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Still within his reach?

September 3, 2004

Conrad Black could come back -- but would find himself in a legal minefield.

Since January, court orders, federal investigations and lawsuits have prevented Black from running Hollinger International, the company that owns the Chicago Sun-Times. Black, 60, holds a controlling stake in the company, but has been unable to do much with it lately.

But now that an internal probe of his alleged misdeeds is complete, and a court injunction is set to expire next month, some observers wonder if the media mogul could seize power again -- or at least disrupt the plans of those now running Hollinger International.

""That's always a possibility,"" said former Illinois Gov. Jim Thompson, a member of Hollinger International's board of directors. ""Absent any injunction or court order, he could reassert his control through his shares.""

Legal documents show Black can soon start acting like an owner again -- in some ways. An injunction limiting his actions expires Oct. 31, freeing him to sell his stake. But even when that injunction expires, another court order keeping him or any owner from firing the board of directors will likely still be in place.

Black controls Hollinger International through Hollinger Inc., a Canadian holding company that owns a 68 percent voting stake. Last year, a ""special committee"" of Hollinger International directors reported that Black and top executives took $32 million in unauthorized funds from the company. The disclosure resulted from complaints by another shareholder, Tweedy, Browne Co. LLC.

The committee ousted Black and his top deputy, Sun-Times Publisher David Radler. The company then got courts to bar Black from exerting his ownership power. It later sued Black, Radler and others for $1.25 billion. In a report issued Monday, the special committee's adviser Richard Breeden alleged the men skimmed $400 million from Hollinger International -- 95 percent of the profits over a seven-year period.

In June, a judge in Delaware's Court of Chancery issued an injunction barring Black from interfering with the company's efforts to sell off its newspapers. The following month, Hollinger International sold London's Daily Telegraph for about $1.2 billion.

The injunction runs through Oct. 31, and when it expires, Black will be free to sell his shares in Hollinger Inc., meaning he can sell control of Hollinger International. Black might try to take the company private by buying out the public shareholders, according to one source.

While the Telegraph sale meant Black had lost the paper he most prized, the company still owns the Sun-Times and about 100 other Chicago area papers, as well as the Jerusalem Post. According to a June filing with the U.S. Securities and Exchange Commission, Black held talks with Cerberus Capital Management about teaming up to buy out the other shareholders. Under the plan, the partners would own the Chicago papers, and Black would be allowed to run the company again.

Black held similar discussions with Triarc, an investment fund owned by financier Nelson Peltz, according to a Delaware court opinion.

But while Black will be free to sell his stake in Hollinger International, even a new owner would face limits in its behavior toward the board of directors and the special committee.

In January, the SEC got a federal court order providing that a ""special monitor"" be appointed over Hollinger International in the event Black fired the board or interfered with the committee's work. The order remains in place until the special committee's work is finished. While Black or any new owner has the right to replace the board, doing so would mean having to deal with the special monitor, who would have sweeping powers to investigate and file lawsuits to recoup money taken from the company. The court order names Breeden, a former SEC chairman, to fill that role.

It is not clear when the federal court order will expire. U.S. District Judge Blanche Manning will decide. Black's lawyers are expected to argue the order should be lifted because Breeden's report concludes the committee's work, sources said. But the report asserts the committee has more to do -- namely, recovering $1.25 billion in a lawsuit it has filed against Black and others. The SEC agrees.

""The work that still needs to be accomplished by the special committee is the prosecution of its lawsuits to recover assets, and that work is not done,"" said Tim Warren, associate regional director of the SEC's Midwest office.

Continuing investigations by the SEC and U.S. Justice Department could also hinder a Black comeback. Breeden suggested in Delaware testimony some executives would face criminal charges.

At least one shareholder does not sound worried about Black's return.

""The 31st of October is a long ways away. The special committee is capable of moving and doing a lot of things between now and then,"" said Laura Jereski, an analyst at Tweedy, Browne Co.

Spokesmen for Black and Hollinger International declined comment.