The Ontario Securities Commission accused former media baron Conrad Black of "egregious conduct" Friday as it filed notice that it intends to launch proceedings against Black, Hollinger Inc., and three former associates for alleged violations of securities laws.

In its 43-page statement of allegations, OSC staff accused Black and three former Hollinger Inc. execs of breaching their fiduciary duties to both Hollinger Inc. and Hollinger International, mainly by improperly diverting funds from Hollinger International's newspaper asset sales for their own benefit.

"Their [Black and the three other execs] omissions of information and failure to accurately present facts constitutes egregious conduct." the OSC said.

Conrad Black (CP File Photo)
Conrad Black (CP File Photo)

This is the first enforcement action the OSC has taken against Black since he was ousted as Hollinger International's chairman in January 2004.

Last November, the U.S. Securities and Exchange Commission laid a civil fraud lawsuit against Black, accusing him and a former associate of improperly diverting tens of millions of dollars from Hollinger International.

Among the allegations levelled by OSC staff Friday:

  • Hollinger Inc. was used as a vehicle to divert $16.55 million US from Hollinger International to Hollinger Inc.
  • Hollinger Inc. made misleading statements to the OSC relating to non-competition payments totalling almost $110 million paid to Black and others.
  • Black, former Hollinger Inc. president David Radler, former Hollinger Inc. executive vice president John Boultbee and former Hollinger Inc. vice president Peter Atkinson authorized the improper diversion of funds.
  • Black, Radler, Boultbee and Atkinson "engaged in conduct contrary to the public interest."
"These failures exacerbated a management culture that disregarded appropriate practices to address conflicts of interest," the statement of allegations said.

"The respondents failed to adequately disclose and address the many conflicts of interest on the part of Black, Radler, Boultbee, and Atkinson," it said.

OSC staff are asking for an order that Hollinger Inc., Black, and the other named execs each pay an administrative penalty of up to $1 million for each alleged violation of Ontario securities law.

The commission's staff are also asking that the respondents "disgorge...any amounts obtained as a result of non-compliance by that respondent with Ontario securities law."

They are also asking that the four be reprimanded and pay the costs of the investigation. OSC staff may also seek to bar Black and the others from serving as directors or officers of any publicly-traded company.

A permanent cease-trade order in the shares of Hollinger Inc. may also be sought, the OSC statement said.

Hollinger Inc. denies wrongdoing

Hollinger Inc. issued a statement late Friday denying the allegations made against the company.

"The new directors of Hollinger do not believe that Hollinger has committed any breach of Ontario securities law," it said.

"Hollinger also does not believe that it has acted contrary to the public interest."

"These allegations are without merit," Black's lawyer, Edward Greenspan, told the Canadian Press.

Hollinger International has been locked in a lawsuit battle with Black and other former Hollinger Inc. execs for more than a year.

Hollinger International's special committee accused Black and several associates of running a "corporate kleptocracy".

Black and the other execs have repeatedly denied that they did anything wrong. Black has sued the special committee for defamation.

A first appearance is scheduled for May 18 to set a date for a hearing.