Claims in a lawsuit against media baron Conrad Black were radically ratcheted up last night to include "racketeering" allegations and a dramatically increased demand for $1.25-billion (U.S.) in damages.
A special committee of the board of Hollinger International Inc. has amended a lawsuit filed in a Chicago court in January that initially had demanded the return of $200-million to the company. At that time, the committee alleged that Lord Black and others took money from the company in a "continuing conspiracy" to "improperly enrich themselves."
The initial suit targeted Lord Black, his holding companies, his lieutenant David Radler, and former Hollinger International executive Jack Boultbee. Two new defendants — Lord Black's wife, Barbara Amiel, and his long-time colleague Daniel Colson — have been added to the suit.
The special committee, which has spent months investigating Lord Black's actions, has delved further into a complex web of transactions at the Chicago-based publishing company since the initial suit was filed.
That has given it ammunition to harden its language and ask for more substantial damages under the U.S. Racketeer Influenced and Corrupt Organizations Act, known as RICO. It now says the defendants "engaged in a pattern of racketeering activities."
RICO, passed in 1970 to fight organized crime, has been used in recent years in civil lawsuits as a way to boost financial claims sharply. If a civil RICO claim can be proven, it automatically triples damages.
In a statement last night, Lord Black and his co-defendants described the racketeering allegations as "tabloid journalism masquerading as law." They said that "overreaching use" of RICO has been "frowned upon in virtually every circuit court in the United States."
Most of the agreements and transactions to which the special committee objects were reviewed and approved by the company's independent directors, all of whom were "extremely sophisticated professionals," the statement said.
"We look forward with confidence to litigating this matter and will respond in full to the complaint through the appropriate legal channels," it said.
The special committee's initial complaint said that Lord Black, his holding companies and other former Hollinger International executives took millions in unauthorized "non-compete" payments when papers were sold to other companies, and collected excessive management fees.
The revised suit says the defendants also breached their duties to the company by selling some newspapers at less than fair market value to companies partly owned by Lord Black and Mr. Radler.
It also says an arm of the company, Hollinger Digital LLC, paid millions of dollars in inappropriate bonuses to executives.
The amended filing alleges that all these actions amounted to "fraudulent diversion" of company funds and violated RICO.
The special committee says RICO rules allow it to ask for triple its basic $380.6-million damage claim. Another $103.9-million in interest puts the total claim at about $1.25-billion.
The latest legal move ups the ante in the widespread legal battle between Lord Black and his former colleagues at Hollinger International. Previously, the highest claim in the high-stakes spat was Lord Black's defamation suit in an Ontario court that asked for $850-million (Canadian) from Hollinger International's board and its advisers.
Lord Black was removed as chief executive officer of Hollinger International in November and as chairman in January. He remains on the board, and is still the chairman and CEO of Hollinger Inc., the Canadian company that holds a controlling stake in Hollinger International.
© The Globe and Mail
Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.
Discover a wealth of investment information and and exclusive features.
