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Defence: Black Didn't Get Involved with Company Finances
Updated March 27, 2007. Eddie Greenspan, Conrad Black's well-known Canadian lawyer, continued to try and create a doubt about veracity of the prosecution's first witness Gordon Paris (seen on the right). Paris took the stand for an hour yesterday when he was questioned by Genson and his testimony continued today with questioning from Greenspan. During his questioning, Greenspan impugned that Paris - who had replaced Black as Hollinger International Inc's CEO - had a conflict of interest when Paris was charged with investigating financial problems at HII.
Could Defence Tactics have Hurt Black?
The standard in a criminal trial is for the prosecution to prove their case beyond a reasonable doubt. The defence needs to introduce that doubt, and they spared no effort in this direction. However, could it be that Genson and Greenspan's intensive and harsh questioning made Paris say things that may have hurt their client, Black, in the minds of the jury?
Excerpts from Paris' Report
"The Special Committee of the Board of Directors of Hollinger International Inc. submits this Report to the U.S. Securities and Exchange Commission and the Honorable Blanche M. Manning of the United States District Court for the Northern District of Illinois pursuant to Section III.4 of the Order of Permanent Injunction dated January 16, 2004 in the matter of United States Securities and Exchange Commission vs. Hollinger International Inc. The Report covers the results of the Special Committee's investigation since it was formed in June 2003 in response to allegations of fiduciary duty violations and other misconduct at Hollinger.
Genson Grills Paris
Yesterday, Paris was constantly interrupted by Black's lawyer, Ed Genson. The interruptions prompted Judge Amy St. Eve to ask Genson to let witnesses finish speaking before asking another question. "I'm sure it's not the last time I'll have to ask you that," she said to Genson. Genson replied smiling, "I'll apologize every time."
Who was Responsible for Hollinger's Finances?
Under vigorous cross examination by Genson on Wednesday, March 21, Paris said that while Black "was quite knowledgeable" about Hollinger's financial strategy, Black was not as knowledgeable as Jack Boultbee (Hollinger International's Chief Financial Officer during the time Conrad Black was CEO), who Paris called "the architect of the financial strategy". Nevertheless, in testimony on the 22nd, Paris testified that Black managed to control HII even though he owned only a minority of shares.
How Black Controlled Hollinger Int. with only 16% Shares
Prosecutor Eric Sussman asked Paris to explain how Black who effectively owned 16% of Hollinger International Inc's shares, managed to control HII's voting stock through a layer of holding companies.
Defence Strategy 1: Radler and Others Responsible - Not Black
The defence strategy is to show that the architect for Hollinger International's financial woes were individuals other than Black. According to the defence lawyers, the main culprit of HII's woes was Black's partner David Radler (who is expected to appear as a witness and who has already pleaded guilty), and perhaps the other defendants.
Can this Defence be Refuted?
On the face of it, unless the defence has a surprise up their sleeve or prosecution drops the ball, the prosecution should be able to repute the defence that Black did not involve himself in financial management. First, Black was HII's Chief Executive Officer - an executive position by definition. Second, Black received management fees - very large management fees. If Black was not managing, why did he charge management fees? CEO's usually do not involve themselves directly in specific management tasks - they have other executives supervise the execution of those tasks: primarily operations and finances. The CEO gives these executives direction and holds them accountable for their performance. If a CEO fails to do so, it amounts to an abdication of leadership and even negligence. Such abdication or negligence is not a defence. Famously, the management buck stops here - smack in the CEO's lap.
Greenspan Grills Paris - was there a Conflict of Interest?
The other member of Black's legal team, Eddie Greenspan, took up questioning Paris on Thursday, March 22. Asked Greenspan, "Did you never say to yourself, 'You know, this is inappropriate,' [since] you were hanging out with the crowd you were investigating?" (When Paris was chairman of the investigation committee, he was also a board member and a member of the board's audit committee.)
You too had Your Fingers in the Cookie Jar!
If Paris found that Black was receiving unjustifiably large amounts of money from Hollinger, then according to Greenspan, so did Paris. "I'm going to suggest to you that you were making $15,805 a day in '05," shot Greenspan. Paris didn't have a chance to respond since the prosecution objected to the question and the judge sustained the objection. Paris admitted he received US$511,375 from Hollinger International in 2003.
Defence Strategy 2: Black Relied on Others. Got OK from Board of Luminaries
Continuing the the defence strategy to portray Black as someone who relied on others in making business decisions, Greenspan added that Black couldn't have manipulated Hollinger International Inc's finances because HII's board included luminaries who were "no pushovers" - luminaries like former U.S. secretary of state Henry Kissinger, past Illinois governor James Thompson, former U.S. ambassador to Germany Richard Burt, and Wall-Street financier Henry Kravis' wife Marie-Josee Kravis.
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