Federal prosecutors confirmed for the first time Tuesday they are conducting a criminal investigation of newspaper tycoon Conrad Black, his former top deputy David Radler and Hollinger Inc.
The government acknowledged the investigation in court papers in which it asked to intervene in a U.S. Securities and Exchange Commission lawsuit filed in November against Black, Radler and Hollinger Inc. The SEC alleges they engaged in a “fraudulent and deceptive scheme” to take cash and other assets from Chicago-based Hollinger International, the parent company of the Chicago Sun-Times, and concealing the actions from shareholders.
The government asked to delay until Aug. 1 the release of a document that the defendants requested from the SEC “to protect the integrity of the related criminal investigation.”
Releasing that document would impair the government’s criminal investigation, the motion says. Prosecutors requested a hearing for Wednesday.
Hollinger Inc. attorney Nathan Eimer said Tuesday that his client is seeking 150 boxes of documents from the SEC and doesn’t know which one prosecutors are seeking to block.
“We don’t believe that the company has engaged in any criminal conduct,” Eimer said. “We don’t believe at the end of the day it will be found to have engaged in any criminal conduct.”
A special committee of Hollinger International’s board of directors is also suing Black and his associates to recover what they say are hundreds of millions of dollars that were siphoned from the company. Black has denied any wrongdoing.
The U.S. Attorney’s office wouldn’t release details of the document, but it said in the court filing that its criminal investigation is of Black, who was ousted as CEO of Hollinger International over a year ago; Hollinger Inc., Black’s newspaper holding company; Radler; and “others relating to their conduct as Hollinger International.”
“The criminal investigation seeks to determine whether the SEC defendants and others fraudulently diverted corporate assets and opportunities owned by Hollinger International to themselves and to companies that they controlled,” the filing said.
Transactions under investigation include “various purported ’non-competition payments’ that were made to Black, Radler, Hollinger Inc. and others in connection with Hollinger International’s sale of newspaper publications to third parties.”
The investigation also seeks to determine whether fraud occurred in connection with Hollinger International’s sale of newspaper publications to companies controlled by Black and Radler, as well as other transactions between Hollinger International and the defendants in the SEC lawsuit and their companies.
Prosecutors said they are investigating whether those transactions were appropriately disclosed to Hollinger International’s independent directors, in Hollinger International’s SEC filings and during Hollinger International’s shareholder meetings.
“In short, the government’s criminal investigation seeks to determine whether the SEC defendants and others have violated various federal criminal statutes,” including conspiracy, mail fraud, wire fraud, securities fraud and interstate transportation of funds obtained by fraud, the U.S. attorney’s filing said.
Besides the Sun-Times, Hollinger International publishes the Daily Southtown and a handful of small publications in the Chicago area and Canada. It recently sold The Jerusalem Post and The Daily Telegraph of London.