On September 12, 2007 a Settlement agreement was filed by Plaintiffs outlining the details of the proposed $30 million settlement. Parties moved for preliminary approval of the deal, which was granted by the judge on May 16, 2008.
According to a press release dated July 31, 2007, Sun-Times Media Group, Inc. (NYSE: SVN) (the "Company") today announced that it had entered into an agreement to settle securities class action suits pending against it and a number of its former directors and officers in the United States and Canada, and an agreement to settle litigation over its directors and officers insurance coverage. These agreements are subject to court approval in the United States and Canada. If approved, the securities class action settlement will resolve the claims asserted against the Company, a number of its former directors and officers, certain affiliated companies, and the Company's auditor, KPMG LLP, in a consolidated class action in the United States District Court for the Northern District of Illinois entitled In re Hollinger International Inc. Securities Litigation, No. 04C-0834, and in similar actions that have been initiated in Saskatchewan, Ontario, and Quebec, Canada. Those actions assert, among other things, that from 1999 to 2003 the defendants breached U.S. federal, state, and/or Canadian law by allegedly making misleading disclosures and omissions regarding certain "non-competition" payments and the payment of allegedly excessive management fees. The Company's settlement of the securities class action lawsuits will be funded entirely by $30 million in proceeds from the Company's insurance policies.
On September 13, 2006, the plaintiff filed a Third Consolidated Amended Complaint. In October 2006, the defendants filed several motions to dismiss the Third Consolidated Amended Class Action Complaint.
According to the Company’s Form 10-Q for the quarterly period ended June 30, 2006, on June 28, 2006, the court issued its ruling on the motions to dismiss filed by the Company and other defendants. The court dismissed six of the eight claims filed, including claims relating to allegedly inflated circulation figures at the Chicago Sun-Times and claims filed under the Illinois securities laws. As to the two remaining claims, which are claims under the federal securities laws, the court allowed the plaintiffs to replead those claims as to additional named plaintiffs who purchased Company stock later than the existing named plaintiffs. If the plaintiffs do not replead adding such additional plaintiffs, the court will then address whether the remaining two claims should be dismissed as to any alleged misrepresentations or omissions after June 29, 2001, which is the date of the last purchase by the existing named plaintiffs.
As previously disclosed by the Company’s Form 10-K for the fiscal year ended December 31, 2005, in February and April 2004, three alleged stockholders of the Company (Teachers’ Retirement System of Louisiana, Kenneth Mozingo, and Washington Area Carpenters Pension and Retirement Fund) initiated purported class actions suits in the United States District Court for the Northern District of Illinois against the Company, Black, certain former executive officers and certain former directors of the Company, Hollinger Inc., Ravelston and certain affiliated entities and KPMG LLP, the Company’s independent registered public accounting firm. On July 9, 2004, the court consolidated the three actions for pretrial purposes. The consolidated action is entitled In re Hollinger Inc. Securities Litigation, No. 04C-0834. Plaintiffs filed an amended consolidated class action complaint on August 2, 2004, and a second consolidated amended class action complaint on November 19, 2004. The named plaintiffs in the second consolidated amended class action complaint are Teachers’ Retirement System of Louisiana, Washington Area Carpenters Pension and Retirement Fund, and E. Dean Carlson. They are purporting to sue on behalf of an alleged class consisting of themselves and all other purchasers of securities of the Company between and including August 13, 1999 and December 11, 2002. The second consolidated amended class action complaint asserts claims under federal and Illinois securities laws and claims of breach of fiduciary duty and aiding and abetting in breaches of fiduciary duty in connection with misleading disclosures and omissions regarding: certain “non-competition” payments, the payment of allegedly excessive management fees, allegedly inflated circulation figures at the Chicago Sun-Times, and other alleged misconduct. The complaint seeks unspecified monetary damages, rescission, and an injunction against future violations. In January 2005, the defendants in In re Hollinger International Inc. Securities Litigation, including the Company, filed motions to dismiss the second consolidated amended class action complaint in the United States District Court for the Northern District of Illinois. The motions are pending.
The original complaint charges defendants with violations of sections 10(b), 18 and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission ("SEC"), violations of the Illinois Securities Law of 1953, breaches of fiduciary duties, and aiding and abetting the breaches of fiduciary duties, by issuing a series of material misrepresentations to the market during the Class Period. The complaint alleges that defendants violated the federal securities laws by issuing a series of materially false and misleading statements to the market throughout the Class Period which statements had the effect of artificially inflating the market price of the Company's securities.
Specifically, the complaint alleges that, during the Class Period, the defendants (a) misrepresented the terms of Hollinger's asset sales by failing to disclose that significant portions of the proceeds from the asset sales were diverted to Hollinger Inc., Lord Black, Radler, Boultbee and Atkinson under the guise of purported "non-compete" payments; (b) misrepresented the terms of management services agreements between Hollinger and its parent corporation (controlled by Lord Black) Hollinger Inc. and/or entities controlled by Lord Black and certain of the defendants, and concealed the fact that Hollinger was paying purported management services fees to those entities without having them provide any services to Hollinger; (c) misrepresented the terms of Hollinger's asset sales to entities owned and/or controlled by Lord Black and other defendants in transactions at below market prices, where in some cases Hollinger sold newspapers for one dollar which others had offered to buy for over $1 million; and (d) misrepresented Lord Black's compensation, by failing to disclose millions of dollars paid to Lord Black by a Hollinger subsidiary. The defendants compounded their fraud by falsely claiming that Hollinger's asset sales, the non-compete payments to Lord Black and other defendants, and other related-party transactions, were approved by Hollinger's Board of Directors and the Audit Committee of the Board of Directors, when they were not. As a result of defendants' materially false and misleading statements during the Class Period, the investing public was deceived, the market price of Hollinger's stock was artificially inflated, and plaintiff and other members of the class were damaged by their purchases of Hollinger stock at prices artificially inflated by defendants' fraud.
The complaint alleges that once Hollinger finally disclosed to its shareholders some of the information about the self-dealing transactions and non-compete payments in the Company's SEC filings, it misrepresented the amount of the non-compete payments, it falsely stated that those payments were "required" to close the Company's assets sales, and it falsely claimed that the Company's independent directors had approved the payments. Hollinger's SEC filings also failed to disclose that, although the company was paying Ravelston Corporation Limited millions of dollars each year pursuant to management services agreements, Ravelston was not providing any services to the Company. Hollinger's SEC filings also failed to disclose the terms of its prior asset sales which were designed to favor companies controlled by Lord Conrad Black and other defendants named in the complaint.
The complaint further alleges that Hollinger's misrepresentations and fraud began at least as early as the filing of its Form 10-Q with the SEC on August 13, 1999, at which time Hollinger's stock traded at $10.08 per share, but as a result of defendants' misrepresentations and fraud, Hollinger's stock was artificially inflated and traded at $13.11 per share by March 28, 2002. As the marketplace reacted to the news of Lord Black's self-dealing, Hollinger's stock began to drop in price, but it was not until March 31, 2003, under pressure from its institutional investors, that Hollinger disclosed the improprieties by Lord Black and the other defendants, and the price of the Company stock dropped that day to $7.90 per share. This action, therefore, is brought on behalf of a class of individuals who purchased Hollinger's securities during the Class Period and lost millions of dollars as a result of the defendant's fraud.