Thursday, March 15, 2007

Black deeds

Jury selection has begun in the Chicago trial of Canadian media magnate Conrad Black. The 62 year old former CEO of Hollinger International is charged with three other ex-Hollinger executives of swindling the company out of $84 million through asset sales. Black is also accused of using company funds to finance a lavish lifestyle.

Also facing trial with Black are Canadians Jack Boultbee, Hollinger’s former Chief Financial Officer; Peter Atkinson, the company's former general counsel and American Mark Kipnis, an attorney who was corporate secretary at Hollinger’s Chicago headquarters. Black’s high powered legal team is led by his former law school friend Edward Greenspan. Worldwide media are salivating over a trial is expected to last several months.

The trial is a large fall from grace for one of international media’s biggest players. Conrad Black's newspaper empire was once the third largest in the world after Gannett and Murdoch's News Corporation. Black had 650 titles with a circulation of 10 million people. These titles included prestigious newspapers such as Britain's Daily Telegraph, Canada's National Post, the Jerusalem Post and the Chicago Sun-Times. He was also part of owner of the Fairfax empire in Australia. The problems started after Black sold most of the empire and diverted shareholder profits from the sales. He was forced to resign as Hollinger CEO in November 2003 amid charges of corruption. Two months later, he was fired as chairman.

He was born Conrad Moffat Black on 25 August 1944 in Montreal. His father George Montegu Black Jr was president of Canadian Breweries. Aged 14, Conrad was expelled from Toronto's elite Upper Canada College after making a $1,500 profit by selling stolen exam results to his classmates. Despite this setback, he went on academic success, completing a history degree at Carleton University, a law degree at Laval and gaining an MA from McGill. While still at university, Black and a friend began buying small Canadian newspapers, and in 1971 they co-founded the Sterling Newspapers Group.

In 1978 he took over the blue-chip Argus Corporation after he cajoled two elderly widows to sell their controlling stock. Black proceeded to sell off most of Argus’ holdings for a healthy profit in order to concentrate on the newspaper business. This business he called Hollinger, which was originally a Chicago-based mining offshoot of Argus.
By the early 1990s Hollinger owned 60% of Canada’s newspapers and expanded into US, Britain, Australia and Israel. At its peak in 1999, Hollinger had revenues of over $2 billion. His influence was such that Tony Blair offered Black a peerage in 1999.

However Jean Chrétien’s government opposed the title invoking the obscure 1919 Nickle Resolution which disallowed foreign governments from granting titles of honours to Canadians. Black challenged the ruling in court but lost. Black renounced his citizenship, became British and finally took his seat in the House of Lords in 2001. He became Lord Black of Crossharbour, named for a station on the light rail line near his Daily Telegraph headquarters in Canary Wharf.

But all was not well across the pond in Hollinger’s headquarters. Black was raiding the till to finance his lifestyle and his stable of titles was losing money. Mounting debt forced Black to sell his chain of Canadian newspapers to the Winnipeg Asper family’s CanWest Global in a deal worth $3.5 billion that was the largest in Canadian media history.

But what should have been a dream payout to shareholders was denied by Black and his associates who took for themselves the “non-compete” payments written into the sale of his publications in Canada and the US. The payments protect new owners from the launch of a rival publication and are typical in media transactions. The directors kept these payments rather than recycle them into the company. This matter is at the heart of the current case. Prosecution have won the right to introduce evidence that shows Black’s extravagant lifestyle which was partially funded by these payments; a birthday party for his wife Barbara Amiel, designer handbags, exercise equipment, opera tickets, a vacation in the South Pacific and the refurbishment of a Rolls-Royce.

The wheels began to fall off for Black in 2003 when a Hollinger internal inquiry alleged he had received more than $7 million in unauthorised payments of company funds. Black resigned as chairman in 2004 and the company filed a lawsuit for the recovery of the money. The US Securities and Exchange Commission (SEC) got involved and in November 2005 Black was charged with eight occurrences of criminal fraud. The SEC accused Black and his deputy David Radler of treating the company as if it was "their personal piggy bank". Four other federal charges were later added: racketeering, obstruction of justice, money laundering and wire fraud.

Black’s money laundering charges carry a maximum sentence of 10 years and a fine of twice the original amount, $4.3 million. The wire fraud charge carries a maximum penalty of five years in prison and a $250,000 fine. If convicted on all 12 charges he faces, Black could face a maximum prison term of 95 years. Conrad Black would be 157 years old on release.

1 comment:

Bwca said...

I'm here from reading page 412 of Connie's autobiog, where he says mean things about Malcolm Turnbull during the Tourang thing.

My friend has just pointed out to me that Turnbull has paid back the insult by approving the production of more pulp in Tasmania to print Connie's papers ... where he can read about his own sentencing soon.