May 12, 2006
How Much Is That Special Committee in the Window
The Wall Street Journal Law Blog has an interesting post (here) on the attorney's fee payments made to date by Hollinger International, Inc. to its former officers and directors in connection with the various investigations and litigation related to Lord Conrad Black's alleged looting of the company. Black has been indicted and is facing trial in 2007 on various charges, including RICO, and he and the company were involved in litigation in Delaware over control of the corporation. As the Law Blog notes, some of the fee amounts have been pretty steep, including $4.3 million for Black, $857,000 for his wifewho served as a director of the company, and $4.7 million for Richard Perle.
Hollinger's most recent 10-Q (here) provides interesting figures for the amounts spent by the company on the various aspects of the investigation of Lord Black's transactions and the related litigation/investigations. The first thing a company does once it determines there is a problem is to appoint a special committee, which in turn hires lawyers, accountants, and other professionals to conduct the investigation. Hollinger has spent over $53.6 million since the board first appointed the Special Committee on June 17, 2003. On top of that, the company has spent $21.4 million for its own litigation costs and a whopping $49.3 million on attorney's fees for those it contractually agreed to indemnify, most prominently Black and the other directors. A Toronto law firm, Torys, paid Hollinger $30 million to settle claims arising from its legal advice related to Lord Black, so that puts a small dent in the overall costs. That said, the company spent over $12 million on the case in 2005, and another $8 million in the first quarter of 2006 alone, mostly in indemnification of attorney's fees for individuals (all of Black's fees were paid in the quarter, skewing the numbers a bit). An agreement on indemnification of litigation costs between Black and Hollinger requires the company to pay 75% of his fees in the upcoming criminal trial (see earlier post here). Those costs will likely run the bill up quite a bit and likely will push Hollinger well past the $100 million mark by the end of the year. Internal investigations and the litigation they spawn certainly can be lucrative for the lawyers. (ph)
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