Hollinger lawyers lay out case against Black

Lawyers for UK newspaper Daily Telegraph owner Hollinger International began laying out the case against controlling shareholder Conrad Black, saying he took several payments without authorisation.

Gordon Paris, a board member who is serving as interim CEO and chairman of the company, testified in the US yesterday that Black took millions of dollars in payments that were never authorised by independent board directors, even though the company’s financial statements said they were.

The money paid to Black had been described as “non-compete” payments, which are normally paid to a seller of a newspaper by the buyer to assure that the seller does not immediately re-enter the same market.

But Mr Paris said that in Black’s case, the payments were made to him instead of to the company, and without approval from independent directors. He called them “fictitious” and said “they were inappropriate, and they were unauthorised”.

Raymond Seitz, a former ambassador to the United Kingdom and one of the board members probing the payments, testified later that it was unclear why some of the money described as “non-compete” payments was going to Hollinger International’s Toronto-based holding company, which did not seem to ever be a likely competitive threat in the US community newspaper market.

In one case, a non-compete payment went to a wholly owned subsidiary of Hollinger International.

Mr Seitz said he found it “odd to have an agreement not to compete with yourself”.

He said the situation “moved from the peculiar to the bizarre” when it became apparent that there had not even been an actual non-compete agreement signed in that case.

The case is highly unusual in pitting a board of directors against its controlling shareholder, both claiming the right to determine the fate of the company.

It is also a public showdown for Black, a combative character who renounced his Canadian citizenship to become a peer. He boasts of top-level political connections, and has denounced dissident shareholders as “hypocrites and ingrates”.

Black is expected to testify, but has not yet done so. The trial runs through Friday at Chancery Court in Wilmington, Delaware, where Hollinger International and many other US companies are incorporated.

The company, which also publishes the Chicago Sun-Times and The Jerusalem Post, is accusing Black of using his control of Hollinger International to line his own pockets as well as those of several associates.

They also say he improperly cut a private deal to sell control of Hollinger International’s parent company, excluding the input of minority shareholders and undermining a separate sale process of Hollinger International that was already under way.

Black had agreed to support that sale process. But Mr Paris testified that he clashed with a deputy of Black’s, Daniel Colson, for having contacts with the investment firm Hicks, Muse, Tate and Furst outside the official sale process.

Mr Paris also acknowledged that he was completely unaware that Black was negotiating behind the board’s back to sell his interest in Hollinger International’s parent company, Hollinger Inc, to the Barclay brothers of Britain.

Mr Paris said the announcement of the deal had a “chilling effect” on the company’s efforts to find a buyer for Hollinger International. The company is asking the court, among other things, to temporarily block the deal.