The gathering storm around Richard Perle

D.C.'s "Prince of Darkness" has prospered in the shadows between the Beltway and big business -- but the latest scandal threatens to bring him down.

By Eric Boehlert

Nov 26, 2003 | Storm clouds are gathering around Washington's "Prince of Darkness," Richard Perle.

An influential über-hawk who enjoys close ties to the top of the Pentagon's civilian leadership, Perle got his wish earlier this year when the United States launched the preemptive war against Saddam Hussein that he'd spent a decade lobbying for. (The "Prince of Darkness" nickname stems from Perle's apparent dislike of nuclear arms treaties and Middle East peace accords.) A private businessman who once worked for an Israeli arms manufacturer, Perle maintains a public platform through the Defense Policy Board, a civilian advisory group stacked with hawks -- including James Woolsey, Newt Gingrich and Henry Kissinger -- who supported a war with Iraq.

Though he was forced to give up the board's chairmanship when some of his private defense-contracting clients were revealed, Perle maintains a unique position as a shadowy Beltway operator who blurs the line between private business and foreign policy. He's been making lots of noise -- and news -- lately, and his critics are asking questions about his intentions.

It's too early to tell how the accumulating controversies will affect Perle's role as a pro-war spokesman. In the past though, despite a history of missteps, Perle has managed to prosper. Or more important, to maintain the loyalty of senior administration officials ("the string of Perles"), many of whom he's cultivated for years and who find his pro-war bravado helpful.

Still, virtually none of Perle's predictions about the surprisingly messy war with Iraq have proven true. ("Support for Saddam, including within his military organization, will collapse at the first whiff of gunpowder," he told PBS in 2002.) Moreover, Perle recently found himself involved in a controversial story about how, on the eve of war, the Bush administration rebuffed a last-minute back-channel offer from Saddam Hussein that could have averted an invasion. And last week he raised hackles when he ventured away from the White House talking points and conceded that the war itself, however justified, was illegal under international law.

"That's a startling admission for him," says Vince Cannistraro, former CIA counter-terrorism chief.

But more ominous for Perle than questions about his foreign policy meddling are those regarding his business dealings, as he suddenly finds himself at the center of a boardroom scandal that's likely to claim Lord Conrad Black's $1 billion media empire. Up until last week, Black served as CEO of Hollinger International, whose key assets include the Chicago Sun-Times, the London Daily Telegraph and the Jerusalem Post.

The company's implosion was sparked when an audit by outsiders, lead by former Securities and Exchange Commission chairman Richard Breeden, discovered $32 million in questionable payments to key company executives, including $7.2 million directly to Black and $16.55 million to Hollinger's Canadian parent company. The generous payments were made while Hollinger's handpicked board of directors apparently looked the other way as the CEO allegedly used the public company as his private piggy bank.

Perle serves on Hollinger's board with Henry Kissinger and Black's wife, conservative columnist Barbara Amiel, among others.

Drawing shareholder scrutiny, as well, are investments Hollinger made in companies run by its board members. Hollinger Digital, headed by Perle, invested $2.5 million in Trireme Partners, the venture capital firm that invests in technology, goods and services related to homeland security and defense. Trireme Partners is co-managed by Perle.

According to the Financial Times: "Also under review is a $14 million investment the company made under Mr. Perle's direction through Hillman Capital, a venture capital group controlled by Gerald Hillman -- who has since become a partner at Trireme and, like Mr. Perle, is a member of the U.S. Defense Policy Board."

"It's typical of the problems many boards of directors face, but this seemed to be a case of board problems on steroids," says Nell Minow, editor of Capitol Library, which covers corporate governance. "The CEO had voting control, so there was not even pretense that shareholders had a role. He gets access to capital you only get through going public, yet he gets to control it as if it were a private company. For investors, it's the worst of both worlds."

Last Monday, Black, a member of Britain's House of Lords, resigned as CEO from Hollinger. By week's end the Security and Exchange Commission began issuing subpoenas for its investigation into Hollinger's board. It appears Black's company, which he built over 33 years, will now be sold off, piece by piece; the investment bank Lazard has been hired to search for interested buyers.

The usually ubiquitous Perle, who has been a pro-war staple on TV talk shows and Op-Ed pages this year, has been uncharacteristically quiet since the Hollinger story broke. He was traveling out of the country and could not be reached for comment.

"The situation for the [Hollinger] directors involved is quite serious," warns Herbert Denton, a shareholder advocate who has represented other investors in Hollinger. "I am certain additional legal action will be taken. And the focus will be the board of directors. It's got to go there."

That means Perle and others will soon be facing some "ugly depositions and headaches," says Minow. "The directors should start putting their assets in their wife's name," she quips.

The idea that as a board member Perle could face punitive damages for allegedly not fulfilling his duty to shareholders is not entirely out of the question. This May, a Delaware judge stunned the corporate world when he ruled that the Disney board members who OK'd an extravagant $140 million severance package for exiting executive Michael Ovitz (who worked at Disney for 15 months), might be forced to pay the money back themselves since they so dramatically failed in their duties.

Judge William Chandler wrote that the plaintiff's complaint "suggests that the Disney directors failed to exercise any business judgment and failed to make any good-faith attempt to fulfill their fiduciary duties to Disney and its stockholders."

The ruling breaks with decades of corporate-friendly Delaware decisions, which maintained a hands-off approach toward board members, absent any criminal activity. The Disney shareholder trial is scheduled for early 2004.

Next Page: According to the Defense Department, Perle works for the Pentagon only eight days a year

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