CEO: Hollinger Board Never OK'd Black Payments

The trial pitting Conrad Black (search) against the board of Hollinger International (search) began on Wednesday with the company's interim chief executive saying there is no evidence board members ever approved millions of dollars of disputed payments to the media mogul.

The special payments are at the heart of a complex legal battle that could determine the fate of the media company whose newspapers include Britain's Daily Telegraph and the Chicago Sun-Times.

At issue is whether Black can sell his controlling stake in the company to outside investors, or whether the board can block that buyout and move forward with its own plan to sell assets.

The trial in Delaware Chancery Court, expected to last three days, began with testimony from interim Chairman and Chief Executive Gordon Paris (search). Under questioning from Hollinger International attorney Martin Flumenbaum, Paris said, "There is no evidence that I've seen of any approvals" of the payments.

Paris also said that when Black agreed under pressure in November to resign as CEO, Black supported hiring investment bankers from Lazard LLC to explore a possible sale of the company's assets that would benefit all shareholders.

Black, however, now is at odds with the company over the fate of the company's assets.

Black, who is expected to testify during the three-day trial. wants to sell his controlling stake in Hollinger International's parent, Toronto-based Hollinger Inc., to British tycoons David and Frederick Barclay.

Hollinger International says the deal with the Barclays is not in the best interests of minority shareholders.

Hollinger International's lawyers presented a Nov. 3 letter that Black wrote to David Barclay that appeared to rebuff a possible offer for the Telegraph. A week later, however, Black wrote another letter to Barclay suggesting that the two men speak by telephone to discuss an unspecified matter.

The Delaware case is the first lawsuit in the bitter legal wrangling between the two sides to go to trial. Black resigned under pressure as chief executive in November after the Chicago-based publisher said it uncovered millions of dollars in special payments that Black and his associates improperly collected. Black, a member of Britain's House of Lords, denies any wrongdoing.

Other possible witnesses include investment bankers from Lazard LLC, which is exploring an asset sale for the company.

The trial is being held in Delaware because Hollinger International, like many U.S. companies, is incorporated there.

The case is being heard by Vice Chancellor Leo Strine, who has presided over other high-profile cases such as the dispute between Oracle Corp. and its hostile takeover target, PeopleSoft Inc.

Black also faces a separate lawsuit filed by the company in Chicago federal court that accuses him and his associates of diverting more than $200 million in company assets to themselves.

A verdict in the Delaware case is expected by the end of February before the Barclays' tender offer for Hollinger Inc. shares expires March 3.

Meanwhile, bids for Hollinger International's Telegraph newspapers have topped $1.14 billion, forcing at least one bidder, Collins Stewart, to pull out, sources close to the deal said on Wednesday.

Other bidders include Richard Desmond, owner of Britain's Express newspapers; rival newspaper publisher Daily Mail; General Trust and private equity firms 3i, Candover and Apax.