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The court-ordered investigation into internal dealings between Conrad Black and Hollinger Inc. suffered a setback yesterday with the resignation of a forensic inspector appointed to lead the probe.

Hollinger announced yesterday that Toronto firm Kroll Lindquist Avey had withdrawn from the assignment, but no explanation was offered. Alan Stewart, a Kroll official appointed by Ontario's Superior Court last week, was not available for comment.

Lawyers for Hollinger raised concerns in court last week that Kroll has "certain potential conflict of interest issues." Sources close to Hollinger said Kroll had previously worked for individuals associated with the company.

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A spokesman for Hollinger declined to comment on Kroll's departure, but he said the company was working to find a potential replacement as quickly as possible.

The Hollinger probe was triggered by a complaint from Toronto-based institutional shareholder Catalyst Fund General Partner 1 Inc. An Ontario Superior Court judge agreed to the investigation after it was alleged last month that Hollinger improperly transferred more than $1-million, this summer, to a private company controlled by Lord Black. Lord Black and his team have denied any impropriety.

The Ontario court is set to hear a motion from Catalyst on Monday, which seeks to remove Lord Black, his wife Barbara Amiel and deputies David Radler and Jack Boultbee, as Hollinger officials.

The Hollinger investigation comes nearly a year after its U.S. operating subsidiary, Hollinger International Inc., unveiled allegations from a special committee of directors that Lord Black and three senior officials allegedly pocketed $32-million (U.S.) of payments without authorization from the board. The allegations prompted Lord Black's resignation as Hollinger International's chief executive officer, and unleashed a battle for control of the company's destiny.

The U.S. battle could come to a head as early as Oct. 31, when a Delaware court injunction restricting Lord Black is to expire. Yesterday, Hollinger International said it has filed a motion with the Delaware Chancery Court requesting the injunction be extended to Dec. 31.

Hollinger International said in a statement yesterday that it is seeking the extension so that it can complete the distribution of proceeds to shareholders from the sale this summer of its interest in The Daily Telegraph newspaper.

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