Bloomberg, Joe Schneider and Doug Alexander, 5 July 2007
Hollinger Inc. sued three Canadian banks, accusing them of securing loan repayments while aware its former Chairman Conrad Black was improperly siphoning money to companies he controlled.
Hollinger sued the Canadian Imperial Bank of Commerce, Toronto-Dominion Bank and the Bank of Nova Scotia to recover C$65.2 million ($61.7 million) that the company said the banks received from an improper repayment of debt. The money came from a C$180 million Hollinger financing, part of which was diverted to Ravelston Corp., a company controlled by Black, Toronto-based Hollinger said in the complaint.
The banks received the debt repayment ``as a direct result of the breaches by Black associates,'' according to the June 29 complaint in Toronto. The banks ``had actual or constructive knowledge of these breaches,'' Hollinger said.
Black, 62, also the former chairman of newspaper publisher Hollinger International Inc., is awaiting a jury verdict with three former executives of that company in federal court in Chicago. The four are accused of diverting $60 million through illegal noncompete payments as Hollinger International sold more than $3 billion in newspaper assets.
The Chicago jury finished its sixth day of deliberations today without reaching a verdict. Jurors said in a note to the judge they plan to work tomorrow from 9 a.m. to 2 p.m.
Black controlled Hollinger International, now Sun-Times Media Group Inc., through a complex set of holding companies in Canada, including Hollinger Inc., Ravelston, Ravelston Management Inc. and Argus Corp.
Ravelston Corp. and Ravelston Management are in court- ordered receivership.
Beginning in 1998, Black and his associates improperly diverted to Ravelston most of the management fees that Hollinger International paid Hollinger Inc., according to the complaint. Ravelston let Hollinger Inc. keep C$10.7 million a year from management fees until 2001, when it stopped those payments and began providing loans to keep the company running, Hollinger said in the complaint.
John Boultbee wrote a letter from himself as chief financial officer at Ravelston to himself as chief financial officer of Hollinger Inc. ending the payments in 2001 ``in an attempt to evidence this termination,'' Hollinger said in the complaint. ``Boultbee signed this letter on behalf of Hollinger to indicate its agreement to the termination.''
The banks ``became aware of problems'' within Hollinger and Ravelston in 2002 and decided to end their lending relationship with the companies, Hollinger said in the complaint.
In March 2003, Hollinger raised C$180 million from the sale of notes and repaid the banks from the financing, according to the complaint. Hollinger used C$91 million of that to pay its debt to the banks. Ravelston got C$48.8 million for its advances to Hollinger and C$16.4 as a loan from Hollinger, and it then used those funds to pay its debt to the bank, according to the complaint.
The repayments ``were the direct result of a series of actions which the Black associates caused Hollinger to take between 1998 and 2003 in breach of their fiduciary duties,'' Hollinger said in the complaint.
Donald Fullerton, a former Canadian Imperial Bank of Commerce chairman and chief executive who was a Hollinger Inc. board member from 1992 to 2003, breached his duty to Hollinger by failing to notify independent directors of the improper transfers, according to the complaint.
"As a director of both Hollinger and CIBC, Fullerton was in an irreconcilable conflict of interest,'' Hollinger said in the complaint. Fullerton isn't named as a defendant in the suit.
CIBC spokesman Rob McLeod and Bank of Nova Scotia spokeswoman Ann DeRabbie declined to comment on the complaint.
``We're not in a position to comment as we have not yet been served with any lawsuit,'' Toronto-Dominion Bank spokesman Nick Petter said.
Black stepped down as Hollinger International chief executive officer in November 2003. Two months later, the board fired him as chairman and sued him for $200 million.
He quit as chairman and CEO of Hollinger Inc. in November 2004 as an Ontario judge was about to consider a shareholder's request to remove him from the posts. Black resigned as chairman of Ravelston in April 2005.
Boultbee, 64, former Hollinger Vice President Peter Atkinson, 60, and former General Counsel Mark Kipnis, 59, are on trial with Black in Chicago. Each man faces more than 20 years in prison if convicted.
Black, Boultbee, Atkinson and Kipnis have denied wrongdoing. Former Hollinger International President F. David Radler pleaded guilty to fraud and testified against them.
Hollinger Inc. sued Black, Radler, Boultbee, Atkinson and Ravelston in March 2005 to recover C$636 million the company claims was improperly diverted.
The new case is Between Hollinger Inc. and Canadian Imperial Bank of Commerce, 07-cl-7043, Ontario Superior Court of Justice (Toronto).
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Hollinger Inc. sued three Canadian banks, accusing them of securing loan repayments while aware its former Chairman Conrad Black was improperly siphoning money to companies he controlled.
Hollinger sued the Canadian Imperial Bank of Commerce, Toronto-Dominion Bank and the Bank of Nova Scotia to recover C$65.2 million ($61.7 million) that the company said the banks received from an improper repayment of debt. The money came from a C$180 million Hollinger financing, part of which was diverted to Ravelston Corp., a company controlled by Black, Toronto-based Hollinger said in the complaint.
The banks received the debt repayment ``as a direct result of the breaches by Black associates,'' according to the June 29 complaint in Toronto. The banks ``had actual or constructive knowledge of these breaches,'' Hollinger said.
Black, 62, also the former chairman of newspaper publisher Hollinger International Inc., is awaiting a jury verdict with three former executives of that company in federal court in Chicago. The four are accused of diverting $60 million through illegal noncompete payments as Hollinger International sold more than $3 billion in newspaper assets.
The Chicago jury finished its sixth day of deliberations today without reaching a verdict. Jurors said in a note to the judge they plan to work tomorrow from 9 a.m. to 2 p.m.
Black controlled Hollinger International, now Sun-Times Media Group Inc., through a complex set of holding companies in Canada, including Hollinger Inc., Ravelston, Ravelston Management Inc. and Argus Corp.
Ravelston Corp. and Ravelston Management are in court- ordered receivership.
Beginning in 1998, Black and his associates improperly diverted to Ravelston most of the management fees that Hollinger International paid Hollinger Inc., according to the complaint. Ravelston let Hollinger Inc. keep C$10.7 million a year from management fees until 2001, when it stopped those payments and began providing loans to keep the company running, Hollinger said in the complaint.
John Boultbee wrote a letter from himself as chief financial officer at Ravelston to himself as chief financial officer of Hollinger Inc. ending the payments in 2001 ``in an attempt to evidence this termination,'' Hollinger said in the complaint. ``Boultbee signed this letter on behalf of Hollinger to indicate its agreement to the termination.''
The banks ``became aware of problems'' within Hollinger and Ravelston in 2002 and decided to end their lending relationship with the companies, Hollinger said in the complaint.
In March 2003, Hollinger raised C$180 million from the sale of notes and repaid the banks from the financing, according to the complaint. Hollinger used C$91 million of that to pay its debt to the banks. Ravelston got C$48.8 million for its advances to Hollinger and C$16.4 as a loan from Hollinger, and it then used those funds to pay its debt to the bank, according to the complaint.
The repayments ``were the direct result of a series of actions which the Black associates caused Hollinger to take between 1998 and 2003 in breach of their fiduciary duties,'' Hollinger said in the complaint.
Donald Fullerton, a former Canadian Imperial Bank of Commerce chairman and chief executive who was a Hollinger Inc. board member from 1992 to 2003, breached his duty to Hollinger by failing to notify independent directors of the improper transfers, according to the complaint.
"As a director of both Hollinger and CIBC, Fullerton was in an irreconcilable conflict of interest,'' Hollinger said in the complaint. Fullerton isn't named as a defendant in the suit.
CIBC spokesman Rob McLeod and Bank of Nova Scotia spokeswoman Ann DeRabbie declined to comment on the complaint.
``We're not in a position to comment as we have not yet been served with any lawsuit,'' Toronto-Dominion Bank spokesman Nick Petter said.
Black stepped down as Hollinger International chief executive officer in November 2003. Two months later, the board fired him as chairman and sued him for $200 million.
He quit as chairman and CEO of Hollinger Inc. in November 2004 as an Ontario judge was about to consider a shareholder's request to remove him from the posts. Black resigned as chairman of Ravelston in April 2005.
Boultbee, 64, former Hollinger Vice President Peter Atkinson, 60, and former General Counsel Mark Kipnis, 59, are on trial with Black in Chicago. Each man faces more than 20 years in prison if convicted.
Black, Boultbee, Atkinson and Kipnis have denied wrongdoing. Former Hollinger International President F. David Radler pleaded guilty to fraud and testified against them.
Hollinger Inc. sued Black, Radler, Boultbee, Atkinson and Ravelston in March 2005 to recover C$636 million the company claims was improperly diverted.
The new case is Between Hollinger Inc. and Canadian Imperial Bank of Commerce, 07-cl-7043, Ontario Superior Court of Justice (Toronto).
