The Securities and Exchange Commission yesterday filed a civil lawsuit alleging that media baron Conrad M. Black fraudulently diverted millions of dollars from Hollinger International Inc., the newspaper company he formerly led.
The agency is seeking to fine Black and former chief operating officer F. David Radler, force them to give up their alleged ill-gotten gains, and bar them from serving as officers or directors of public companies. The SEC also asked a federal court to appoint a trustee to exercise the controlling voting power that Black indirectly holds over Hollinger International.
"Black and Radler abused their control of a public company and treated it as their personal piggy bank," SEC enforcement director Stephen M. Cutler said in a news release. Ravelston Corp., which is owned by Black and Radler, issued a statement saying "we fully expect to be vindicated in this fight." It said the transactions at the core of the SEC case were made with the advice of professionals and disclosed to the board of directors.
In a 77-page complaint that follows the outlines of a private suit the company filed against its former bosses, the SEC alleged that Black and Radler diverted $85 million to themselves, their holding companies and other corporate insiders when Hollinger International sold some of its newspapers. They allegedly received payments for agreeing not to compete with the purchasers of the businesses, even when the purchasers did not request such agreements from Black's holding company.
The SEC alleged Black and Radler orchestrated the sale of Hollinger publications to a company they owned and controlled at cut-rate prices, including the sale of one publication for $1.
The agency also alleged that Black knew or was reckless in not knowing that Hollinger reports filed with the SEC misstated and omitted facts about the company's investment of $2.5 million in a venture capital firm that Hollinger director and former Pentagon official Richard N. Perle co-founded.