Conrad Black is facing the battle of his life with U.S. justice officials, who have slapped him with a sweeping criminal indictment that could send him to jail for 40 years.
U.S. Attorney Patrick Fitzgerald alleged yesterday that, through lies, greed and theft, Lord Black and three former colleagues diverted $84-million (U.S.) out of investors' hands and into their own pockets.
"All in all, what has happened here has been a gross abuse by officers and directors and insiders who decided to line their pockets," said Mr. Fitzgerald, U.S. Attorney for the Northern District of Illinois.
At a press conference in Chicago, he added that Canadian taxpayers were also victims of the alleged fraud because Lord Black and the others allegedly disguised millions of dollars in bonus payments as something else in order to avoid paying taxes. "So there was sort of twin fraud, one upon the investing shareholders of an American corporation and the Canadian tax authorities."
The U.S. Attorney charged Lord Black, 61, with eight counts of fraud-related charges and moved to seize his Florida mansion. Each charge carries a maximum of five years in prison. Mr. Fitzgerald said arrest warrants had been issued for Lord Black and three others. "We hope they will appear voluntarily in response to the warrants and, if they don't, we'll extradite," he said.
Through his lawyer, Lord Black said he was innocent and vowed to fight the allegations. "Conrad Black asserts his innocence without qualification with respect to each and every one of the charges set forth in the indictment," Toronto lawyer Edward Greenspan said in a statement.
"It will be shown that he has, at all times, acted within the law. He is confident that, if given a full and fair opportunity to defend himself, he will be found innocent."
Reached last night, Mr. Greenspan said Lord Black is considering his options.
"We got no more notice than the media got. So we're dealing with it and have a lot to discuss."
Also charged yesterday were John Boultbee, Peter Atkinson and Mark Kipnis. They all have denied any wrongdoing.
Lord Black and the others were technically charged under mail- and wire-fraud laws that date back to 1872. Those laws have recently become a popular tool to go after corporate crime because they can be interpreted broadly enough to include almost any scheme "to deprive another of the intangible right of honest services."
Although he owns homes in Canada and Florida, Lord Black has been spending most of his time in Toronto. He was forced to give up his Canadian citizenship in 2001 in order to sit in Britain's House of Lords, but Mr. Greenspan has said Lord Black "loves Canada."
"Obviously, Canada is very dear to him in many senses," Mr. Greenspan said in an interview last month.
Yesterday's criminal charges centre around Hollinger International Inc., a Chicago-based newspaper company that Lord Black controlled through a Toronto business called Ravelston Corp. Ltd. At one time. Hollinger owned hundreds of newspapers in Canada, the United States, Britain and Israel, including the Chicago-Sun Times, National Post, Vancouver Sun, Ottawa Citizen and London's Daily Telegraph.
Between 1998 and 2001, Hollinger sold most of its holdings, including its major Canadian newspapers. It's through those transactions that most of the alleged fraud took place, according to court filings yesterday. For example, the U.S. Attorney alleges that when Hollinger sold its Canadian newspapers to CanWest Global Communications Corp. in 2000, Lord Black and the others allegedly negotiated a $51.8-million "non-compete" payment for themselves. The money should have gone to the company, filings allege.
Non-compete payments were not taxed in Canada for several years and the documents allege that Lord Black and the others disguised what should have been taxable bonuses as non-competes in order to avoid paying tax. Officials at the Canada Revenue Agency declined to comment yesterday. Property records, however, show the agency put a lien on Lord Black's mansion in Palm Beach, Fla.
The U.S. Attorney also alleges that Lord Black billed the company for the bulk of a $62,000 surprise birthday party in New York for his wife, Barbara Amiel, and used the company's jet for a South Pacific holiday in Bora-Bora. When company accountants asked him to pay for the trip, Lord Black allegedly replied: "Needless to say, no such outcome is acceptable."
Lord Black also allegedly used company money for $1.5-million in renovations to a New York apartment on Park Avenue in order to house his servants. He later arranged to buy the unit from Hollinger, allegedly at below-market value. Lord Black sold the apartment in October, but just as the deal closed, FBI agents swooped in and seized his net proceeds of $8.9-million. Lord Black is suing to get the money back.
Prosecutors will likely pin much of their case on Lord Black's long-time colleague, David Radler. Sources say Mr. Radler, once Lord Black's right-hand man at Hollinger, has been co-operating with prosecutors for a year. In September, he pleaded guilty to one fraud charge in return for a lesser sentence and an agreement to testify against the others.
Ravelston has also been charged, and although it is operating under receivership in Toronto, it also plans to file a not-guilty plea.
Mr. Fitzgerald was asked yesterday why he did not go after other company directors, in particular members of the board's audit committee, who approved most of the alleged deals. He declined to answer directly other than to say, "I'm not here to opine on how corporations should run themselves."
Jim Thomson, who chaired the audit committee for years, said the indictment alleges the committee was repeatedly lied to. "I'll let the evidence speak for itself," he said.
While the criminal charges are serious, they don't mean much to Hollinger shareholders who have lost millions of dollars, said Gene Fox, partner at Cardinal Capital, which has invested in the company. "If they go to jail, it's important," Mr. Fox said yesterday. "But that doesn't help us, per se. This is about restitution, it's about recovery."