Hollinger Lawsuit as SEC Probe Seeks Help from Brits

10 December 2003

Hollinger International, the beleaguered publishing group run by Lord Conrad Black of Crossharbour, is about to be hit with another lawsuit by a disgruntled shareholder.

To compound his lordship's woes, the US Securities and Exchange Commission has sought help from the UK's Department of Trade and Industry in its investigation into allegedly unauthorized management payments at Hollinger.

The SEC -- which has no official jurisdiction in the UK -- on Tuesday asked the DTI for information on inter-company loans and management payments made by Telegraph Group, the London-based Hollinger unit whose stable includes the Daily Telegraph and Sunday Telegraph national newspapers.

Since 2000, the Telegraph Group has paid more than £4 million ($6.95m; €5.71m) in management fees to Hollinger Incorporated, the holding company behind Hollinger International -- both of which are chaired by Black.

Telegraph Group has also guaranteed several hundred million dollars of loans to the parent companies. Managers at the UK subsidiary justified the loan guarantees as normal.

The DTI and Hollinger both declined to comment on the matter.

• Meantime, Cardinal Value Equity Partners, a Connecticut-based investor holding around 2% of Hollinger International shares, declared in a Delaware court filing it was "appropriate" to commence a lawsuit.
    The legal action is partly based on information supplied to Cardinal by Hollinger. In an earlier statement, Hollinger admitted that documents requested by Cardinal were "consistent" with issues already raised by another litigious investor, New York-based Tweedy Browne.
    Cardinal's suit is technically filed on behalf of all Hollinger shareholders; it names former and current Hollinger executives and board members -- whose number includes former Illinois governor James Thompson and Richard Perle, the defence adviser.

Data sourced from: Financial Times; additional content by WARC staff