A judge blocked Conrad Black's plan to sell control of his publishing empire, Hollinger International Inc, to the Barclay brothers of Britain, saying Black consistently breached his duties to the company.
In a much-anticipated ruling, Judge Leo Strine of Delaware's Chancery Court said Thursday that Black "breached his fiduciary and contractual duties persistently and seriously," adding that his conduct "threatens grave injury" to Hollinger International and its stockholders.
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.
The ruling marks a stunning setback for one of the most flamboyant and controversial 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.
Hollinger International publishes the Chicago Sun-Times, The Daily Telegraph of London and The Jerusalem Post.
Pressure began to mount against him 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 US$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.
Black said in a statement late Thursday that while he "respectfully" disagrees with Strine's ruling, he nonetheless recognizes that it "points the way to a realization of full value for shareholders" by allowing a formal sale process to go ahead through the Lazard LLC investment bank. Black said he expected that process to yield a better value than the deal with the Barclay brothers.
Hollinger International released a statement saying it was "extremely pleased."
In an accelerated three-day trial last week, Black took the stand, 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.
Black acted "in a cunning and calculated way," Strine wrote, and "misrepresented facts to the [Hollinger] International board, used confidential company information for his own purposes without permission, and made threats ... towards International's independent directors."
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