Conrad Black Faces SEC Lawsuit
The Securities and Exchange Commission filed a lawsuit Monday accusing newspaper tycoon Conrad Black of looting Hollinger International Inc. of $85 million and seeking to block him from keeping control of the company.
The lawsuit also names David Radler, the company’s former president, and Hollinger Inc., the Canadian company Black uses to control Chicago-based newspaper publisher Hollinger International. The Chicago Sun-Times and the Jerusalem Post are among its holdings.
The lawsuit seeks to bar Black and Radler from serving as officers or directors of a public company and demands unspecified penalties. The agency also wants to force Black to place his Hollinger International shares in a trust, the first time in 16 years the SEC has taken action to try to strip a controlling shareholder of voting authority.
“This is so aggressive it’s virtually unprecedented,” said Christopher Bebel, a former SEC lawyer now in private practice in Houston. “It manifests the SEC’s willingness to flex its muscle.”
The suit, filed in federal court in Chicago, also linked Hollinger board member Richard Perle, a former senior Pentagon official, to some transactions with Black without naming him as a defendant.
A spokesman for Black and Hollinger Inc., James Badenhausen, declined to comment. A spokesman for Radler said he would defend the charges in court. Perle’s lawyer, Dennis Block, said he hadn’t seen the lawsuit and wouldn’t comment.
Hollinger International’s Class A shares rose 36 cents to $18.16 on the New York Stock Exchange.
Black, 60, and Radler, 61, diverted $85 million in proceeds from Hollinger International’s sale of newspaper publications through so-called non-competition payments between 1999 and 2001, the SEC alleged. They also tried to conceal the “self-dealing” from board members and public shareholders.
The money, which amounted to 14% of Hollinger International’s pretax income during this three-year period, was diverted to Black, Radler, Hollinger Inc. and other companies they controlled, and some associates, the suit contended.
The SEC also alleged Black and Radler orchestrated the sale of three Hollinger International publications at below-market prices to another closely held company that they owned. One publication was sold for a dollar, it said.