Plot Thickens As Hollinger Sues Black

by Mike Godfrey, for LawAndTax-News.com, Washington

01 April 2005

The legal woes being faced by former Telegraph Group owner, Conrad Black were increased on Tuesday when Hollinger Inc. announced that it was suing its majority shareholder and former chief executive.

According to reports, the lawsuit filed with the Ontario Superior Court of Justice names Lord Black and his holding company, Ravelston Corp., in addition to Moffat Management Inc., Black-Amiel Management Inc., and several former Hollinger employees.

Hollinger Inc., once used by Lord Black to control Hollinger International, has announced that it is seeking C$550 million in monetary damages, in addition to the repayment of around C$86 million (plus interest and costs) owed to it by Ravelston.

"The monetary damages include management fees and non-competition payments misappropriated to Ravelston and the individual defendants during a period since 1998, as well as reimbursement of fees and costs including those related to the current inspection by Ernst & Young and the now withdrawn going-private transaction," Hollinger announced in a statement, continuing: "Other bases of the claims include diversion of corporate opportunities, breach of fiduciary duties and oppression."

Meanwhile, the Ontario Securities Commission (OSC) announced on Monday that it would not be varying the terms of management cease trade orders (MCTOs) against certain directors, officers and insiders of Hollinger Inc. and Hollinger International.

The MCTOs were initially issued by the OSC in June 2004 because Hollinger Inc. and Hollinger International failed to comply with their obligations under Ontario securities law to file interim and annual financial statements, related Management’s Discussion and Analysis, and Annual Information Forms.

Lord Black had applied for the trading ban to be lifted in order to allow Hollinger Inc. to be taken private by Ravelston, which currently owns a reported 78% of the firm.

However, the OSC explained that:

“In pursuing the purposes of the (Ontario Securities) Act, the Commission is directed to have regard to, and balance in specific cases, the fundamental principles which are set out in section 2.1 of the Act. The fundamental principles of the Act include: requirements for timely, accurate and efficient disclosure of information; restrictions on fraudulent and unfair market practices and procedures; and requirements for the maintenance of high standards of fitness and business conduct to ensure honest and responsible conduct by market participants."

“The Commission is guided by these purposes and principles in its administration of the Act. In the circumstances of this case, and for the reasons discussed above, the Commission has been unable to form the opinion that it would not be prejudicial to the public interest to grant the relief requested. Accordingly, the applications to vary the MCTOs are denied.”

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