A U.S. court on Friday dealt a blow to Hollinger International Inc.’s efforts to recover $1.25 billion from ex-chairman Conrad Black and others, dismissing its racketeering lawsuit against them.
The ruling, which still allows Hollinger International to sue Black in a state court for a lesser amount, is the latest development in a complex legal battle between Black and the newspaper company. Hollinger International charged “a pattern of racketeering” was behind deals in which Black and his associates sold Hollinger newspapers for less than fair value to private companies they controlled.
Hollinger International, which owns the Chicago Sun-Times, Jerusalem Post and until recently the UK’s Daily Telegraph, said it was considering an appeal of the ruling by Judge Blanche Manning of the U.S. District Court in northern Illinois.
The decision was made on “technical grounds” and “does not in any way diminish the strength or merits of the breach of fiduciary duty claims that have been asserted against these defendants,” said Gordon Paris, Hollinger International’s interim chairman and CEO.
Under a federal racketeering law originally designed to fight organized crime, Hollinger had sought triple the $381 million in damages it claimed under the lawsuit. The company filed the lawsuit in January and amended it in May with the racketeering allegations.
Hollinger Inc. (HLGc.TO: Quote, Profile, Research) , a Toronto-based holding company controlled by Black, had argued that its U.S. affiliate should not be able to bring its case under the Racketeer Influenced and Corrupt Organizations Act, the so-called RICO act.
A spokesman for Black called the decision a “stinging setback to Hollinger International’s campaign against Conrad Black and the rest of the former management” of Chicago-based Hollinger International.
“We always believed that Hollinger International’s racketeering claim highlighted the overreaching and exaggerated nature of this lawsuit, and by dismissing the racketeering claim with prejudice, the judge has ruled that this is not and cannot be a racketeering case,” the spokesman said.
Many federal courts have shunned RICO claims in private commercial disputes, said former federal prosecutor Randy Mastro, now a partner at law firm Gibson, Dunn & Crutcher in New York.
“It doesn’t mean this matter is over. It does mean that there can’t be a federal racketeering claim under these circumstances,” he said. “It means that the case going forward won’t be in federal court.”
Black, a member of the UK’s House of Lords, has repeatedly denied any wrongdoing. His spokesman last week said Black would sue a Hollinger International special committee for C$1.1 billion ($878 million) over a report that accused him and other former executives of operating a “corporate kleptocracy” that drained the publisher of hundreds of millions of dollars.