Hollinger probe on insider payments

THE battle by Hollinger chairman Lord Black to retain control over his media empire, which includes the Daily and Sunday Telegraph, suffered a setback with the disclosure that the company is investigating undisclosed payments to insiders.

The revelation came in a filing with the US Securities and Exchange Commission that said the company would now be forced to delay the compulsory filing of its accounts.

Hollinger, which is already facing shareholder allegations that it improperly paid Black and other insiders $300m (£178m), said that two committees investigating the payments 'had determined that there are inaccuracies in prior public filings of the company involving the amount, authorisation and purpose of such payments, among other things'.

The statement to the SEC went on: 'As previously announced, the company formed a special committee of independent directors on June 17, 2003, to investigate certain matters raised by shareholders.

'That investigation has recently focused on payments characterised as non-compete payments made by the company to related parties.

'Some of these payments have been previously disclosed and others have not been previously disclosed.'

The submission raises the possibility that the controversial payments are larger than the company's critics have suggested.

If so, Hollinger may have to restate its past results, a move that could activate the interest of SEC investigators and lawyers representing shareholders, as well as further denting the company's credibility on Wall Street.

There were no apparent trades in Hollinger International shares after the release of the information on Friday night, though an electronic trading network listed a bid price at $10.23 - 25% below Friday's official closing price.

If Hollinger shares were traded at that price when the market opens tomorrow, it would represent a loss in market value of about $260m.

The SEC documents were filed after a meeting at which, reportedly, Black was to ask the board whether it wanted to appoint an investment banker to sell off all or part of the company.

Black, who built Hollinger into what was once one of the world's biggest media empires, has vowed to retain control and has denied reports that the company would consider a sale of assets.

Other properties owned by Hollinger International include The Spectator, the Jerusalem Post and the Chicago Sun-Times newspaper.