By: Mark Fitzgerald
Conrad Black’s old holding company, Ravelston Corp., just couldn’t catch a break Thursday. In Chicago, it was indicted for fraud, and in Toronto, an Ontario court torpedoed, at least temporarily, a lawsuit settlement it had painstakingly worked out to collect about U.S.$10.5 million from CanWest Global Communications Inc.
Ravelston, which is now in the hands of receivers appointed by a Canadian court, was the vehicle Black used to control Hollinger Inc., which in turn controlled Hollinger International, the company that publishes the Chicago Sun-Times and dozens of other Chicago-area dailies and weeklies.
Announcing Ravelston’s indictment by a grand jury Thursday, U.S. Attorney Patrick Fitzgerald said former Sun-Times Publisher F. David Radler and former Hollinger International general counsel Mark Kipnis, who were also indicted, used Ravelston to illegally divert $32 million to companies Radler owned. Fitzgerald also described illegal actions by a person he referred to only as ?the chairman.? Black, who was not indicted, is the former chairman of both Hollinger International and Hollinger Inc.
In the less-noticed development in Canada, Ontario Superior Court judge James Farley, who is overseeing Ravelston while it’s in bankruptcy protection, refused to approve the lawsuit settlement when Ravelston creditors indicated they objected to the deal. At a court hearing Thursday, Farley delayed the hearing on the settlement until Aug. 27 to allow creditors time to prepare their arguments.
Ravelston had been providing management services to the National Post — a paper created by Black in the late 1990s — and other CanWest papers since 2000, when the chain bought Hollinger Inc.’s Canadian newspapers.
Under their agreement, CanWest paid C$6 million (U.S. $4.95 million) annually in fees. The deal carried a termination penalty of C$22.5 million (U.S.$18.6 million) if Ravelston cancelled the arrangement. The court-appointed receiver, RSM Richter Inc., cancelled the deal when Ravelston went into receivership earlier this year.
Richter demanded the termination penalty plus an additional C$6 million for the six months during which Ravelston gave notice of its cancellation. CanWest argued that Ravelston was insolvent, and not owed anything.
The agreement reached this week would have split the difference between the two sides, awarding Ravelston C$12.75 million.