CanWest Global Communications Corp. has accused an Israeli company of extortion in demanding changes to an agreement that would have given the Canadian firm a 50-per-cent interest in the Jerusalem Post newspaper along with control of its board.

In an affidavit filed in a New York court, CanWest lawyer Richard Leipsic said it was a shock to the company´s executives when representatives of Mirkaei Tikshoret Ltd. said they would not live up to a binding agreement to share ownership of the Post.

CanWest got a temporary restraining order from the Supreme Court of New York stopping MTL from changing the Post while the dispute is under arbitration.

In Mr. Leipsic´s affidavit, CanWest outlines how the deal to share the Post came about. The two companies negotiated the purchase last year with the paper´s then-owner Hollinger International Inc. MTL was to buy the Post from Hollinger, then transfer it to a new entity that would be owned 50-50 by CanWest and MTL.

MTL paid Hollinger $13.2-million (U.S.) for the Post, and CanWest was to pay MTL $6.6-million after the new company was set up.

Other court documents filed in New York indicate that MTL and CanWest had planned to eventually take the Post public through an initial public offering.

However, according to Mr. Leipsic´s affidavit, MTL did not set up the new company as expected in December after the deal with Hollinger closed.

At meetings earlier this month in Tel Aviv, MTL executives told CanWest executives -- including chief executive officer Leonard Asper -- that the Israeli company wanted to own between 51 per cent and 75 per cent of the company holding the Post.

It also wanted a change to the portion of the arrangement that said CanWest would appoint four of seven board members, including the chairman, and control the editorial policy of the paper.

The "repudiation of the agreements was a complete shock to me and other CanWest executives present," Mr. Leipsic said in the affidavit. "This was not good faith negotiation. This was, plain and simple, extortion."

MTL had to be constrained under an injunction, CanWest said in its filing, because the Israeli firm has already begun making changes at the Post, such as firing senior managers and hiring new executives.

MTL will also likely try to sell presses and the Post´s office building and printing plant in Jerusalem, the affidavit says. While CanWest had earlier agreed that the sales made sense, it is now concerned selling those assets could "do irreparable harm to the business, as well as pay out the proceeds beyond the reach of CanWest."

MTL´s lawyer in New York did not return calls yesterday. Senior executives at the Jerusalem Post said last night they were "completely in the dark" about the legal dispute.

Post staff said Aviv Bushinsky, former adviser to Israel´s right-wing finance minister and former prime minister Benjamin Netanyahu, introduced himself last Sunday as the paper´s new publisher. He reportedly told Post staff that the paper´s ageing building in Jerusalem would be sold. He said the editorial offices would remain in Jerusalem, where most Post editorial staff live, but the printing plant, business and administration offices would move to Tel Aviv where MTL has extensive property. (© 2005 Bell Globemedia Interactive Inc. 01/26/05)