SEC threat adds to Black's woes

EMBATTLED newspaper mogul Lord Black faces another setback with a possible civil action to be launched against his empire by US watchdog the Securities and Exchange Commission (SEC) for alleged securities violations.

Toronto-based Hollinger Inc said the SEC had served a notice that it could take civil proceedings against the company.

This latest news comes as Black braces himself for fresh allegations of misuse of company cash by him and his wife Barbara Amiel, expected to emerge today in a courtroom filing of a long-awaited investigation by former SEC chief Richard Breeden.

Black and others already face a $1.25bn (£700m) racketeering suit by Hollinger International claiming they looted the company of almost $400m.

The company says the SEC has also notified some of Hollinger's directors and company officers that they face civil proceedings for securities violations, although it did not name them.

Hollinger said the SEC notice includes an offer to make a 'Wells submission' to argue why action should not be brought against it for alleged violations of the US Securities Exchange Act.

Hollinger said it would object vigorously to the action. Hollinger Inc's principal asset is its 68% voting and 18.2% equity interest in Hollinger International. Black resigned as chief executive of Hollinger International after the company's board uncovered millions in disputed payments to him.

Hollinger Inc is still embroiled in a complex legal battle with Hollinger International, the ultimate owner of major newspapers, including the Telegraph which it has sold to the Barclay Brothers, the Chicago Sun-Times and the Jerusalem Post.

Updating the state of the company, Hollinger Inc said it has received a notice from a trustee informing it that, because of the failure to file its 2003 financial statements with the SEC, it has technically defaulted on $78m (£43.5m) in bonds which is due 2011.

As a result, a trustee holding at least 25% of the outstanding principal has the right to speed up the maturity of the notes.

About $5m in interest on the notes is due tomorrow, and Hollinger has deposited the full amount with the trustee so that noteholders will get their payment in a timely manner, Hollinger said.

The delay in filing has come about because of a disagreement between Hollinger International and the Canadian company, with Hollinger Inc saying the US firm has failed to give it enough information to complete the filing.