Hollinger Inc. Hires Lawyers to Defend Against Suit

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(AP) The board of Hollinger Inc. announced Thursday that it will hire U.S. securities lawyers to defend its decision not to repay $16.5 million to subsidiary Hollinger International.

The move is a response to Hollinger International’s announcement last week that it had sued former Hollinger Inc. CEO Conrad Black and others to recover $200 million the company says he took in inflated management fees and other payments.

Hollinger Inc.’s announcement concerns six noncompete payments received by Toronto-based Hollinger Inc. in 1999 and 2000, said Joseph Groia, an attorney hired by Hollinger Inc.’s board and a former enforcement director at the Ontario Securities Commission.

“This matter will in all likelihood need to be resolved through litigation as Hollinger International appears to have ruled out any further discussion or negotiation,” Hollinger Inc. and Groia said in a statement.

Groia, retained by Hollinger Inc.’s board in early December to report on the noncompete fees, said he was confident Hollinger Inc. would prevail. Hollinger Inc. is keeping Groia’s report secret pending the court case.

Black, who has a controlling interest in Hollinger Inc., has called Hollinger International’s suit “spurious” and says he doesn’t recognize the board’s decision to oust him as chairman.

He has also refused to return $7.2 million in fees that he had previously agreed to repay, saying new evidence had emerged that the payments were in fact authorized, contrary to previous findings by a special committee.

In November, Black agreed to repay $7.2 million and seek about $16 million in repayments from Hollinger Inc. A total of $32.2 million in so-called “noncompete” fees was to be repaid by June 1.

Black is attempting to sell his stake in Hollinger Inc. to British twin tycoons the Barclay brothers, a move which could complicate Hollinger International’s efforts to recoup money from him if the sale is approved.

Black asked a Toronto court on Monday for an injunction to prevent Hollinger International and some of its directors from interfering in the deal with the Barclays.

The Barclay deal would give them control of Hollinger International which owns London’s Daily Telegraph, the Chicago Sun-Times (Click for QuikCap) and the Jerusalem Post.

Ontario securities regulators confirmed Wednesday that investigators have assembled “a substantial amount of information” in an investigation into the Canadian-based holdings of the Hollinger newspaper group.

Black stepped down as CEO of Hollinger International under pressure in November as part of a management shake-up, but he remained the company’s controlling shareholder through his control of Hollinger Inc.

Hollinger International’s board includes several prominent public figures, including Henry Kissinger, defense adviser Richard Perle and former Illinois Gov. James R. Thompson.

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