Sun-Times Media Group Inc. (STMG) said late Tuesday that it had entered into an agreement to settle the securities class-action lawsuits in the U.S. and Canada that accused the publishing company formerly known as Hollinger International of making misleading disclosures and omissions about "non-competition" payments, and paying excessive management fees. The settlement will be funded entirely by $30 million in proceeds from STMG's insurance policies, the company said.
The lawsuits, which were consolidated in U.S. District Court in Chicago, were filed against the company, several former directors and officers, some affiliated companies, and STMG's auditor KPMG LLP.
The lawsuits accused the defendants of violating securities laws in the U.S. and Canada. Former Hollinger International Chairman Conrad Black was convicted last month on U.S. federal fraud charges he improperly pocketed phony non-compete fees in the sale of three groups of community newspapers. A jury found him not guilty of fraudulently taking non-compete fees in several other sales. Black faces sentencing in November.
"The settlement includes no admission of liability by the company or any of the settling defendants and the company continues to deny any such liability or damages," STMG said in a statement.
Under terms of the proposed agreement, which needs the approval of courts in the U.S. and Canada, STMG insurers will deposit $24.5 million in insurance proceeds into an escrow account to fund defense costs the company incurred in the securities class action, and other litigation.
The carriers will then be released from any other claims for the July 1, 2002 to July 1, 2003 policy period.
STMG and the other parties "will then seek a judicial determination" on how to allocate the $24.5 million among insured parties, it said.
STMG said it has been in negotiations with Toronto-based Hollinger Inc. -- the holding company convicted former newspaper baron Conrad Black used to control his once-worldwide collection of newspaper -- to determine how the proceeds should be allocated among themselves.
If negotiations fail, they have agreed to go to binding arbitration, STMG said.
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