Here is some venture capital reading from the Hollinger special report. This time it is Richard Perle — yes, that Richard Perle — who comes in for special treatment.
The issue? Perle’s role as a Hollinger board member, but in particular his role as co-Chairman of Hollinger Digital, a pseudo venture capital unit within Hollinger. The “fund” invested in dot-coms during the go-go days of the late 1990s. Interestingly, Mr. Perle’s compensation (as disclosed in the report) was like venture capitalists in its size, but unlike them in its, ahem, tenuous link to performance.
To be specific, in 2000 Mr. Perle received $300,000 in salary and another $2.89-million in “incentive” payments pursuant to his venture investing. But there is a wrinkle: his venture investing was, in a word, lousy:
“Perle’s investments did not perform well enough to warrant the large bonus payments he received. Perle told the Special Committee that he originated Digital’s investments in Trireme, CDT, Onset Technology, Hemanext, Crosshill Georgetown Capital, Spectra Disc and Handbag.com. According to [Hollinger Digital president] Doull, Perle was also responsible for Hollinger’s investments in American Interactive Media, News Alert, Career Rewards and Mascot Network. Of these investments, only Crosshill Georgetown Capital has produced a gain, albeit modest — Digital invested $2,002,055 and has received dividends totaling $67,064 from that investment. As of December 31, 2003, Hollinger has recorded losses of $49.6 million on the other investments.
Specifically, Hollinger invested $63.6 million in these eleven companies, and by December 31, 2003, four of them had been completely written off, one had been sold at a loss of $2.5 million, and the remaining six had a carrying value of $13 million. In sum, although the investments Perle was responsible for bringing into Digital’s portfolio have produced losses of more than $49 million, he walked away with more than $3.1 million in performance bonuses.”