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On Oct. 29, Hollinger International Inc. sued Richard Perle, one of its directors, for his role in the web of alleged misdeeds spun by former chief executive officer Conrad Black. The media company, led by a special committee of its board, accused Perle of fiduciary breaches in an amended complaint filed in Chicago federal court seeking $542 million. The publicly traded company, which owns the Chicago Sun-Times, has also sued Black, his top executives and entities they control. As the suit bluntly states: “The Black Group used Hollinger as a cash cow to be milked of every possible drop of cash.” The addition of Perle to this suit raises the question of whether other directors will be held accountable, including James Thompson Jr., the chairman of Winston & Strawn and former governor of Illinois. The board also includes such luminaries as Henry Kissinger. But it was Thompson, 68, and the audit committee he chaired that approved a raft of controversial payments to Black and his cohorts. Perle’s role differed significantly from other directors because he also headed a Hollinger subsidiary. Still, the failings of Hollinger’s board were stunning, according to a report that the special committee released in August. The report was prepared by former U.S. Securities and Exchange Commission chairman Richard Breeden, who led an internal investigation with the assistance of O’Melveny & Myers. Thompson and the other directors have already been targeted as defendants in a $300 million derivative suit filed in Delaware by shareholder Cardinal Value Equity Partners, LP. The parties have been in mediation since the summer. The special committee said in its report that it would “assess its options” regarding the directors after that mediation is over. Based on the details in the 512-page August report, it might be hard for Hollinger to let Thompson and his fellow directors off the hook. The report practically ridicules the board for functioning “like a social club” that enjoyed good lunches, while ignoring its fiduciary duties. It notes that Black repeatedly misled the audit committee, but faults the directors for not being more diligent. For instance, the committee approved nearly $90 million in noncompete payments to Black and others that had no economic justification, the report concluded. Breeden did, however, praise Thompson for acting responsibly after shareholders raised questions, and for cooperating with the investigation. This embarrassment for Thompson came to light shortly after Winston & Strawn went out of its way to accommodate its prominent chairman. In March 2003 Thompson’s partners amended the firm’s bylaws for the second time to grant him an exception to the firm’s mandatory retirement age of 65 and assume another three-year term as chairman. Two months later, a major Hollinger shareholder filed a complaint with the SEC questioning payments to Black. Thompson declined to comment for this article. In November 2003, he told the Chicago Tribune: “The board doesn’t run the company. Management runs the company.” In September he told the Financial Times that he agreed with “98 percent” of Breeden’s findings, but did not accept “all the conclusions about me and the audit committee.”

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