The Securities and Exchange Commission announced today that it has filed an enforcement action against Conrad Black, foomer chairman and CEO of Hollinger, accusing him and a former associate of improperly diverting tens of millions of dollars from the company.

The U.S. regulator also filed charges against former Hollinger International deputy chairman and COO, David Radler, and Hollinger Inc.

The commission’s complaint alleges that from approximately 1999 through 2003, Black, Radler and Hollinger Inc. engaged in a fraudulent scheme to divert assets from Hollinger International Inc., a U. S. public company and a subsidiary of Hollinger Inc., and concealed their self-dealing from Hollinger International’s public shareholders. The press release announcing the action cites cooperation in the investigation from the Ontario Securities Commission.

None of the allegations have been proven. The SEC’s compliant, filed in the U.S. District Court, Northern District of Illinois, requests that the court: enjoin the defendants from further violations of the securities laws; order the defendants to disgorge their allegedly ill-gotten gains and pay pre-judgment interest; order civil penalties; bar Black and Radler from serving as an officer or director of a public company; and impose a voting trust upon the shares of Hollinger International held directly or indirectly by Black and Hollinger Inc.

Stephen Cutler, director of the commission’s Division of Enforcement, said, “Black and Radler abused their control of a public company and treated it as their personal piggy bank. Instead of carrying out their responsibilities to protect the interest of public shareholders, the defendants cheated and defrauded these shareholders through a series of deceptive schemes and misstatements.”

In the complaint filed today, the SEC alleges, among other things, that, Black, Radler and Hollinger, Inc. engaged in a scheme to defraud Hollinger International shareholders through a series of related party transactions by which Black and Radler diverted to themselves, other corporate insiders and Hollinger, Inc. approximately US$85 million of the proceeds from Hollinger International’s sale of newspaper publications through purported “non-competition: payments.

The regulator also alleges they defrauded public shareholders by orchestrating the sale of certain of Hollinger International’s newspaper publications at below-market prices to another privately-held company owned and controlled by Black and Radler. It also claims that Black and Radler misled Hollinger International’s audit committee and board of directors concerning the related party transactions.

On Jan. 16, 2004, the SEC obtained a federal court order against the Chicago-based Hollinger International, alleging that from at least 1999 through 2003, the company’s SEC filings contained misstatements and omitted material facts regarding transfers of certain corporate assets to certain of Hollinger International’s insiders and related entities.

On the same date, the SEC obtained a federal court order to ensure that the work of the Special Committee of Hollinger International’s board of directors — including its efforts to recover and preserve corporate assets — continued under the jurisdiction and oversight of the court. Hollinger International consented to the entry of the order.

http://www.sec.gov/news/press/2004-155.htm