Wednesday, March 23, 2005

Lord Black Is the Target of a Criminal Investigation

Lord Conrad Black, the former controlling shareholder of Hollinger International Inc., a multinational media company (including the Chicago Sun-Times), is the target of a federal criminal investigation by the U.S. Attorney for the Northern District of Illinois (Chicago).  The SEC filed a civil fraud suit against Black and Hollinger last November (SEC complaint here) alleging fraud in a series of related party transactions involving non-competition payments to Black and other senior executives.  As part of that litigation, the defendants sought discovery of documents from the SEC, and the U.S. Attorney has filed a motion to postpone discovery of certain documents while it conducts its criminal grand jury investigation.  The U.S. Attorney's motion states, "The criminal investigation seeks to determine whether the SEC defendants and others fraudulently diverted corporate assets and opportunities owned by Hollinger International to themselves and to companies that they controlled." The possible violations include mail, wire, and securities fraud, along with conspiracy and interstate transportation of stolen property.  The district courts usually grant such motions to avoid interfering with a criminal investigation, unless a party can show some prejudice from the delay -- and an indictment doesn't count as prejudicial.  What started as a nasty dispute two years ago between Black and the Hollinger board, which he hand-picked, has now turned into the most dangerous of animals, a criminal investigation. An AP story here discusses the U.S. Attorney's filing. (ph)


UPDATE (3/23): A report on Bloomberg (here) states that former Hollinger International board member Richard Perle has received a Wells Notice from the SEC that it intends to file a civil suit against him for securities law violations. Perle was a member of Hollinger's three-member board executive committee, along with Lord Black and former company president David Radler, who is also a target of the criminal investigation along with Black.  The committee approved the non-compete agreements and compensation payments that are being investigated by the grand jury and that are the basis of the SEC securities fraud action.  Perle was an Assistant Secretary of Defense during the Reagan administration and a foreign policy advisor to President Bush during the 2000 campaign. (ph)

Fraud, Investigations, Securities | Permalink

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