances between Winkler and the newspaper sapped morale of many of his colleagues.
He said his career was even threatened by a former boss when he was called as a witness in the Winkler trial.
He believes the ownership connection should have been made public earlier.
"Did it affect the readers? How would we know if they were affected by it when they didn’t know about it," he said.
But there was little chance of publishing that story. When news of Laurent’s involvement became known, the very day the sale was announced, the snooping earned a stern rebuke from the new owners. The story was quashed before it had a chance to start.
West Partners sold the newspaper last August to David Black and Black Press, a large newspaper company in B.C. and Alberta and a fierce competitor of Conrad Black and David Radler.
It appears that, for the first time in five years, the Daily Courier and the Capital News are competing newspapers in every sense of the term.
Competition has been so fierce since West Partners got involved, the Daily Courier even refuses to deliver its newspaper to the Capital News or its publisher, Nigel Lark.
All ties are definitely cut.
Vogt has since left Horizon Publications and is believed to be living in California.
Radler and Black still own Horizon Operations, which has other holdings including the Lethbridge Herald, as well as the Daily Courier in Kelowna. ◉
mjones@kelownacapnews.com