Judge dismisses $1.25bn case against Black
Saturday 09 October 2004
Lord Black, former owner of
The Daily Telegraph, won a temporary reprieve yesterday when a US judge dismissed a lawsuit by his former company, which was seeking $1.25bn (£700m).
Lord Black, former owner of The Daily Telegraph, won a temporary reprieve yesterday when a US judge dismissed a lawsuit by his former company, which was seeking $1.25bn (£700m).
The ruling by a federal judge, which still allows Hollinger International to sue in a state court for a lesser amount, is the latest development in a complex legal battle between Lord Black and the newspaper company.
Hollinger International claimed "a pattern of racketeering" was behind deals in which Lord Black and his associates, including former chief operating officer David Radler, sold Hollinger newspapers for less than a fair value to private companies they controlled.
Hollinger International, which owns The Chicago Sun-Times, Jerusalem Post and until recently the Telegraph, said it was considering an appeal against the ruling by Judge Blanche Manning of the US District Court in northern Illinois.
In a 20-page ruling, Ms Manning said the heart of the suit's claims should be considered under securities fraud laws rather than racketeering.
The judge's ruling does not signal an end to the legal case against Lord Black, who is married to the former Telegraph columnist Barbara Amiel . He and his associates, who were accused in a detailed report compiled by a special company committee of systematically looting the publishing firm of more than $400m - nearly all of its profits from 1997 to 2003. In her ruling, the judge said: "This court is not making any determination as to validity of the fraudulent actions underlying these claims."
She dismissed the non-racketeering claims without prejudice, meaning Hollinger International could still prevail on those points if it refiles.
Gordon Paris, Hollinger International's interim chairman and CEO, said that the company was not deterred by the ruling. Mr Paris said: "The court's dismissal of the special committee's claims on technical grounds does not in any way diminish the strength or merits of the breach of fiduciary duty claims that have been asserted against these defendants.
"In the interest of the company and its shareholders, the special committee will pursue these claims aggressively and seek restitution for funds diverted by the defendants from the company."
Nathan Eimer, Hollinger Inc. attorney, said that even if the lawsuit is refiled, the judge's ruling in effect eliminates two-thirds of the total sought by determining that the case cannot be considered under racketeering laws.
Under a federal racketeering law originally designed to fight organised crime, Hollinger had sought triple the $381m in damages it claimed under the lawsuit. It also asked for $104m in interest. The company filed the lawsuit in January and amended it in May with the racketeering allegations.
Hollinger Inc, a Toronto-based holding company controlled by Lord Black, had argued its US affiliate should not be able to bring its case under the Racketeer Influenced and Corrupt Organisations Act, the so-called RICO act. A spokes-man for Lord Black called the decision a "stinging setback to Hollinger International's campaign against Conrad Black and the rest of the former management" of Chicago-based Hollinger International.
The spokesman said: "We always believed that Hollinger International's racketeering claim highlighted the overreaching and exaggerated nature of this lawsuit, and by dismissing the racketeering claim with prejudice, the judge has ruled that this is not and cannot be a racketeering case."
Many federal courts have shunned RICO claims in private commercial disputes, said former federal prosecutor Randy Mastro, now a partner at law firm Gibson, Dunn & Crutcher in New York.
Mr Mastro said: "It doesn't mean this matter is over. It does mean that there can't be a federal racketeering claim under these circumstances. It means that the case going forward won't be in federal court."
Black has repeatedly denied any wrongdoing. His spokesman said last week that Lord Black would sue a Hollinger International special committee for $878m over a report that accused him and other former executives of operating a "corporate kleptocracy" that drained the publisher of hundreds of millions of dollars.
Hollinger Inc. holds about 18.2 per cent of Hollinger International and controls 68 per cent of its votes through a special share class. The holding company's shares jumped more than 6 per cent in afternoon trade in Toronto yesterday. Hollinger International stock slipped 10 cents to $17.64 on the New York Stock Exchange.
HOLLINGER VS BLACK
Between 1999 & 2002: Lord Black and three other directors of Hollinger receive unauthorised payments following the sale of various newspapers including several in the US and Canada. Money is described as "non-competition payments"
November 2003: All the executives involved are forced to resign posts. Lord Black loses his job as Chief Executive but stays on as non-executive chairman
November 2003: Launch of investigation by US regulators into Black's financial affairs
Details of the suspect payments also reported to the US financial regulator
End of 2003: Hollinger considers selling its main asset - the world's third largest group of titles including The Daily Telegraph and its sister Sunday title and the Spectator magazine
January: Black launches secret bid to sell his shareholding in Hollinger
17 January: Hollinger International announces it is to sue Black for the payments and he is sacked as non-executive chairman (to be replaced by Gordon Paris, pictured, as interim chairman and CEO). A few hours later, he infuriates Hollinger by announcing planned sale of the Telegraph titles to the Barclay Brothers
June: The Barclay Brothers £665m bid for the Telegraph papers accepted
July: Black's Hollinger Inc files lawsuit in an attempt to force a shareholder vote on the Telegraph sale
July: Ruling from a Delaware court states that Black will not get to vote on the decision to sell
August: Hollinger report states that Black and his associates ransacked more than £220m from his former empire
October: Black announces he is suing the special board committee of Hollinger International for "defamatory statementsabout him, throughout the committee's recently published report".
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