Hollinger sued for $16-million

Former Hollinger International Inc. executive Jack Boultbee is suing the company and the special committee of its board for about $16-million, claiming he was wrongfully fired for accepting non-competition payments.

Mr. Boultbee, a former executive vice-president, was dismissed in November after he refused to repay about $600,000 (U.S.) in non-compete payments the special committee says were not properly authorized.

Three other former Hollinger International executives, including chairman Conrad Black, have agreed to pay back their share of about $32.2-million of unauthorized payments.

Mr. Boultbee's statement, filed yesterday in the Ontario Superior Court, claims that he was told by former Hollinger International president David Radler that the payments were approved by a committee of independent directors of the company.

The payments were in return for Mr. Boultbee's "bona fide agreement not to compete with the purchasers of certain newspapers which were being sold by Hollinger International," the statement said, and he wouldn't have made such a deal unless he was "properly compensated."

The court document also says that other similar payments, made by CanWest Global Communications Corp. to individual Hollinger managers, were approved by Hollinger International's legal advisers and its auditor, leading "Boultbee to believe that the payments were completely legitimate."

Mr. Boultbee has spent the money he received, and can't reasonably be expected to repay the company, his claim says.

He filed a notice of his intention to sue a few weeks ago, but yesterday's filing gives details of his claim and the amounts he is seeking.

About $3.7-million (Canadian) is for loss of pay, $746,000 is for loss of benefits, $1-million for loss of reputation, and $1-million for punitive and exemplary damages. He is also asking $7-million for the loss of stock options, and $2.5-million because the special committee blocked him from exercising vested stock options after he was fired.

The filing says Mr. Boultbee answered questions at the offices of the legal advisers to the special committee on Oct. 29 and Nov. 13. Three days after the second meeting, Hollinger International's executive committee "abruptly terminated" his employment, without allowing him to make any presentation to the special committee, the claim says. He was told on the afternoon of Nov. 16 to resign by 5 p.m. or be fired, the filing says, and when he didn't he was "summarily terminated."

The public firing caused damage to Mr. Boultbee's professional reputation, the suit says, and has made him a "sacrificial goat" for Hollinger's corporate governance structure that has been heavily criticized by institutional investors.

Meanwhile, the institutional shareholder that prompted the investigation into the allegedly improper payments has written to the company, saying Lord Black should not be allowed to make any deal involving parent Hollinger Inc.

The letter from Tweedy Browne Co. to Hollinger International's interim chief executive officer Gordon Paris, dated Dec. 9, says "any transaction involving Hollinger Inc. alone is to the detriment of Hollinger International shareholders" because it would transfer control of Hollinger International in a deal not open to all shareholders.

Reports have suggested Lord Black is looking for an investor for Hollinger Inc., or is considering selling part of his controlling interest in the company. Hollinger Inc. owns 30 per cent of the equity and controls 73 per cent of the votes of Hollinger International.

Sources said the Hollinger International special committee has already considered a number of steps, including legal action, that it might take to prevent Lord Black from selling his interest in the firm.

"We would have several instruments available to us, but it's hypothetical [now]," a source said.

Tweedy Browne's letter, from managing director Christopher Browne, also says Hollinger International's board should explain why it is still paying management fees to some of the firm's executives through Lord Black's private company Ravelston Corp. Most of those executives "cannot perform their obligations," the letter said.

The company should escrow those funds, against money owed to it by Lord Black's own companies, the letter said.

Lord Black is scheduled to meet Monday with the U.S. Securities and Exchange Commission, which is investigating alleged financial irregularities at the Hollinger group.

RICHARD BLACKWELL, MEDIA REPORTER; With files from reporter Sinclair Stewart, Globe and Mail Update

BACKSTORY

Hollinger examines Perle investments Financial Times | 11/12/2003 | Stephanie Kirchgaessner

Hollinger International is examining investments that were made by Richard Perle, a director on the publisher's board and prominent defense advisor, on behalf of the company.

The investigation is part of a wider internal probe at the publisher of the Daily Telegraph and Chicago Sun-Times into some of the company's corporate governance practices, including the payment of nearly $300m in management fees to Conrad Black, chief executive and chairman, and his deputies.

That probe, which is being lead by former Securities and Exchange Commission chairman Richard Breeden, is wide-ranging and involves close scrutiny of so-called "related-party transactions", or deals in which members of Hollinger's board or executives personally benefited from deals the publisher agreed with other companies.

One transaction that caught the attention of some Hollinger investors was a $2.5m investment earlier this year in Trireme Partners, a venture capital company in which Mr Perle, an independent director, is a managing partner.

Mr Perle has also played a prominent role in the late 1990's and early 2000 in directing investments in other companies through Hollinger Digital, Hollinger's investment arm.

Under review is a $14m investment the company made under Mr Perle's direction through Hillman Capital, a venture capital group controlled by Gerald Hillman - who has since become a partner at Trireme and is a member of the Defense Policy Board, as is Mr Perle.

The $14m investment contributed to a fund used by Hillman Capital to acquire - with another private equity group - more than 70 per cent of Cambridge Display Technology, a UK-based technology group that holds a patent in light-emitting polymers, in 1999.

Early investors in CDT included Lord Young, a former business adviser of Baroness Thatcher's.

Mr Perle has been criticised in the past over perceived conflicts of interest in his business dealings.

Mr Perle resigned as chairman of the Defense Policy Board earlier this year after he was criticised for having a $750,000 contract with Global Crossing, the bankrupt telecoms group. Global Crossing was at the time seeking to overcome Defense Department objections on its sale to Hutchison Whampoa, a Chinese-controlled company.

Paul Healy, head of investor relations at Hollinger, refused to comment. Mr Perle and Mr Hillman were unavailable for comment.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.