US ambassador and governor in line of Hollinger legal fire
Sunday 05 September 2004
Former US ambassador Richard Burt and ex-Illinois governor James Thompson could face further legal action from shareholders of the fallen US media giant Hollinger International.
The two directors are most exposed to more legal action because they served on the audit committee during the reign of former chairman Lord Black.
A report into alleged "corporate kleptocracy" at the company, released last week by Richard Breeden, a former Securities and Exchange Commission regulator in the US, was heavily critical of the audit committee for failing to spot the alleged looting of millions of dollars of company funds by Lord Black.
It said the committee's performance was "ineffective and careless".
The rest of Hollinger International's directors, who include former US secretary of state Henry Kissinger, are also under pressure. The mood among the board was said to be of "fatigue".
Many directors who served under the disgraced peer would like to resign but have not because they would lose the legal advice and liability insurance provided by the company, said a source close to the board.
The directors cannot be sacked because the findings in the report are allegations, which have not been proved.
Directors have personal liability insurance worth around $130m (£73m), which shareholders are seeking to recoup.
One shareholder, Cardinal Capital Management, had suspended its $300m claim against the company, former owner of The Daily Telegraph, pending the release of Mr Breeden's report.
"We may add things to the lawsuit," a source close to the fund said. "But the action is currently stayed. It allows mediation with everyone - the insurance companies, directors. There are lots of parties."
Hollinger International is also bringing a $1.25bn racketeering suit against Lord Black and his associates. Another shareholder, Tweedy Browne, wants the company to take action against former and current board members.
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