Hollinger Report

The NY Times has the key section of the special committee report on how Hollinger's executives (including Lord Conrad Black) allegedly looted the company over a period of several years. Eleven separate sets of transactions are called into question. For corporate law professors, this report will be a gold mine. I can already see a slew of exam questions. A key item that immediately draws one's attention is the section dealing with the audit committee. The report notes that the audit committee was deliberately misled by management, but nevertheless blasts the audit committee for being "inert and ineffective." (Ouch.) As to a number of related party transactions, which require close scrutiny due to the potential for conflicts of interest, the committee "failed to make any meaningful inquiry or to obtain independent advice regarding, or to meaningfully and independently negotiate." The special committee thus is lining up its ducks to go after the audit committee members for breach of fiduciary duty. All of which will significantly ratchet up the pressure on audit committees, which have taken the brunt of post-Enron reforms. As a result, trying to find qualified persons to serve on audit committees is probably going to get even harder after this report.