By: Mike Robinson, Associated Press Writer
(AP) Newspaper baron Conrad Black should have received notice before a court entered an emergency order restricting his authority to replace the board of directors of holding company Hollinger International, a federal judge ruled Monday.
U.S. District Judge Blanche M. Manning struck down portions of the six-week-old order but immediately stayed her ruling pending further court action.
Manning said Black’s Toronto-based Hollinger Inc., which owns 30% of the equity and 72% of the voting stock of Hollinger International, publisher of the Chicago Sun-Times, The Daily Telegraph of London and The Jerusalem Post, “should have been given notice and an opportunity to object to the judgment before it was entered.”
The emergency order, entered Jan. 16 by U.S. District Judge Robert W. Gettleman, would automatically put a special monitor in power at Hollinger International if Black attempted to make changes in the company’s board of directors.
The special monitor would have standing to ask the court to block such changes.
The SEC asked for the emergency order, saying there was evidence of at least $32 million in improper payments to “corporate insiders” at Hollinger International and signs that those same insiders were attempting to make changes in the board.
Because Manning stayed her order, the special monitor would still automatically be put in place if Black made changes in the board. But Manning said Hollinger Inc. has an important stake in the case because the monitor would restrict its unfettered right to vote its shares.
“After careful consideration, this court finds that although [Hollinger] Inc. could still vote with the judgment in place, its unfettered and fundamental right to do so … would be impeded by the judgment,” she said in her 15-page decision.
She said it appeared that the SEC and Hollinger International “failed to present a complete factual picture to Judge Gettleman, which in turn prevented him from properly assessing whether the judgment was fair, reasonable, or if, and to what extent, it affected the rights of [Hollinger] Inc.”
Peter Chan, SEC assistant regional director, reacted by saying a decision by a Delaware court Friday barring Black from selling control of Hollinger International to a pair of British businessmen “undercut many of the arguments Hollinger Inc. has made” in the Chicago case.
He said the SEC will be presenting that argument to Manning at the next hearing on the issue. No date has been set for that hearing.
Meanwhile, Hollinger Inc. issued a statement saying it was “pleased that Judge Manning has upheld our right to intervene in this matter and to protect our rights as a shareholder.”