Business

THE PAPER TRAIL

The Hollinger suits revolve around newspaper sales

PATRICIA TREBLE March 1 2004
Business

THE PAPER TRAIL

The Hollinger suits revolve around newspaper sales

PATRICIA TREBLE March 1 2004

THE PAPER TRAIL

The Hollinger suits revolve around newspaper sales

PATRICIA TREBLE

INCLUDING THE LAWSUIT before Delaware’s Chancery Court last week, there are at least 10 legal actions swirling around Hollinger International Inc. and its former CEO, Conrad Black. With all the complicated claims and counterclaims, it’s easy to lose sight of what is at the heart of the controversy: the 1998-2001 sales of most of Hollinger’s newspapers for roughly US$3 billion. The complaints, including one by the U.S. Securities and Exchange Commission, make serious allegations about how the sales were negotiated and structured, how they were approved (or not approved), and who benefited.

Conrad Black denies any wrongdoing, and claims any payments he received from noncompete agreements had previously been approved. But the charges, as yet unproven in court, are explosive, suggesting that Hollinger executives were at both ends of some deals: in February 2001, Horizon Publications, controlled by Black and Hollinger International president David Radler, allegedly bought two newspapers from Hollinger International for only US$1.

Non-compete agreements are a fairly standard practice in which sellers agree not to compete with papers they are selling. For tax reasons, a portion of the sale price often goes to the seller’s non-compete agreement. What the complainants object to is that many of Hollinger’s non-compete payments went directly to individual executives, and sometimes to parent firms, instead of going to the actual seller of the papers, Hollinger International. In one case cited in a lawsuit, a “sham” non-compete payment of US$2.6 million was allegedly made to Black from American Publishing in return for his agreement not to compete with it, even though American Publishing was a wholly owned subsidiary of Hollinger International. The accompanying chart outlines the contentious sales.

Conrad Black: $21.4 million David Radler: $21.4 million

Hollinger Inc.: $16.6 million Ravelston: $26.5 million

Sources: 1. Hollinger International v. Hollinger Inc., Ravelston Corp. Ltd., Conrad Black, David Radler etc. (Jan. 14,2004); 2. Cardinal Value Equity Partners LP v. Conrad Black etc. and Hollinger International (Dec. 9,2003); 3. Hollinger International’s 2002 annual report