Judge says Sun-Times group must keep paying Black's legal fees
Sun-Times Media Group Inc., the newspaper publisher formerly led by Conrad Black, can't stop paying Black's legal fees while he appeals a fraud conviction, a judge ruled.
Delaware Chancery Court Judge Leo Strine concluded this week that the company's bylaws require payment of fees for corporate officials while their cases are still on appeal. Black and other former executives were convicted of stealing $6.1 million through the sales of some of the Chicago-based chain's newspapers. The company is seeking to recoup more than $70 million it spent to defend the officials.
Allowing the company to cut off legal-fee payments would create a "patchwork system of advancement" that wouldn't provide proper coverage for executives entangled in legal disputes, the judge said in his ruling.
Black, the company's former chairman and chief executive officer, is asking a federal appeals court to overturn his fraud conviction, saying the evidence against him was "fundamentally weak." Black, 63, is serving a 6 1/2-year sentence in a federal prison in Florida.
Black's appeal has been joined by ex-Chief Financial Officer John Boultbee, former Vice President Peter Atkinson and former General Counsel Mark Kipnis.
`Very Good Thing'
"I think it's a very good thing," Black's Canadian lawyer, Edward Greenspan, said today in a phone interview. "It allows Conrad Black to take whatever actions he thinks are appropriate."
Atkinson's lawyer, Michael Schachter, wasn't immediately available for comment.
Kipnis, who is now running a commercial-sign shop in Elgin, Illinois, deserves to have his legal bills covered by the company because he was acquitted of some charges in the criminal case, Ronald Safer, his lawyer, said in an interview.
"I think it's appropriate that he not have to bear that expense individually," Safer said.
The men were convicted of participating in a scheme to use bogus non-compete agreements tied to $3 billion in asset sales to reap illegal payments. All four have had their legal fees covered by Sun-Times, the successor company to Hollinger International Inc.
"We're disappointed with the ruling, but the legal process will eventually exhaust itself," Tammy Chase, a Sun-Times spokeswoman, said today in an interview. "At that point, we'll definitely go back and seek to recoup everything we believe we're owed in legal fees."
Executives' Fees
It's standard procedure for companies to cover executives' legal fees when officials face criminal charges or lawsuits over work-related actions.
"The core dispute between the Sun-Times and the defendants is over an issue that is relevant to virtually all corporations, directors, and officers who are affected by the advancement and indemnification provisions covered by Delaware law," Strine said in his ruling.
Sun-Times' officials argued Black and the other former officials were only entitled to have their legal fees paid up to the point they were sentenced on the criminal charges, according to court papers.
The chain's lawyers reasoned that the sentencing was the "final disposition" of the criminal proceedings against them and that any appeals were separate proceedings.
Strine rejected those claims, saying Sun-Times bylaws required fees be paid until the legal proceeding involved "is finally resolved or disposed of."
"I conclude that the final disposition of a proceeding in this context is the final, non-appealable conclusion to that proceeding," the judge said.
Sun-Times fell 3 cents, or 11 percent, to 30 cents in over- the-counter trading at 3.54 p.m. The company's stock has fallen 86 percent this year.
The case is Sun Times Media Group v. Conrad M. Black, 3518, Delaware Chancery Court (Wilmington).
For related news: Sun-Times Media's earnings: SUTM US TCNI ERN Sun-Times legal news: SUTM US TCNI LAW Today's top legal stories: TLAW Bloomberg legal resources: BLAW --With reporting by Andrew Harris in Chicago, Leon Lazaroff in New York and Joe Schneider in Toronto. Editors: Glenn Holdcraft, Steve Farr.To contact the reporter on this story: Jef Feeley in Wilmington, Delaware, at +1-302-661-7616 or jfeeleybloomberg.net.To contact the editors responsible for this story: Patrick Oster at +1-212-617-4088 or posterbloomberg.net; Jennifer Sondag at 212-617-2716 or jsondagbloomberg.net.-0- Aug/01/2008 00:13 GMT