During the summer of 2001, Conrad Black and his wife, Barbara Amiel-Black, went on vacation. The couple flew from Seattle to Bora Bora in French Polynesia on a corporate jet, stayed about a week, and then returned to Seattle. When accountants for the jet's owner, Chicago-based Hollinger International, requested Black pay a bill of tens of thousands of dollars for the flight hours, he was allegedly disobliging. In an e-mail to a fellow executive, he sniffed: “Needless to say, no such outcome is acceptable.”
In the latest in a string of events likely deemed unacceptable by the former press baron, long-anticipated criminal charges against Black and three associates were unveiled on Nov. 17. A federal grand jury in Chicago returned an indictment alleging 11 counts of wire and mail fraud. The Bora Bora incident, included in the indictment, was just one example in a massive inventory of purported wrongdoing. Combined, they're intended to exemplify the tactics Black and certain underlings allegedly employed to divert millions from Hollinger International into their own pockets. Also named were accountant John “Jack” Boultbee, and lawyers Peter Atkinson and Mark Kipnis, all former lieutenants with various roles within Black's turbid flowchart of corporations. The indictment came exactly two years after the Hollinger scandal exploded with the resignations of Black and his longtime associate, David Radler.
The profusion of allegations contained within the indictment have not been proven in court. According to one of Black's lawyers, Edward Greenspan, Black denies all of the charges. “It will be shown that he has, at all times, acted within the law,” Greenspan stated. “He is confident that, if given a full and fair opportunity to defend himself, he will be found innocent.”
American officials issued warrants for the arrests of Black, Boultbee and Atkinson. All have homes in the Toronto area, though Black is a British citizen who renounced Canadian citizenship in 2001. If the defendants fail to present themselves voluntarily in a Chicago court on Nov. 22, officials said they will seek extradition. (Kipnis, who lives in Illinois and pleaded not guilty to earlier charges, is free on bond.) If convicted on the eight counts against him, Black faces fines of up to US$2 million and 40 years in prison. U.S. prosecutors also seek the forfeiture of at least US$80 million from the defendants, as well as US$8.5 million from the sale of Black's New York apartment and his mansion in Palm Beach, Fla.
The 60-page indictment serves up many more alleged transgressions by the defendants, some of them involving abuse of corporate perks. Among other things, Black threw a surprise birthday party for Amiel, held in late 2000 at New York City's La Grenouille restaurant. Dinners ran nearly US$200 a plate, and about US$14,000 worth of wine was consumed. According to the indictment, Black chipped in US$20,000; he caused Hollinger to pick up the remaining US$42,000 tab. Prosecutors claim that the party served no business purpose.
Then there's the Manhattan apartment. Hollinger purchased it in the mid-1990s for US$3 million, to be used by Black when in the city. According to the indictment, real estate prices on the Upper East Side boomed for the remainder of the decade, and the company spent more than US$400,000 in renovations to the property. It turns out that Black had an option to buy the 4,500-square-foot Park Avenue apartment for “fair market value.” But when he exercised that option in 2000, he decided he would pay the same price Hollinger had paid six years earlier. He neglected to seek approval from the company's audit committee, the indictment alleges. (That's the same apartment that Black sold in October, only to have the US$8.9-million proceeds seized by the FBI. Black sued later to recover the funds.)
The central allegations, however, revolve around the now infamous non-compete payments made to Black and his associates between 1998 and 2001, during which time Hollinger International was selling many of its newspapers. In addition to repeating several allegations about previously disclosed non-compete payments totalling more than US$32 million, the indictment claims that the defendants improperly diverted another US$51.8 million to themselves when Hollinger sold newspaper assets to Winnipeg-based CanWest Global Communications Corp. in 2000. The payments were motivated, in part, to take advantage of a Canadian tax loophole–a fraud on Canadian tax authorities, the indictment charges.
The indictment brings Black closer to what appears to be an inevitable showdown with Radler, his former right-hand man. Radler's purported wrongdoings sit alongside those of Black on the indictment's pages, but his name is absent on the list of defendants. That's because in September, a month after a separate indictment was brought against him, Radler pleaded guilty to a single count of fraud; he is said by prosecutors to be “co-operating in the ongoing investigation.” That co-operation might involve testifying against Black. Radler has entered into a plea agreement that would see him sentenced to 29 months in prison and fined US$250,000.
At press time, it remained unclear whether Black would appear at the Nov. 22 arraignment, or how he would defend against the indictment's allegations. If history offers any indication, however, he will contest them vigorously, employing his famously combative personality and all resources at his disposal. The Hollinger scandal has dragged on for several years already–and may continue for many more. But for all the lawsuits and regulatory actions Black has faced, this must surely be the most threatening. And this time, it's on his dime.