Conrad Black Trial - Role of Lawyers in Non-Compete Payments

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Conrad Black Trial: Non-Compete Payments & the Role of Torys LLP Lawyers

Darren Sukonick, lawyer, Torys LLPApril 16, 2007. On April 12, Darren Sukonick, a partner at Torys LLP, gave six hours of video testimony as a prosecution witness at the Conrad Black trial. Mr. Sukonick had declined to appear before the jury in the Chicago trial, exercising his right not to appear in a foreign court. Instead, he was examined under oath in Toronto, Canada by lawyers from both sides in January 2007, and his testimony was video-taped. The jury watched the video tape of that examination.

Darren Sukonick works in the Tory LLPs' Corporate/Technology department. He was part of the legal team at the well-known Toronto/New York law firm of Torys LLP that represented Hollinger International Inc. in a year 2000 $3.5-billion deal, with CanWest Global Communications Corp.. Tory had advised HII throughout the deal that culminated in the sale of HII's Canadian newspaper chain (the former Southam newspaper chain) to CanWest. CanWest is a Winnipeg-based Canadian media company. Today, Torys has 300 lawyers in its offices.

The purchase price paid by CanWest to HII included $80-million in payments that went to Lord Black and the other co-defendants as part of an agreement by the defendants not to compete with Global. The prosecution in Black's criminal trial asserts that this money was stolen from the shareholders of Hollinger International. The prosecution also asserts that the non-competition payments to Lord Conrad Black and three co-defendants, former Hollinger executives, John Boultbee, Peter Atkinson and Mark Kipnis, were bonuses disguised as non-compete payments.

Torys LLP have since agreed to pay $30.25 million in a settlement with Hollinger International shareholders who had accused the firm of not raising red flags over the non-compete payments to Hollinger International. In agreeing to the payment Torys LLP did not admit to any wrongdoing.

During questioning by prosecutor Julie Ruder, Sukonick said that just days before the CanWest deal was signed on July 30, 2000, co-defendant and former Hollinger vice-president, Peter Atkinson asked to be added to the non-compete agreement along with John Boultbee. Atkinson also increased the amount of the non-competition payments to $80-million from $57-million.

Sukonick said he believed Peter Atkinson wanted the non-compete payments referred to as "bonuses" as a means of "rationalization" and "justification" for the different individuals receiving a portion of the payments. Sukonick testified that Atkinson told him it was common for executives to receive bonuses in deals of this type. According to Sukonick , Atkinson also said he wanted to structure the bonuses as non-compete payments because non-compete payments were not taxable in Canada at the time.

In short, the prosecution contention is that Black and his three other co-defendants, illegally conspired to take money from the company by disguising bonuses as non-competition payments. Sukonick's testimony was intended to give credence to that contention.

Defendant Peter Atkinson's lawyer challenged Sukonick's assertion that Atkinson had told Sukonick how to structure the payments. Under vigorous cross-examination, Sukonick admitted that he had suggested several times that Hollinger promote the idea of paying non-compete fees to company executives as a way to avoid attracting tax liability.

Peter Atkinson's lawyer produced several e-mails indicating that it was Sukonick, and not Atkinson, who was the architect of the payment scheme. Sukonick devised the way for Lord Black and the others would get the payments without either CanWest or Hollinger International's shareholders knowing the details.

In an email to Sukonick, Atkinson had raised his concerns about proper tax disclosure and added "In view of the importance of the tax issue to the recipients of the non-compete payments, these cheques to each individual and Ravelston should, I believe, be made to the individuals." Sukonick testified that he suggested at the time that all the payments were to go to Black's holding company Ravelston, "that way, CanWest need not know how much has been allocated to each individual." Sukonick further testified that he didn't see anything wrong with keeping the amounts of the personal payments from CanWest "for privacy" and had believed it was Hollinger's management who would decide how to distribute them.

In one e-mail, Sukonick wrote that "for privacy reasons" CanWest could send the $80-million to a Hollinger-related company. That company could in turn pay the defendants and "CanWest wouldn't know how much each individual got."

In another e-mail, Sukonick told defendant Mark Kipnis, that the payments did not have to be disclosed because the money would come directly from CanWest.

Boultbee and Atkinson did not agree with these suggestions, deciding instead to have the money sent to Hollinger International, which would pass it on to the individuals. The final CanWest agreement named all the defendants and cited the non-compete payments as a closing condition.

April 12 also witnessed a change in the demeanour of the defendants. Whereas early in the trial the defendants had avoided contact with one another, during a recess on this day, Atkinson was seen engaged in a friendly discussion with Conrad Black.