Judge Upholds Hollinger Probe Protection

By: Mark Fitzgerald Declaring that former Hollinger International Inc. CEO Conrad Black exploited his control of the company at the expense of ordinary shareholders, a federal judge in Chicago upheld an injunction forbidding the press magnate from interfering with the investigation into his alleged looting of the company by the board of directors.

In her ruling issued Monday, U.S. District Judge Blanche Manning aligned herself squarely with the comments Delaware Chancery Court Judge Leo Strine made in February when he stopped Black's attempt to sell Hollinger International to the Barclay brothers' publishing company in Britain.

Manning wrote in her ruling: "As the Delaware court has found, Black has 'persistently and seriously' breached his fiduciary duties and his conduct 'threatens grave injury to International and its stockholders.' ... Since 1999, Black has gone to great lengths to use his control of International for his own benefit at the expense of the non-controlling shareholders. In addition to converting corporate assets and attempting to usurp corporate opportunities, Black has used deceit and threats to derail the special committee's investigation into his wrongdoing."

Black controls Hollinger International through supervoting stock owned by his holding company Hollinger Inc. that gives him a 29.7% equity interest and 72.3% voting stake in the publishing company.

Just as Judge Strine's ruling blocked Black from selling Hollinger International on his own, Judge Manning's action effectively prevents Black from stopping the company from selling all or parts of its chain, which includes the Chicago Sun-Times, the Daily Telegraph in London and the Jerusalem Post.

Under the original injunction, obtained by the federal Securities and Exchange Commission, Black was forbidden from firing members of the special committee or interfering with their work. If he did so, the injunction says, a "special monitor" -- former SEC Chairman Richard Breeden - - would take over the work of the committee. Hollinger International has alleged in a lawsuit that Black and several other fired top executives improperly collected unapproved payments in excess of $200 million that they either paid to themselves or companies they controlled.