Black should have had notice of lawsuit - Judge

Newspaper baron Conrad Black should have received notice before a court entered an emergency order restricting his authority to replace the board of directors of holding company Hollinger International, a federal judge ruled in Chicago.

US District Judge Blanche Manning struck down portions of the six-week-old order but immediately stayed her ruling pending further court action.

Manning said Black’s Toronto-based Hollinger Inc, which owns 30% of the equity and 72% of the voting stock of Hollinger International, publisher of The Daily Telegraph, “should have been given notice and an opportunity to object to the judgement before it was entered.”

The emergency order, entered on January 16 by US District Judge Robert Gettleman, would automatically put a special monitor in power at Hollinger International if Black attempted to make changes in the company’s board of directors.

The special monitor would have standing to ask the court to block such changes.

The Security Exchange Commission asked for the emergency order, saying there was evidence of at least $32m (€25m) in improper payments to “corporate insiders” at Hollinger International and signs that those same insiders were attempting to make changes in the board.

Manning said it appeared that the SEC and Hollinger International “failed to present a complete factual picture to Judge Gettleman, which in turn prevented him from properly assessing whether the judgment was fair, reasonable, or if, and to what extent, it affected the rights of Inc.”

Peter Chan, SEC assistant regional director, reacted by saying a decision by a Delaware court on Friday barring Black from selling control of Hollinger International to the Barclay brothers “undercut many of the arguments Hollinger Inc. has made” in the Chicago case.

He said the SEC will be presenting that argument to Manning at the next hearing on the issue. No date has been set for that hearing.

Hollinger Inc issued a statement saying it was “pleased that Judge Manning has upheld our right to intervene in this matter and to protect our rights as a shareholder.”