Black to Directors: Let Hollinger Go Private, or Else

By: Mark Fitzgerald With a shareholders vote looming in four weeks, independent directors of Hollinger Inc. have told a Canadian judge they're worried former Chairman and CEO Conrad Black will sue them if they don't approve his plan to take the holding company private.

The directors are also asking the judge if they can add another Canadian $10 million (approximately U.S. $8.1 million) to a Canadian $2 million indemnity fund to "provide the five independent directors with a realistic measure of protection against the costs of potential and threatened litigation," Hollinger said in a statement issued Monday. The directors also want to set aside another Canadian $500,000 as an indemnity fund for two unnamed Hollinger financial executives, the company said.

At issue between Black and the directors, Hollinger Inc. said, is whether the company can hold a vote on going private before the court-ordered inspector finishes his report on the many allegations of improper self-dealing by Black and other former key Hollinger Inc. figures. Hollinger Inc. said it has asked Colin Campbell of the Ontario Superior Court of Justice to rule on that question as well.

Hollinger Inc. set a March 31 shareholders meeting vote on the privatization plan and said it must give notice of the meeting by March 10 under its bylaws. But the company said the inspector's report will not be ready by then.

Black has proposed taking Hollinger Inc. private by buying it out all shares he does not yet own through yet another holding company he controls, Ravelston Corp. He maintains there is no need to delay the vote because of the report.

In an e-mail to Hollinger Inc. Chairman Gordon Walker -- one of a series of threatening e-mails sent to independent directors -- Black said the directors want to wait for the inspector's report "to perpetuate your sinecures and continue the orchestrated denigration of those fully entitled to a presumption of innocence, who built the company and its subsidiaries," according to an article in the Globe and Mail by Richard Blackwell. The e-mails were included in affidavits filed with the court.

In another e-mail, black threatens to reduce Ravelston's offer for the company if privatization is delayed beyond March 31, the Globe and Mail reported. He added that those responsible for a delay "will have to bear the legal consequences of their actions."

Black's threats have put the directors in a no-win situation, Chairman Walker says in his affidavit. "If for some reason we decline to support the proposal, we will be sued by Black, Ravelston and potentially others," he states in the affidavit. And if the directors do approve privitization, they "may be regarded as having simply 'knuckled under'" to pressure from Black.

Toronto-based Hollinger Inc.'s principal asset is a 68% voting and 18.2% equity interest in Chicago-based Hollinger International, which publishes the Chicago Sun-Times and about 100 other dailies and community papers in the Chicago area as well a commercial real estate in Canada. Black, former Sun-Times Publisher F. David Radler, and several other top executives were forced to resign from Hollinger International amid allegations, later documented by a special board of directors committee, that they "looted" the publishing company of $400 million over a period of seven years by taking improper fees and through insider deals.