SEC claims Black used Hollinger as his own piggy bank

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The Independent Online

The legal case against Lord Black of Crossharbour mounted yesterday when US regulators accused the former owner of The Daily Telegraph of orchestrating a "fraudulent and deceptive scheme" to divert more than $85m (£46m) to the pockets of himself and his friends from the media company Hollinger International.

The legal case against Lord Black of Crossharbour mounted yesterday when US regulators accused the former owner of The Daily Telegraph of orchestrating a "fraudulent and deceptive scheme" to divert more than $85m (£46m) to the pockets of himself and his friends from the media company Hollinger International.

The Securities and Exchange Commission, which has been examining the actions of the Canadian peer for the best part of a year, also accused him and Hollinger's chief operating officer, David Radler, of misleading the company's board, its audit committee and its shareholders.

Stephen Cutler, the SEC's director of enforcement, said: "Black and Radler abused their control of a public company and treated it as their personal piggy bank. Instead of carrying out their responsibilities to protect the interest of public shareholders, the defendants cheated and defrauded them through a series of deceptive schemes and mis-statements."

The SEC's case is the first legal action directed against Lord Black by government authorities. He and some of his close associates at Hollinger Inc, the holding company which sits above Hollinger International, are also the subject of lawsuits brought by shareholders in both companies who accuse the group of destroying the value of the businesses through their allegedly corrupt schemes.

The SEC is pressing for Lord Black and Mr Radler to repay their "ill-gotten gains", and to hand over a fine. The body is freezing Lord Black's shareholding in Hollinger International in a voting trust that the regulator will control and is also seeking to ban the two from serving as directors of a public company.

The body warned that its enforcement action, lodged in an Illinois court, could be just the beginning of its case against certain Hollinger Inc directors.

Merri Jo Gillette, the director of the SEC's Midwest office, said: "We intend to seek tough sanctions against them based on these charges. However, our work is not done. We will continue our investigation into wrongdoing at Hollinger."

The SEC's case highlights instances where Lord Black and his allies introduced "non-compete" clauses which allowed them personally to collect $85m from sales of Hollinger International's publications. It also says the group consistently sold off newspaper assets at below-market prices, one for just $1, to another privately held company they controlled.

The case comes after Richard Breeden, a former SEC chairman, prepared a report on Hollinger, which accused Lord Black of "corporate kleptocracy". Lord Black has always denied any wrongdoing.

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