Fund sues Hollinger's board

THE reputation of the Hollinger scandal as a honeypot for laywers was underlined today as a burnt investor launched a class-action lawsuit.

The Teachers' Retirement System of Louisiana, an aggressive shareholder with several corporate scalps under its belt, filed the action against current and former Hollinger International directors, saying they repeatedly deceived shareholders.

The lawsuit is being conducted by Grant & Eisenhofer, which specialises in fraud and corporate governance cases on behalf of shareholders and says it has recovered more than $2bn (£1.1bn) in such cases.

With parts of Lord Black's empire suing and countersuing one another, and a full-scale auction of Hollinger's newspapers - including the Daily and Sunday Telegraph - being conducted by Lazard, the prospective fees are rapidly escalating.

The Louisiana claim brings to at least 10 the number of suits and counter-suits filed in the US, while keen interest in the Telegraph titles has ensured plenty of work for London lawyers.

Catrin Griffiths, editor of The Lawyer, said: 'This is shaping up to be the next Safeway in terms of the number of lawyers involved.'

But she added that the bonanza may be capped over here because Lazard has told potential bidders it is not prepared to underwrite legal costs.

Almost every top City law firm has a client involved in some way - Herbert Smith, Lovells, Slaughter & May, Freshfields Bruckhaus Deringer and Clifford Chance among them.

The Louisiana fund said investors who bought Hollinger International stock between August 1999 and March 2003 'lost millions of dollars as a result of the defendants' fraud'.

Because of the misrepresentation of Hollinger International payments to Lord Black and others, 'the investing public was deceived' and the stock price 'artificially inflated', it argued.

Shares in Hollinger International rose as high as $13.11 because of the alleged fraud, slumping to $7.90 after Lord Black's improprieties were revealed, it said.

Toronto-based Hollinger Inc, the unit controlled by Black, has filed a counter-claim against Hollinger International, accusing it of 'blatant thievery' and 'illegal manoeuvering' in its attempt to stop the sale of Black's stake to the Barclay brothers.