Focus: Decline and fall of the paper emperor

Lord Black of Crossharbour was fêted by presidents and prime ministers. He was a man used to luxury and the privilege of expressing himself through his own stable of newspapers. Now the fan of Napoleon is losing his empire and a judge has destroyed his reputation. Tim Luckhurst explains why there may be much worse to come

Damned, and damned utterly. Judge Leo Strine's ruling against Lord Black of Crossharbour eschews nuance and goes straight for the jugular. In his efforts to sell The Daily Telegraph to the Barclay brothers behind the backs of his fellow directors at Hollinger International, Conrad Black "repeatedly behaved in a manner inconsistent with the duty of loyalty he owed to the company".

Black's hero is Napoleon Bonaparte. Until days before the verdict, some of the media baron's friends still believed that, like Napoleon, he would return from exile to mount a last effort to salvage his power. One friend said: "Conrad will be vindicated. When this is all over it will be clear that what he did was authorised and legal." That does not square with the view of Judge Strine, who presided over hearings at the Court of Chancery in Delaware last week. He granted an injunction to prevent the $466m (£250m) deal with Sir David and Sir Frederick Barclay going ahead, opening the way to a bidding war.

Judge Strine said Lord Black had "breached his fiduciary and contractual duties persistently and seriously". As a witness, Strine found Black "evasive and unreliable". The Tory peer's conduct was "cunning and calculated".

Lord Black revels in prestige. With palatial homes in London, New York, Florida and Toronto, he loves to pack parties with the great of politics, business and academia. He has not given up. He "respectfully disagreed" with Judge Strine's ruling and continues to deny any wrongdoing. Libel suits are outstanding against several Hollinger directors. But at no time since he launched his media empire by buying two local newspapers in Quebec when he was still a student has his name been so sullied.

The headlines alone are enough to destroy a reputation. The eloquent narrative of Strine's ruling piles ignominy upon defeat. Lord Black's statements about the lucrative "non-compete" payments which first alerted shareholders in Hollinger International to possible wrongdoing "were false in many respects". Put simply, says Strine, Black's actions were prompted by fear of scrutiny and "even a possible criminal investigation".

But it is on the proposed sale of his assets to Sir David and Sir Frederick Barclay that Black's misconduct is most ruthlessly exposed. He knew that he should not be negotiating with the brothers on his own behalf. He was formally committed to a public sale of Hollinger International's assets, an agreement referred to as the Strategic Process; and he had promised to commit his energy to ensuring that the best possible price was realised. Yet, in blunt contradiction of this promise, it was Black who encouraged the Barclays to deal exclusively with him, and Black who suggested the devious scheme whereby the brothers would acquire control of Hollinger's media empire without having to compete in an open sale.

Judge Strine's ruling reveals that in the summer and autumn of 2003 David Barclay wrote to Black, repeatedly expressing interest in acquiring The Daily Telegraph and holding out the possibility of a wider and more lucrative deal. Black's duty was to report that interest to the board. The company, not Black himself, is the legal proprietor of the newspaper. At first Black responded with arrogant chutzpah. Sir David should not give the "slightest credence" to reports that Black was in financial difficulties. The approaches were in danger of becoming boring.

Then, with creditors closing in and global speculation about his imminent demise, Lord Black performed an astonishing volte-face. In Judge Strine's words, "Black steered the Barclays towards doing an end-run around the Strategic Process, knowing that his contractual assurances gave the [Hollinger] International Board a false sense that they had time for adequate deliberation."

At this point Strine's ruling is venomous. "Black used confidential advice given to him in his official capacity at [Hollinger] International to negotiate behind International's back with the Barclays." His statements were "intended to mislead his fellow directors and to convince them that he was being faithful to the restructuring proposal when in fact he was not".

The reclusive Barclays do not escape unscathed, Judge Strine exposing them to a form of scrutiny they have long avoided in Britain. He concludes that "the Barclays have portrayed themselves as innocents who have tried to do right by all" but their conduct "was unaccompanied by the kind of candour necessary for me to draw the inference of highly honourable conduct that the Barclays desire". The brothers released "information that is of questionable accuracy" in their dealings with the US authorities. David Barclay claimed to be too ill to give evidence, causing Judge Strine to observe: "It is difficult for me to give as much credit to the Barclays' factual arguments as they would like, in view of the fact that their key witness did not make himself available to testify."

The ploy by which the Barclays would have seized control of the Telegraph without ever competing against other bidders is dead. Lord Black's plan to get out with his wealth intact has been shattered. His media empire is gone. So are his corporate aircraft. Elements of his private property portfolio are for sale.

At Black's beloved Spectator magazine the verdict caused little pleasure. Staff continue to regard Lord Black as a good proprietor who guaranteed editorial freedom and presided over a period of rising circulation. Some journalists admit to a wry smile at the brutal way in which Judge Strine treated their incom- parably pompous proprietor, but schadenfreude does not pay salaries. A journalist says: "The Barclay deal was about as good as it gets. It's not much fun being in limbo. At least they would have brought closure. I am concerned that something less pleasant may come along."

Journalists at The Daily Telegraph and The Sunday Telegraph express the same fear. An insider explains: "There is considerable disappointment. The ruling is a recipe for a protracted saga, and people here are keen for it all to be over." Another confirms the Barclay brothers had come to be seen as saviours. "There was an intuition that they would be entrepreneurial and forward-looking. Now we start from scratch."

The Barclays have let it be known that they were "disappointed" by the Delaware ruling. When their private deal with Lord Black was scuppered, analysts who had watched the Barclays rise from obscurity to enormous wealth felt it would be in character to lose interest in the Telegraph. "They are extremely clever traders, but they have traditionally been unwilling to get involved in public auctions," said one. "They prefer deals that can be done fast and with a minimum of public discussion."

That is now impossible, however, and yesterday it emerged the twins are preparing to enter the auction for the Telegraph group, which could sell for up to £500 million. They will only bid when their advisers are certain the IRS, the American tax watchdog, will not challenge the auction arrangements that were set up so Hollinger International can avoid a hefty tax bill.

Meanwhile, Richard Desmond, the owner of the Daily Express and Daily Star titles, has made no secret of his ambitions. The Daily Mail and General Trust (DMGT), proprietor of the Daily Mail and London Evening Standard, has also tabled an offer for the Telegraph group. As existing newspaper owners, both Desmond and DMGT are likely to face regulatory scrutiny from the new Ofcom regime, delaying any deal still further. But the directors of Hollinger International will be aware that both bidders could achieve substantial synergies by merging the Telegraph with their existing newspaper businesses. There will be a temptation to offset delays against the prospect of securing a premium price. With Black removed from the decision- making process, Hollinger is under no great pressure to choose a fast option.

Other bidders who have already declared their interest include the venture capital firms 3i and Candover and the US media group Gannet, working in alliance with Apax Partners. A Telegraph insider says: "We are not living in a state of terror, more one of suspended animation."

At the height of his power Black exercised direct personal control over national newspapers in Britain, Canada and Israel. He was courted by prime ministers and presidents and handsomely equipped to promote his passionate brand of free-market conservatism and support for the state of Israel. His betrayal of Hollinger International, the ultimate corporate owner of all these newspapers, has left him bereft. Black no longer possesses a voice with which to speak.

That alone is anathema to this most bombastic of press barons. But there may be worse to come. Few analysts expect him to face the criminal prosecution Judge Strine has identified as Black's deepest fear, but that is not inconceivable. Liberal politi- cians in his native Canada revile Black. If a prosecution can be mounted in Canada or the US, where he appears to have infringed laws on corporate governance, the appetite to pursue him will be fierce.

In the short term his financial assets are threatened by a $200m civil suit launched by his former colleagues on the board of Hollinger International. Black remains a multi-millionaire, but if that case goes against him as emphatically as the one in Delaware did he will be left with a hefty settlement to pay. When Black's business difficulties first emerged last summer, he declared: "I'm not prepared to re-enact the French Revolutionary renunciation of the rights of the nobility." He swore to fight for his reputation and his empire. Now Judge Strine has left the reputation in tatters and the empire is all but lost.

Players in the bidding war

Sir David and Sir Frederick Barclay sought to pay £250m for the Telegraph group. Now that deal has been blocked in the courts the shy twins look likely to change their habits and enter the public auction.

Nicholas Berry, son of former Telegraph owner Lord Hartwell, joined forces for early £550m bid with Daily Mail & General Trust, which sees the upmarket broadsheet as complement to its right-wing tabloid.

Stephen Grabiner, formerly Telegraph managing director, is now senior partner at British-based private equity group Apax Partners, which has made few public statements about its bid.

Lord Fowler is likely to be installed as chairman if Candover, another private equity firm, is successful. It owns no other newspapers. Would offer leading roles to current Telegraph executives.

David Montgomery, who pleased the City but upset journalists with budget cuts while boss of Mirror Group, now looking to return to print with the backing of venture capitalists 3i.

Richard Desmond, publisher of Daily Express, Daily Star and several adult magazines, made first bid. Success would bring him respectability. Co-owns, with Telegraph, Westferry printworks.

Lady Black: Manolos in her cupboard, a kick in her columns

The travails of well-known women always make good copy, but Barbara Amiel has helped to turn her problems into a celebrity soap opera. Rather than holing up in silence, the wife of Conrad Black is fighting her corner, responding to a devastating attack in The Spectator, one of the

titles in her husband's stable, to correct a quibble about whether she uses one or two executive jets. She is also continuing to turn out the highly opinionated columns for The Daily Telegraph, many of them fervidly pro-Israeli, which have so polarised opinion about her.

Amiel's long journey from left-wing radical to right-wing hate figure, taking in a father's suicide, four husbands, an early abortion and an addiction to

pain-killers, might have been made for Hollywood. And though she was born in Watford and educated at the North London Collegiate, the behaviour which stokes resentment against her is very un-British.

While she and her husband are frequently touted as London's "most glamorous power couple", with a salon of rich right-wingers ranging from Baroness Thatcher to Henry Kissinger, the "in-your-face" grandiosity that Amiel exhibits is not that of the English upper classes. When she told Vogue that her own extravagance "knows no bounds", and then described her 100 pairs of Manolo Blahnik shoes, her separate wardrobes for day, her furs, and her Hermes Birkins bags, it was not exactly in the spirit of British self-deprecation.

Another way to guarantee a bad press is to specialise in upsetting journalists; tales of Amiel's hauteur abound. There is the story of how she invited the journalist Eleanor Mills to a dinner party to make up the numbers, then told her curtly to leave by the kitchen door when yet another guest dropped out.

Up close, though, there are cracks in the ice. I remember standing with the impeccably clad Amiel at a party last year as her husband talked someone else into submission, and she consistently tried to catch his eye. Situations like that happened all the time, she said. They needed to go, but he wasn't taking the signals. "She's in constant pain you know," another society woman told me, explaining the urgency behind Amiel's look of strained forbearance.

Scleroderma, a rare disease which causes mask-like hardening of the skin (the reason she looks younger than her 63 years), is just one of the ailments that has dogged her - chronicled with unsparing honesty in her autobiography, Confessions. She also has a deep fear of empty spaces, which she admitted had led to extreme behaviour in her youth: "I could find myself stranded, sitting in my own urine, sitting for hours too frightened to cry and too frightened to move."

Friends say she is behaving calmly under stress and she should at least be prepared for the current downturn in her fortunes. In 1993 she wrote: "I am a North London Jew who has read a bit of history. That means I know this: in a century that has seen the collapse of the Austro-Hungarian, British and Soviet empires, reversal of fortune is this rich bitch's reality."

Jane Thynne