Skip to comments.Conrad Black is scheduled to meet soon with the U.S. Securities and Exchange Commission.
Posted on 12/16/2003 11:41:29 AM PST by Liz
Tweedy Browne suing Hollinger
Top shareholder seeks legal fees
Investigated payments to Black
Hollinger International Inc. is facing a lawsuit from a New York investment firm that helped blow the whistle on millions in unauthorized payments made to Conrad Black, other executives and parent company Hollinger Inc. of Toronto.
Tweedy Browne Co. filed suit yesterday seeking reimbursement of legal fees its Global Value Fund incurred investigating possible wrongdoing at the company that owns London's Daily Telegraph, the Chicago Sun-Times and Jerusalem Post.
The lawsuit against Chicago-based Hollinger International was filed in Wilmington, Del., in the state's Chancery Court.
"Lord Black and his associates had been paying themselves many millions of dollars without proper disclosure,'' said the suit.
The suit asks for fees commensurate with "potential recovery of $31.55 million (U.S.)"
That's roughly the amount a special committee of Hollinger International is seeking from Black, other executives and Hollinger Inc.
Black and two executives have pledged to repay almost half the amount, while no decision has been made by Hollinger on the rest.
A figure for the legal fees which under U.S. law cannot be charged to shareholders in the Tweedy Browne fund was not specified. Tweedy Browne owns 13.1 million shares in Hollinger International, 18 per cent of its common stock, making it the newspaper company's second-largest institutional shareholder.
An analyst at the investment firm said seeking repayment from Hollinger International is justified because any unauthorized payments recovered will benefit all shareholders.
"We have been instrumental in seeing this go forward. We're trying to do the right thing," said Laura Jereski. "This should be a shared cost."
Hollinger International wouldn't comment on the lawsuit.
The $32.2 million paid to Black, other executives and Hollinger was for so-called "non-compete" fees as part of sales of Hollinger International newspapers to ensure Black and the others would not start competing newspapers. Tweedy Browne said that money should have gone to Hollinger International.
A special committee headed by former U.S. Securities and Exchange Commission chairman Richard Breeden was struck at Hollinger International earlier this year to look into the payments, and found they were not authorized by the board of directors. The committee is investigating other payments. Tweedy Browne has questioned $300 million in payments since 1995.
The suit was filed as The New York Times reported Black will have his first interview with the SEC on Monday as part of its investigation into the unauthorized payments that prompted him to step down as chief executive of Hollinger International last month. He remains chairman as the company looks at options, including the sale of newspapers, to resolve an impending financial squeeze.
Meanwhile, British stockbroker Collins Stewart confirmed yesterday it has entered the bidding for London's Daily Telegraph, Sunday Telegraph and The Spectator magazine.
But the firm, which usually buys companies and offers shares in them to institutional investors, would not elaborate on a report in London's Sunday Times that it is offering £500 million, or about $1.15 billion (Canadian).
Hollinger International has hired global investment banking firm Lazard to seek potential buyers. A source close to the process said no recommendations have been made to Hollinger International as yet.
"There are some (expressions of interest) that are going to make a short list later on and some won't."
Spokespersons for Black and Hollinger International would not comment on the SEC interview.
"If the SEC wants to discuss the status of their investigation, that's up to them," said Jim Badenhausen, Black's personal spokesperson in New York.
A spokesperson for the SEC in Washington declined comment.
The Ontario Securities Commission is also investigating Hollinger and co-operating with the SEC.
With files from the Star's wire services.
DICK LOEK/TORONTO STAR FILE
Black: "Franklin D. Roosevelt was the most important person of the twentieth century."
I don't feel so good.
God, that FDR stuff is so sick.
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