Updated March 20, 2007. The criminal trial of media baron Lord Conrad Moffat Black of Crossharbour started March 14, 2007 in Chicago with jury selection.
Born in 1944, Lord Black was one of the richest men in Canada. A former Canadian citizen, Black renounced his Canadian citizenship in 2001 in his determination to receive a peerage in the British House of Lords. He took the name Crossharbour from a London subway stop near the headquarters to his company's Daily Telegraph Newspaper. His wife Barbara Amiel or Lady Black, is a former conservative journalist.
The principle allegation of the trial is that Black, as Chairman and CEO of Hollinger International Inc. (HII), once the third largest publishing company in the world, illegally took money from corporate coffers and received payments in side deals. These are monies that didn't belong to him, but to all shareholders.
Black on his part disputes these allegations. He says he was entitled to the money, that all the transactions were approved by HII's board of directors and that they were properly disclosed.
The origins of these conflicting contentions can be found in the manner in which Black built his business empire and made his fortune.
Entrepreneurship at School
In his memoirs, Lord Black tells us that in 1959, as a 14-year old he made $1,400 by helping his ninth-grade classmates cheat by selling them stolen exam papers. Despite his father, a wealthy Montreal brewer, telling the headmaster that the young Conrad was only displaying an entrepreneurial spirit, the Upper Canada College expelled him for his efforts.
Lord Black Makes His Fortune-Part 1
Lord Black made his fortune by acquiring four hundred newspapers and magazines around the world. In doing so, he built the world's third largest newspaper & magazine empire. In 1967, Black bought his first Canadian newspaper - the Knowlton Advertiser - for $500. He bought the British Daily Telegraph in 1985, and his global empire grew to included Israel's Jerusalem Post, Canada's National Post, Australia's Sydney Morning Herald, and the US' Chicago Sun-Times.
As part of their governance strategy, after acquiring a publication, Black and his corporate President and Chief Operating Officer, David Radler, would proceed to fire employees and cut operating costs in order boost profits. At its peak in 1999, the empire had revenues of more than $2 billion. However, the growth did not result in sustained earnings. A point was to come when HII would begin to report losses.
While the empire was still growing, Black, a neoconservative, used the newspapers' editorials to advance his ideology. He surrounded himself with like-minded conservatives and selected to sit on his board of directors, individuals such as Henry Kissinger and Richard Pearle. Pearle is one of the architects of President Bush's neoconservative policies. The New York Times reports that Pearle received more than $5 million from Hollinger. An initial supporter when charges were first levied against Black, the Times writes that Pearle soon changed his mind and turned on Black saying that Black had duped him and the other directors.
Black's second marriage was to Barbara Amiel, a conservative journalist who wrote a feature page for Maclean's magazine. Amiel has said that "I have an extravagance that knows no bounds." Together, they lived an extravagant lifestyle, owned homes in different countries, travelled in private jets and threw lavish parties.
According to those who attended the Blacks' parties, the guests included Prince Andrew, cabinet ministers, former British Prime Minister, Mrs. Thatcher, Donald Trump, and a 'lot of young, beautiful women'.
In the year 2000, with Hollinger slipping into debt, Black and Radler began to sell off pieces of the failing empire. However, this business set back did not dampen the Blacks' high society lifestyle.
The lavish parties and the Blacks' extravagant lifestyle - which continued to grow while Hollinger International was reporting losses - did not escape the attention of the company's shareholders. In 2003, Herbert Denton President of Providence Capital, a Hollinger shareholder, and an expert on Corporate Governance, asked to take a look at Hollinger International's books. What he discovered was that 95% of Hollinger's net income was going to Black, Radler and a small group of senior executives. In Denton's words Black "described himself as the proprietor." Lord Black was helping himself to the till. What followed was an investigation by a special committee of the board of directors, counselled by by Richard C. Breeden, a former chairman of the Securities and Exchange Commission.
Lord Black Makes His Fortune-Part 2
When Black and Radler sold off parts of Hollinger International, they found additional opportunities to add to their personal fortunes. They received millions of dollars as a portion of the sale price - payments made to them in exchange for their agreement not open another media outlet in the same region - a non-compete agreement.
Shareholders, however, began to question the sale arrangements made to Black's holding companies and Black's cohorts. In one deal with CanWest worth $2.3 billion dollars, Black and his colleagues privately made $53 million dollars - not a cent of which went to Hollinger International. Black said he had approval for the deal from Hollinger International's board of directors.
Accusations against Conrad Black
The are several accusations against Black and his cohorts and the different accusations have resulted in different responses.
Hollinger International's minority shareholders are suing Black and his cohorts for excessive management fees and other charges in a civil suit. They contend that Black stole money that rightfully belonged to all shareholders and that Black treated the corporation as a private mom-and-pop store. He kept dipping into the till to support a lavish life-style while the company was going into debt. They also contend he made private side deals on the sale of company assets in order to enrich himself and his cohorts at their expense.
In a report, an internal committee at Hollinger accused Black and his partner David Radler of operating a "corporate kleptocracy" and allegedly stealing more than $400 million from the corporation. An excerpt from the 400 page report states:
"The Report chronicles events at Hollinger over the decade since it first became a U.S. public company in 1994. Hollinger is a publishing company, but the story of the last decade at Hollinger, which is the subject of this Report, is not about Hollinger's valuable publishing assets or the quality of the staff at its many publications. Rather, this story is about how Hollinger was systematically manipulated and used by its controlling shareholders for their sole benefit, and in a manner that violated every concept of fiduciary duty. Not once or twice, but on dozens of occasions Hollinger was victimized by its controlling shareholders as they transferred to themselves and their affiliates more than $400 million in the last seven years. The aggregate cash taken by Hollinger's former CEO Conrad M. Black and its former COO F. David Radler and their associates represented 95.2% of Hollinger's entire adjusted net income during 1997-2003."
The US Securities and Exchange Commissions have also charged Black and his cohorts with violations of US securities laws.
Criminal Charges Against Black & Cohorts
US Federal Attorney General's Office determined that some the transactions engaged in by Black and his cohorts, constituted a criminal offence - a felony. These mainly involve the monies solicited and received under the non-compete agreements as well as certain expenses charged to the company. It is important to keep in mind that these monies are only part of the US$400 million shareholders claim Black and his cohorts stole from them.
Black says that he was entitled to all the monies he received and that he received approval from Hollinger International's board of directors. US Federal Attorney, Patrick Fitzgerald, (who has just finished the successful prosecution of Vice-President Cheney's aide "Scooter" Libby in Washington, DC), claims Black and his cohorts lied to Hollinger's board of directors. "The indictment charges that the insiders at Hollinger whose job it was to safeguard the shareholders made it their job to steal and conceal."
The US AG's allegations resulted in a grand jury indictment, that Black, now 62, his partner David Radler, and three other former Hollinger executives, John Boultbee, Peter Atkinson and Mark Kipnis, defrauded Hollinger's minority shareholders out of $84 million dollars when they sold Hollinger's assets. In total, Black faces 17 criminal charges including racketeering, mail fraud and tax evasion, the potential penalty for which amounts to a life sentence and then some - a hundred plus years.
The illegal billing as business expenses that Black is charged with include: a vacation on the Pacific island of Bora Bora, spending $40,000 of company funds on a surprise birthday party for his wife, lavish dinners with former U.S. Secretary of State Henry Kissinger, a $90,000 restoration of his antique Rolls Royce, $2,463 on handbags for his wife, $2,083 on exercise equipment, $2,785 on opera tickets, $24,950 on summer drinks and $3 million annually on leasing a private jet.
There are reports that Donald Trump might testify that he attended the surprise birthday party for Barbara Amiel, for business reasons - because he wanted to buy the Chicago Sun Time's building owned by Hollinger.
Since the indictment in 2005, Lord Black of Crossharbour has been living on a $20,000 judge-approved monthly allowance and has been free on a $21 million bond.
David Radler, Black's former partner and the former president and chief operating officer of Hollinger International, has already pleaded guilty to a single charge of mail fraud for his part in a scheme to divert more than $32 million from Hollinger International. The plea agreement gives him a reduced 29-month jail term in exchange for agreeing to testify as a star witness against his former partner and the others.