Unmoved by testimony about a jet-setting lifestyle at company expense but certain that Hollinger International Inc. had been pilfered, a federal jury on Friday found press baron Conrad Black guilty of the lesser but still serious charges of obstruction of justice and three counts of mail fraud.
With Black’s former business partner F. David Radler serving as a star witness against him, prosecutors had accused Black, 62, of masterminding a racketeering conspiracy that allegedly plundered more than $60 million from Hollinger, owner of the Chicago Sun-Times, the London Daily Telegraph and other newspapers.
The jury in its verdict found that Black illegally had taken a relatively modest $2.9 million. On the strength of a videotape that showed Black personally removing 13 boxes from his Toronto office in the middle of the government’s fraud investigation, the jury also ruled that Black had impeded the investigation.
Black’s conviction marks the stunning downfall of one of Canada’s most prominent businessmen, who used the power of the press to become an international celebrity known as much for his right-wing views as his high-wattage living.
Born to wealth in Canada, Black parlayed a tidy investment in a group of community newspapers into a media empire with holdings in the U.S., Great Britain, Israel and Canada. Black recruited such luminaries as Henry Kissinger and former Illinois Gov. James R. Thompson to his board, and he entertained global movers and shakers at parties, some funded with Chicago-based Hollinger’s money.
The verdict also culminates a saga that first unfolded four years ago, at the height of the scandals over lax corporate governance in the wake of wrongdoing at Enron Corp., Tyco Inc. and other companies.
Black’s hold over Hollinger began to unravel when a little-known shareholder, the investment firm Tweedy, Browne Co., complained publicly about millions of dollars that Black and other top Hollinger executives personally received as part of the company’s sale of dozens of newspapers in the U.S. and Canada.
Black was ousted as Hollinger’s chief executive in 2003, along with Radler, then president of the company now known as Sun-Times Media Group Inc. Black was fired as chairman in January 2004. Soon after, a task force headed by former Securities and Exchange Commission Chairman Richard Breeden issued a scathing report, calling the conduct of Black and Radler at Hollinger a “corporate kleptocracy.”
Black, who gave up his Canadian citizenship in order to become a British lord, showed no visible reaction to the verdict Friday and will appear in court Thursday to learn from U.S. District Judge Amy St. Eve if he may leave the country.
He faces a maximum of 35 years in prison, a maximum penalty of $1 million and possible forfeiture of property. Prosecutors estimate Black’s sentence may range from 15 to 20 years.
The jury in Chicago also found Black’s three co-defendants guilty of three counts each of mail fraud. They are attorney Mark Kipnis, 59, of Northbrook; former Hollinger Chief Financial Officer John Boultbee, 64, of Victoria, British Columbia; and former Executive Vice President Peter Atkinson, 60, of Oakville, Ontario. Each faces up to 15 years in prison and fines of up to $750,000. All three were released on bond.
All defendants are expected to appeal the verdicts.
Prosecutors estimate sentencing ranges of 7 to 10 years for Boultbee, Atkinson and Kipnis. The mixed verdict set off a debate among prosecution and defense lawyers about the meaning of the jury’s verdict.
“If you’re going to take liberties and break the law with other peoples’ money, there are going to be consequences,” U.S. Attorney Patrick Fitzgerald said.
Yet after a four-month trial and 12 days of deliberation, the jury found insufficient evidence to convict Black of the most sweeping charges of the indictment, including racketeering.
The government had sought convictions on 42 separate charges in the 16-count indictment, claiming Black, Radler and the others engaged in a scheme to pocket millions of dollars from the sale of dozens of Hollinger newspapers.
In the deals, Black and Radler personally reaped millions in payments from the buyers of the newspapers. In exchange, the Hollinger executives promised not to compete against the new owners. Some of those payments were not disclosed to shareholders or even to Hollinger’s audit committee.
But defense lawyers argued that such non-compete payments are legitimate and customary in newspaper deals, a claim the jury appeared to find credible in some instances.
Juror Tina Kadisak, a beautician, in an interview at her Woodridge home, said the jury carefully followed the evidence and was unswayed by testimony about Black’s opulent lifestyle.
“The things we felt we could convict on were things we could link up and see obvious proof of,” Kadisak said. “On some counts [prosecutors] just couldn’t do that.”
The guilty verdicts for all four defendants stemmed from charges they received $5.5 million in bogus non-compete agreements with a Hollinger subsidiary — essentially agreeing not compete with themselves. The third guilty count arose from $600,000 in payments fraudulently attached to the sale of community newspapers.
After the verdict, government lawyers sought to have Black immediately placed in custody as a flight risk.
But Black’s defense lawyers vowed their Canadian client would remain in the U.S. to avoid being jailed prior to his sentencing hearing Nov. 30. They also argued that St. Eve should allow a reduction in the bond Black has pledged: the $20 million of equity he has in his home in Palm Beach and proceeds from the $8.5 million sale of a New York apartment.
Well-known Chicago defense lawyer Edward Genson ticked off the names of the transactions on which the jury found no wrongdoing: CanWest, Horizon and Community Newspaper Holdings.
Genson also noted that the jurors found nothing wrong with Hollinger’s allegedly below-market sale of the New York apartment to Black. The jury also did not buy the prosecution’s allegation that Black illegally charged Hollinger for a lavish birthday party for his wife, Barbara Amiel Black.
“He was convicted of the two monetarily lowest amounts in the case,” Genson said.
Edward Greenspan, the Canadian lawyer who led Black’s defense at trial, told reporters the government’s effort to put Black in jail for as long as 20 years is off base given the conviction on relatively narrow charges. “When we were indicted the allegation was $90 million in loss. Now the lost amount for Conrad Black alone is $2.9 million. We intend to appeal and there are viable legal issues,” Greenspan said.
U.S. Atty. Fitzgerald insisted that because Black and his co-defendants were convicted of the first, most sweeping count in the indictment, the judge at sentencing could find them culpable of taking as much as $30 million from Hollinger.
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Still, the evidence connected to that count suggests no more than $3 million was at stake.
Black, dressed in a tan suit and powder blue shirt, sat stoically in the courtroom after the verdict as lawyers argued about his immediate fate.
St. Eve declined to rule immediately on Black’s motion to have his bond reduced and be allowed to travel outside the U.S.
John Hueston, a prosecutor in the Enron case now in private practice in Los Angeles, said prosecutors gambled unsuccessfully that jurors would be outraged by testimony about Black’s wealthy, globe-trotting lifestyle, including lengthy testimony about a trip to Bora Bora on the corporate jet.
Peter Henning, a law professor at Wayne State University, thinks Black will be sentenced far more harshly than his co-defendants because of his obstruction conviction and his outspoken contempt for the prosecution: “Calling the prosecutors Nazis doesn’t put him in a good position.”
Even so, Greenspan argued in an interview that he was pleased with the mixed verdict. “This was vindication for Conrad Black,” he said.
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The Black verdicts
GUILTY
Obstruction of justice: Black was videotaped removing boxes of documents from his office while under investigation.
Mail fraud: 3 counts related to bogus non-compete agreements
NOT GUILTY
Racketeering: Orchestrating the looting of his company
Wire fraud: Paying for perks with company funds (3 counts); non-compete agreement (1 count)
Mail fraud (2 counts)
Tax fraud (2 counts)
Source: Court records
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Key dates in the Conrad Black case
Conrad Black has been found guilty of diverting tens of millions of dollars from newspaper publisher Hollinger International Inc. to other companies he controlled.
A timeline of the case:
2003
May 22: At the Hollinger annual meeting, CEO Conrad Black and other executives come under fire for collecting $73.7 million in fees from the sale of newspapers.
June 11: Tweedy, Browne Co., a New York investment firm with a 17 percent stake in Hollinger, demands a board investigation into the alleged payments made to executives.
Nov. 17: Hollinger reveals that Black, Sun-Times Publisher David Radler and two others received more than $15.6 million in unauthorized payments. Black, Radler and other executives resign.
2004
Jan. 17: The Hollinger board fires Black as chairman after disclosing it had sued Black, Radler and two Black-owned companies for allegedly taking more than $300 million through personal payments and inappropriate changes to the firm’s accounting books.
Nov. 15: The U. S. Securities and Exchange Commission files a civil suit against Radler and Black, saying the two “cheated and defrauded” investors and filed misleading public documents.
2005
March 21: The U.S. attorney’s office confirms it is criminally investigating Black and Radler.
Aug. 18: A federal grand jury indicts Radler for allegedly helping funnel $32 million in corporate funds from Hollinger International Inc. to Ravelston Corp., a company he and Black own that is used to control Hollinger Inc.
Sept. 20: Radler pleads guilty to one count of fraud and agrees to cooperate with federal prosecutors.
Nov. 17: A federal grand jury indicts Black, alleging he and others illegally diverted millions of dollars.
Dec. 1: Black pleads not guilty, calling the allegations against him “nonsense.”
Dec. 15: Prosecutors add counts of racketeering, money laundering, wire fraud and obstruction of justice to their case against Black.
Dec. 16: Black again pleads not guilty at a court appearance in Chicago
2007
Jan. 12: The judge pushes back the start date of Black’s trial by one week to March 14 after defense lawyers say they do not have enough time to prepare their case.
March 15: Defense lawyers and prosecutors select a final panel of jurors.
June 12: The defense rests.
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June 27: The jury begins deliberating.
July 10: The jury announces it cannot agree on a verdict and is told to continue deliberating.
Friday: The jury finds Black guilty on three counts of fraud and one count of obstruction of justice.
Source: Tribune reports
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