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Conrad Black, Ex-Hollinger Chief, Indicted for Fraud (Update3)
Nov. 17 (Bloomberg) -- Conrad Black, the onetime press magnate who built Hollinger International Inc. into the world's third-largest publisher of English-language newspapers, was charged with helping steal $51.8 million from the company.

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The 61-year-old former chairman and chief executive officer of Hollinger International, along with three former company executives, was accused of wire fraud and mail fraud in an 11- count indictment unsealed in Chicago today. Prosecutors issued a warrant for the arrest of Black, who's been a British lord since 2001. He faces as much as 40 years in jail and $2 million in fines if convicted on all charges.

Black's prosecution is the highest-profile criminal case against a former CEO since the arrests last year of WorldCom Inc.'s Bernard Ebbers and Enron Corp.'s Kenneth Lay. At his peak, Black controlled Britain's Daily Telegraph, the Chicago Sun-Times, the Jerusalem Post and 60 percent of Canada's dailies, drawing comparisons to News Corp. chief Rupert Murdoch.

``Insiders at Hollinger -- all the way to the top of the corporate ladder -- whose job it was to safeguard the shareholders, made it their job to steal and conceal,'' U.S. Attorney Patrick Fitzgerald, whose office brought the charges, said in a statement.

Five Years, $250,000

Hollinger Inc. ex-chief financial officer John Boultbee, 62; former Hollinger Inc. general counsel Peter Atkinson, 58; and former Hollinger International corporate counsel Mark Kipnis, 58, were also indicted, along with Ravelston, Black's former company. Boultbee was also CFO at Ravelston. Prosecutors said they would seek the forfeiture of $80 million from the four defendants. Boultbee and Atkinson are Canadian citizens; Kipnis is an American.

Black and Boultbee are each charged with eight counts of mail and wire fraud. Atkinson faces six counts of mail and wire fraud. Kipnis is charged with nine counts of mail and wire fraud. Each fraud count carries a prison term of five years and a $250,000 fine. Ravelston faces the same seven counts of mail and wire fraud first brought against it in August.

Fitzgerald offered Black a chance to turn himself in, and said he would seek Black's extradition if he doesn't surrender. A secretary to one of Black's lawyers, Edward Greenspan, said she didn't know Black's whereabouts and that Greenspan was in court the rest of the afternoon.

``Officers and directors of publicly traded companies who steer shareholders' money into their pockets should not lie to the board of directors to get permission to do so,'' Fitzgerald said in a statement.

An e-mail sent to Black asking for comment wasn't immediately returned.

Schemes Described

The indictments describe two schemes allegedly carried out by the defendants. The first involved the diversion of $51.8 million from Hollinger International's $2.1 billion sale of assets to CanWest Global Communications Corp. in 2000.

The second alleged that Black abused corporate perks provided by Hollinger International, including $40,000 to pay for his wife's surprise birthday party in December 2000. Black also had Hollinger pay for his use of its corporate jet for a personal vacation to Bora Bora in French Polynesia, prosecutors said a statement.

Black's alleged fraud was ``the grossest abuse'' and ``simply unacceptable,'' Fitzgerald said at a press conference.

Ousted in 2003

Black has fought a two-year effort by Hollinger International to neutralize his voting control and influence over the Chicago-based Sun-Times publisher and its Canadian parent, Hollinger Inc. So far, he's mainly failed.

Hollinger International's board ousted Black as CEO in November 2003, sued him and stripped him of the chairman's title the following January. The company then auctioned off the Telegraph over his objections last June. Hollinger International sued to recover more than $425 million it says Black and associates including former President David Radler stole.

Black countersued on April 25, 2004, and said if he's found liable, former Illinois Governor James Thompson and other members of the company's audit committee should pay part of the damages because they breached their fiduciary duties.

Radler, 63, was indicted on Aug. 18 on federal charges that he participated in a $32 million fraud. He pleaded guilty to one of the charges in September and is cooperating with the Justice Department. In return, prosecutors plan to recommend that he serve 29 months in jail and pay a $250,000 fine.

Mansion Mortgaged

Black has mortgaged his Toronto mansion, sold his seven- bedroom London townhouse and been evicted from Hollinger Inc.'s offices. He's also being sued by the U.S. Securities and Exchange Commission. Hollinger Inc. and his private holding company, Ravelston Corp., are in receivership.

Security cameras at Hollinger Inc. filmed Black on May 20 violating a court order by removing boxes of documents from the company's downtown Toronto headquarters. A judge ordered him to return the boxes. Black and his wife, Barbara Amiel, resigned June 2 from Hollinger International's board.

Hollinger International's suit alleges that Black plundered the company to finance a lavish lifestyle for himself and his wife. In addition to his 12-acre estate in Toronto and his London home, Black also owned a Park Avenue apartment in Manhattan and a 17,000-square-foot oceanside mansion in Palm Beach, Florida. Black also had personal use of a company Gulfstream IV business jet.

`Rights of Nobility'

``There has not been an occasion for many months when I got on our plane without wondering whether it was really affordable,'' Black wrote in an August 2002 e-mail to a former colleague that the company submitted as evidence in its suit. ``But I'm not prepared to reenact the French Revolutionary renunciation of the rights of nobility.''

Black's perquisites and his compensation in May 2003 prompted Hollinger International shareholder Tweedy Browne Co. to demand an investigation.

The board subsequently found that Black billed Hollinger International $90,000 to refurbish a 1958 Silver Wraith Rolls Royce limousine he used in London and spent $9 million of its money to acquire historic papers of Franklin D. Roosevelt while he was researching a biography of the former U.S. president, according to the company's suit.

Black's wife charged Hollinger International for tips she gave a doorman at Bergdorf-Goodman, a luxury clothing store in New York City, the company said in its complaint.

New York Apartment

In October, federal agents seized $8.9 million in proceeds from what they called Black's fraudulent sale of his New York apartment. The government said Black misrepresented the price of the apartment when he bought it for $3 million in December 2000 from a Hollinger subsidiary that had allowed him to live there. A fair market value would have been $5.4 million, the government said. Black sold the apartment in October for $10.5 million, the government said.

The SEC suit, filed in November in federal court in Chicago, contends that between 1999 and 2003 Black and Radler diverted $85 million from the publisher in bogus non-competition payments and concealed ``self-dealing'' transactions from shareholders, regulators and the company's board.

Becker said it's unusual for an SEC suit to precede a criminal indictment. Usually, the criminal and civil are filed simultaneously, and the SEC action is delayed until after the Justice Department's prosecution is completed, he said. Defense lawyers have greater access to government evidence in civil suits.

Quick Relief

In Black's case, the SEC filed its suit first ``to get some quick, temporary relief against Black and prevent him from selling the company or otherwise dissipating its assets,'' Becker said.

U.S. District Court Judge William Hart granted the Justice Department's request to keep one document in the civil case sealed because it related to the criminal investigation.

Black moved onto the international stage in 1986 when he gained control of the Telegraph, Britain's biggest broadsheet. He and Radler snapped up small U.S. newspapers for the next several years, then bought the Sun-Times in 1994 and subsequently took control of Canada's Southam chain.

Under Black, Hollinger International founded the National Post, the only national daily to compete with Toronto's Globe and Mail. The paper was critical of Canadian Prime Minister Jean Chretien, who later blocked Black's appointment to the U.K.'s House of Lords.

Black in 2001 renounced his Canadian citizenship to accept a British peerage and become Lord of Crossharbour. He unsuccessfully sued Chretien.

The criminal case is U.S. v. Black, 05-CR-727, U.S. District Court, Northern District of Illinois (Chicago).



To contact the reporters on this story:
Joe Schneider in Toronto at [e-mail];
Kevin Orland in Chicago at [e-mail].
Last Updated: November 17, 2005 15:48 EST