Conrad Black, his top lieutenant David Radler and Hollinger Inc. are the subject of a criminal probe, U.S. federal prosecutors have confirmed.

The U.S. government confirmed the investigation on March 22 when it filed court papers asking to intervene in a civil lawsuit launched by the U.S. Securities and Exchange Commission against Black, Radler and Hollinger Inc.

In its court filing, the government asked for a delay until Aug. 1 of the release of a document that Black and his co-defendants have requested. The government didn't offer details of the document, but said release of it would harm the federal criminal investigation.

Conrad Black (CP file photo)
Conrad Black (CP file photo)

The SEC suit alleged that Black and his co-accused took cash from subsidiary Hollinger International and concealed the action from investors.

"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 U.S. government's court filing said.

Black's lawyers appear at OSC hearing

News of the U.S. government's criminal investigation comes as the Ontario Securities Commission started hearings on a motion to ease restrictions on trading by Hollinger Inc. insiders.

Black is seeking to take Hollinger Inc. private – a move opposed by Hollinger International and some minority investors in Hollinger Inc.

At an OSC hearing In Toronto, lawyers for Black urged the commission not to stand in the way of an imminent vote on plans by Black to take full control of Hollinger.

Black has offered $7.60 a share for the 22 per cent of Hollinger Inc. he doesn't already control through his private holding company, Ravelston Corp.

A shareholder vote is set for March 31. But the commission must first resolve the question of whether it should relax cease-trade orders against Black and other Hollinger insiders.

Black lawyer Alan Mark said his client wants to offer Hollinger's shareholders "an exit strategy."

A Hollinger Inc. lawyer also said the vote should proceed, describing its minority shareholders as "non-combatants" who deserve a chance to vote on the going private offer.

The hearing continues Thursday.