WILMINGTON, Del. – Former top U.S. regulator Richard Breeden (search), who is probing Hollinger International Inc.'s (HLR) finances under Conrad Black (search), testified Thursday the press baron was an overbearing, controlling shareholder who threatened to remove and sue directors who disagreed with him.
Breeden took the stand in the second day of a trial in Delaware Chancery Court that could determine the future of the newspaper company, which owns the Chicago Sun-Times, London's Daily Telegraph and Jerusalem Post.
Black and board members are dueling in court over whether he can sell his controlling stake in Hollinger International to Britain's Barclay brothers or whether the Chicago-based company can block that deal.
In his testimony, the former chairman of the Securities and Exchange Commission (search) said Black threatened to sue members of a special internal panel investigating payments to Black and other other top executives the company says were not authorized.
Breeden recalled one meeting involving Black and interim chief executive Gordon Paris that "began with Mr. Black glaring at us and telling us that he had every intention of bringing actions against members of the special committee."
Black has since launched a defamation suit against Breeden, Paris and several independent board members in Canada, where libel laws are seen as tougher than in the United States.
Black, a member of Britain's House of Lords, is also expected to testify in this Delaware trial, likely on Friday.
In his cross-examination of Breeden, a lawyer for Hollinger Inc., the Canadian holding company used by Black to control Hollinger International, asked the former regulator why he is treating the situation at Hollinger International as severely as he treated WorldCom.
Breeden was the court-appointed corporate monitor of the telecom company when it fell into bankruptcy after a massive fraud.
The lawyer, Gregory Joseph, noted there had been no indictments or convictions at Hollinger International, unlike the WorldCom situation.
In response, Breeden said there had been no indictment "yet" at Hollinger International.
"This is an early stage of a case," Breeden said. "That hasn't happened yet. I have no way or not of knowing if that will happen."
Earlier in the day, Hollinger International board member Raymond Seitz testified that Black reneged on a November deal in which he agreed to step down as chief executive and repay millions of dollars in disputed payments to the company.
Black resigned in November after the special committee uncovered $32 million in disputed payments to Black, several of his top deputies and Hollinger Inc.
Part of that deal required Black personally to begin paying back some of roughly $7 million in disputed payments. Black agreed at first to repay the money, but later changed his mind and said the payments were fully authorized.
"We had a perfectly good agreement," Seitz said. "It became clear, in my view, Mr. Black was reneging on several parts of that."