3 Hollinger Intl directors could face SEC charges

The U.S. Securities and Exchange Commission warned former Gov. Jim Thompson and two others they could be sued because of their conduct as directors of Hollinger International, which owns the Chicago Sun-Times, sources familiar with the matter said.

Thompson, Richard Burt and Marie-Josee Kravis received "Wells notices" from the SEC last month, Bloomberg News reported and another source confirmed. A Wells notice alerts the recipient that the SEC has enough evidence to bring a civil lawsuit against the individual, which could result in fines and a lifetime ban from serving as a director at any public company.

"Nobody wants the SEC to investigate them," said Morton Pierce, a corporate lawyer at the New York firm Dewey Ballantine.

Thompson and Burt declined comment. Kravis could not be reached for comment.

The SEC's action is the latest installment in a long-playing saga of investigations and lawsuits surrounding Hollinger International, which also owns the Daily Southtown and other area papers. Federal prosecutors have indicted ex- Chairman Conrad Black and other former executives, alleging they looted $84 million from the company.

A special committee of Hollinger directors issued a report last year saying Black and his cohorts took a total of $400 million.

Thompson, Burt and Kravis made up Hollinger's audit committee at a time when Black and his lieutenants were allegedly fleecing the company. The three have come under fire from shareholders, who say the audit committee failed to scrutinize the transactions Black used to divert funds to himself. The special committee's 2004 report described the audit committee as "ineffective and careless over a prolonged period of time."

John Coffee, a professor of securities law at Columbia Law School in New York, said the SEC seldom sues people for mere negligence. The agency usually sues only when it has found intent to defraud or recklessness, he said.

"The [SEC's lawyers'] claim would probably be that these people signed and approved the [annual report] with some knowledge that it contained material omissions," Coffee said.

SEC regional director Merri Jo Gillette declined comment.

Being sued by the SEC would be a black mark for Thompson, Burt and Kravis -- all former public officials who have gone on to lofty positions in the private sector.

Thompson is chairman of Winston & Strawn, one of Chicago's biggest law firms. He served on the 9/11 Commission, and is on the board of directors at FMC Corp. and Navigant Consulting. Burt served as U.S. ambassador to Germany under President Ronald Reagan, and was an arms negotiator for President George H.W. Bush. He now heads a Washington, D.C. consulting firm.

Kravis is an economist who held various positions in the Canadian government, and later married financier Henry Kravis. She sits on the board of Ford Motor Co., and is president of New York's Museum of Modern Art. Unlike Thompson and Burt, she is no longer a Hollinger director, having stepped down in 2003.

Last month, Hollinger announced Thompson, Burt and four other directors would not stand for re-election to the board at the annual meeting in January, meaning they will leave next year.

Another Hollinger director, former Pentagon adviser Richard Perle, said in March he had received a Wells notice. To date, the SEC has not sued him. Perle is among the directors who will not seek re-election in January.