Posted on: Tuesday, November 16, 2004
SEC accuses newspaper tycoon of fraud
By Seth Sutel
Associated Press
NEW YORK — The Securities and Exchange Commission filed a lawsuit yesterday accusing the newspaper tycoon Conrad Black and his former top deputy of defrauding shareholders of Hollinger International Inc., a publishing company Black used to run.
In a suit filed in federal court in Chicago, where Hollinger International is based, the SEC accused Black and David Radler of siphoning money from the company to themselves and then misleading the company's board about the transactions.
Stephen Cutler, the SEC's head of enforcement, said the two men "abused their control of a public company and treated it as their personal piggy bank." Hollinger publishes the Chicago Sun-Times and The Jerusalem Post. Until recently it also owned The Daily Telegraph of London.
The suit adds to Black's legal troubles. He is already being sued by his own company for the recovery of money they say he improperly diverted to himself and his associates. That lawsuit makes broader accusations against Black and claims that he caused more than $500 million in damages to the company.
The SEC's case focuses on a narrower set of transactions. It seeks civil penalties against Black and an order barring him and Radler from serving as officers or directors of public companies. The SEC also wants Black's voting shares of Hollinger International placed in a trust.
Black has been removed as chairman and CEO of Hollinger International after an internal investigation found that he and his associates schemed to siphon away millions of dollars in company money. He remains the company's controlling shareholder, however.
No criminal charges have been made against Black. Merri Jo Gillette, the director of the SEC's Midwest Regional Office, noted that in a civil fraud case the SEC need only prove that the defendant knew or should have known that the conduct he was engaging in was fraudulent, as opposed to a criminal case were guilt must be proved beyond a reasonable doubt.
A special committee of Hollinger International's board of directors is suing Black and his associates to recover what they say are hundreds of millions of dollars that were improperly diverted. That lawsuit also names company director Richard Perle as a defendant, alleging he breached his fiduciary responsibility. Perle is a commentator on defense issues and a former assistant secretary of defense.
Black and Radler have denied any wrongdoing. Black did not respond to repeated requests for comment, but a privately held Canadian company he controls, Ravelston Corp., issued a statement late yesterday saying that "we expect to be fully vindicated in this fight." A spokesman for Radler said he would defend the charges in court.
In its suit, the SEC accuses Black and Radler of several instances of self-dealing, including diverting money to themselves as part of the sale of several newspapers; of orchestrating the sale of several newspapers from Hollinger to a privately held company controlled by Black and Radler at below-market prices; and of misleading the company's board regarding the transactions.
