Judge Leo Strine - "Vice Chancellor" at the Court of Chancery in Delaware - has delivered a damning verdict on Lord Black, blocking the sale of his controlling stake in Hollinger International, which owns the UK's Telegraph and Sunday Telegraph and a string of other newspapers around the world. BBC News Online documents key excerpts of the court judgement in the case of Hollinger International v. Lord Black.
"As former Chancellor [Judge] Allen has said, the most interesting corporate law cases involve the color gray, with contending parties dueling over close questions of law, in circumstances when it is possible for each of the contestants to claim she was acting in good faith. Regrettably, this case is not one of that variety.
Rather, in this case, defendant Conrad M. Black, the ultimate controlling stockholder of Hollinger International, Inc. ("International"), a Delaware public company, has repeatedly behaved in a manner inconsistent with the duty of loyalty he
owed the company.
He sued for peace realizing that [Hollinger] International's
independent directors might strip him of all his corporate offices and refer certain matters
to the Securities and Exchange Commission before Black could take steps to remove
them (and knowing that he faced serious personal repercussions if he took that aggressive
The indignity Black faced was galling to him, as the International board was
largely filled with outside directors Black had hand-selected and with whom he had a
To calm the roiled waters, Black made a formal contract ... [which] included his agreement to resign as Chief
Executive Officer and to repay certain funds without any admission of wrongdoing.
But, Black immediately violated his newly undertaken obligations by diverting to
himself a valuable opportunity presented to [Hollinger] International - the possible sale of one of its
flagship newspapers, the Daily Telegraph, or the company as a whole to the Barclays,
English brothers who own newspapers, hotels and other businesses.
this diversion in a cunning and calculated way...
In this opinion, I conclude that Black breached his fiduciary and contractual duties
persistently and seriously. His conduct threatens grave injury to International and its
stockholders by depriving them of the benefits that might flow from the Strategic
Process's search for a value-maximizing transaction
To rectify the irreparable harm Black's wrongdoing obviously threatens, an injunction will issue against
the Barclays Transaction [the sale of the holding company through which Lord Black wields voting control of Hollinger International
to the Barclay Brothers]...
The evidence reveals that Black is a formidable controlling stockholder. ... In particular, during all times relevant to this case, Black has conducted himself as if only his assent was needed to cause [Hollinger] Inc. or [Black's holding company] Ravelston to enter into any major
As to [Telegraph owner Hollinger] International, the picture is more complex but one thing is clear: Black believed himself
to be the initial arbiter of what should be done with International and its assets, to the exclusion of the rest of the company's directors.