Hollinger Removes Black as Chairman, Files Suit

Newspaper publisher Hollinger International Inc. (search) removed Conrad Black (search) as its chairman Saturday, hours after announcing a lawsuit alleging that he and an associate improperly took more than $200 million from the company.

Hollinger International, publisher of newspapers including the Chicago Sun-Times and The Daily Telegraph (search) in London, said the executive committee of its board of directors removed Black as chairman, effective immediately. He remains the company's controlling shareholder.

The lawsuit was filed in federal court in New York Friday but announced by the company Saturday. It accuses Black and David Radler (search), the company's former president and chief operating officer, of "repeated and systematic schemes to divert corporate assets and opportunities to themselves."

Hollinger International is seeking recovery of the money, which includes fees paid to both men as part of asset sales. It also wants the return of fees paid to Hollinger International's Toronto-based parent company Hollinger Inc., which is controlled by Black, as well as two privately held companies also controlled by Black.

The lawsuit accuses Black and Radler of altering the company's books to provide a pretext for the payments or to conceal their actions. It also accused them of lying in public and failing to disclose important information to shareholders and the company's independent directors.

The lawsuit marks the latest escalation of tensions between the company and Black, who was forced out as chief executive in November following a shareholder revolt over millions in fees that he and other senior executives collected. Shareholders say the money should have gone straight to the company.

Black is at loggerheads with the company over $7.2 million in fees that he agreed to repay under a deal reached in November. Black failed to pay a first installment of the repayment at the end of last year, and now has until Sunday to do so.

However, a lawyer for Black has said that newly revealed information makes it uncertain that Black still has to repay the money. The company has strongly disagreed.

A lawyer representing Black, John Warden, said in a statement that Black has shown the special committee evidence contradicting its earlier statements that the payments to Black had not been authorized.

Warden called the lawsuit an attempt "to divert attention from the fallacy of their earlier claims" as well as an effort to hinder Black from making a transaction that would provide needed money to its parent company.

The lawsuit was based on information uncovered by a special committee formed in June to investigate shareholder concerns, principally over the "non-compete" payments made to executives as well as management fees to entities controlled by Black. The committee is being advised by former Securities and Exchange chairman Richard Breeden, and is expected to make a full report of its findings this spring.

On Friday, a federal judge in Chicago issued an order at the SEC's request to bar any interference with the investigation. The SEC said in its lawsuit that there had been efforts by corporate insiders to "to thwart and obstruct the efforts" of the investigation.

Hollinger International's board includes several prominent public figures, including Henry Kissinger, defense adviser Richard Perle and former Illinois Gov. James R. Thompson.