US regulators have stepped up their investigation of Hollinger International, serving subpoenas on the troubled newspaper group following the resignation of chief executive Lord Black this week.
The Securities & Exchange Commission (SEC), the US's chief financial regulator, sent the subpoenas - demands for information that cannot be ignored - following approval by its commissioners for a formal investigation.
Hollinger is already facing an internal investigation, launched in June at the behest of shareholders, who have questioned the legitimacy of nearly $300 million (€252 million) in management fees paid to Lord Black and his top deputies over the past five years.
Lord Black announced his resignation as chief executive on Monday after it emerged he and other senior executives had received so-called "non-compete payments" - fees paid by companies that Hollinger sold assets to - worth $32.15 million, which had not been approved by Hollinger's audit committee or properly disclosed to investors.
Until now, the SEC has taken a back seat in inquiries into Hollinger. The company had hired former SEC chairman Mr Richard Breeden to conduct its internal inquiry. Mr Breeden kept the SEC informed of his progress. The recent revelations made a formal inquiry almost inevitable.
As well as details of the accounting errors, the SEC will also want to know about the conduct of KPMG, Hollinger's auditor, as well as various individuals.
Hollinger is a Canadian company but its shares are listed in the US and, therefore, comes under the watch of the SEC. Hollinger declined to comment.
Daily Mail and General Trust is likely to consider non-core disposals to help fund a takeover bid for the Telegraph Group, pending a break-up of Hollinger International's newspaper assets.
The board of the group was yesterday said to be "excited and strongly interested" by Hollinger's decision to consider a sale or break-up following the resignation of Lord Black as chief executive this week.
The company, which controls Associated Newspaper titles including the Evening Standard and Northcliffe regional newspapers, is likely to conduct a strategic review of its options before contacting Lazard, the investment bank advising Hollinger on a possible sale.
