Newspaper tycoon Conrad Black lost a court battle with his own board of directors, forcing him to abandon a deal he had cut to sell control of Hollinger International Inc. to a pair of British businessmen.
Judge Leo Strine of Delaware's Chancery Court was harshly critical of Black in his 130-page opinion handed down Thursday, saying he didn't believe Black's testimony on key points and found that he "persistently and seriously" breached his obligations to his own company.
Black, while saying he disagreed with the ruling, indicated that he would accept its findings and agree to help sell the company's assets — principally The Daily Telegraph of London, the Chicago Sun-Times and The Jerusalem Post — through a process already under way with the Lazard LLC investment bank.
In his ruling, Strine put a stop to a separate deal Black struck to sell his controlling interest in Hollinger International to the Barclays, a reclusive pair of identical twins who oversee interests in real estate, hotels and newspapers from a tiny island in the English Channel.
Strine also had critical words for Black himself, saying that he found Black "evasive and unreliable" on certain points. "His explanations of key events and of his own motivations do not have the ring of truth," Strine wrote.
The ruling was a devastating blow to Black, a self-made media baron who is one of the most flamboyant figures in the newspaper business. Black, who renounced his Canadian citizenship to accept the title of Lord Black of Crossharbour in England, frequently railed against his critics and defended his claim to run the company he founded the way he saw fit.
He packed his board with hand-picked allies, including prominent political figures such as Henry Kissinger, former Illinois Gov. James Thompson and former defense adviser Richard Perle.
But pressure began to mount against Black last year after minority shareholders raised questions about millions of dollars in payments that Black and his associates received, which the shareholders say should have gone to the company.
Those accusations led to an internal investigation that found Black and others received $32 million in payments that hadn't been duly approved by the company's independent directors, contrary to statements in the company's regulatory filings.
In an accelerated three-day trial last week, Black took the stand to defend his actions, saying he had been forced from the CEO suite by his own directors under false pretenses, and had to sell control of Hollinger International's parent company in order to avoid a financial crisis there.
Strine dismissed Black's arguments, saying that he owed a duty to the company to support a sale process he had agreed to under a restructuring agreement that he signed in November, which also included his removal as CEO.
The judge threw out Black's attempts to change the bylaws of Hollinger International in a way that would have tightened his control of the board of directors. Strine also upheld defensive measures the company took to block the deal with the Barclays.
In November, Black acknowledged receiving $7 million in payments that hadn't been authorized and agreed to return the money. He later reneged on that agreement and went behind the company's back to reach a private deal to sell his controlling stake in the company to the Barclays.
Strine said Black misrepresented facts to Hollinger International's board, used confidential company information to further his own goals and made a series of threats against the company's independent directors.
The ruling found that the Barclays deal would prevent the company from realizing the benefits of the formal sale process that Black had agreed to support. The case was tried in Delaware because Hollinger International, like many U.S. companies, is legally based there.
During the trial, critics of Black painted him as a domineering overlord who abused his influence to further his own goals. Richard Breeden, a former chairman of the Securities and Exchange Commission who is advising the company's international investigation, testified that Black frequently threatened members of his board who were investigating the payments he received.
Breeden also said Black might take the proceeds of the sale of his controlling shares to the Barclays and "get out of Dodge," hiding the money in an offshore account where the investigators would have a hard time recovering it.
In a separate proceeding in federal court in Chicago, lawyers for Black asked Thursday that an earlier order curbing Black's rights to reshape the company's board be lifted.
That order, which was granted Jan. 16, would place a powerful special monitor over Hollinger International's affairs if changes were made in the board of directors. The SEC asked the court for the order, saying there were indications of corporate insiders plotting against the special investigative committee.