US: News Tycoon Stole Millions, US Charges

Conrad M. Black, once a major force in business, political and social circles in Manhattan and London, was indicted in Chicago yesterday on charges that he and three former colleagues stole $51.8 million from Hollinger International, the giant international newspaper publisher he helped create.

The 11-count indictment charged that Lord Black, 61, and his co-defendants worked out a plan to divert funds to themselves and misused corporate money, citing such instances as he and his wife taking a private jet to Bora Bora and $40,000 he spent to cover much of the cost of a lavish birthday party for his wife.

Patrick J. Fitzgerald, the United States attorney there, who announced the indictment by a federal grand jury, said yesterday: "If you worked at a bank and you wanted to spend $40,000 on yourself, you should ask someone other than you. Failing to do so when there was a legal obligation to do so is a fraud."

Lord Black was accused of wire fraud and mail fraud, charges that carry penalties of up to 40 years in prison and fines up to $2 million. A British citizen, Lord Black, has been spending time in Canada.

An arrest warrant has been issued for Lord Black, and there were reports last night that he was believed to be in Canada. But Mr. Fitzgerald said he could not comment on his whereabouts, adding: "He will end up needing to appear in front of a judge in Chicago. We think he should be extradited."

The indictment detailed a plan to defraud Hollinger International by diverting $51.8 million in 2000 from its multibillion-dollar sale of assets to CanWest Global Communications. It contended that the defendants engaged in a series of secret and misleading transactions that funneled payments to themselves disguised as noncompetition fees or as a "management breakup fee" to Ravelston, a company controlled by Lord Black.

It also charged that Lord Black and one of the others indicted misused corporate funds in the South Pacific vacation and when the company paid for two apartments on Park Avenue in Manhattan.

"This is the sort of thing," said Mr. Fitzgerald, a national figure from his role in the C.I.A. leak case, "that in the words of Mr. Black is simply unacceptable." The defendants, he continued, "lined their pockets" by taking money from shareholders for themselves.

"Part of the fraud," Mr. Fitzgerald said, "was basically to defraud innocent shareholders."

Yesterday's indictments were the latest in a succession of charges in the last few years against once-highflying chief executives accused of betraying investors. These have included L. Dennis Kozlowski of Tyco International, John J. Rigas of Adelphia Communications and Bernard J. Ebbers of WorldCom.

But perhaps none of those executives sought as much political and social recognition as Lord Black, whose publishing empire included The Chicago Sun-Times, The Jerusalem Post and The Daily Telegraph of London.

Lord Black and his wife, the conservative newspaper columnist Barbara Amiel, held annual gatherings at the Bilderberg Group, where a variety of leading political figures assembled, including Margaret Thatcher; Richard N. Perle, a high Defense Department official in the Reagan administration and early adviser to the Bush administration; and a former French president, Valéry Giscard d'Estaing.

But Lord Black has been under siege for two years, since the Hollinger International board dismissed him as chief executive in 2003, asserting that he and others took $32 million in unauthorized "noncompete payments" associated with the sale of smaller newspapers.

Lord Black has continued to fight back, aggressively challenging the accusations and seeking to retain power through Hollinger Inc., the holding company for Hollinger International. In the last year, he tried without success to take Hollinger Inc. private.

Indeed, the indictment came as he was trying to regain his social standing in the United States, in Toronto where he now lives, and in London. In January he reportedly told guests at Donald J. Trump's Palm Beach wedding: "Don't write me off. I am about to become a corporate-governance counterterrorist."

And last summer, there were newspaper reports that he was looking for a new apartment and having lunch with prominent friends.

Those charged along with him yesterday were John A. Boultbee, a former chief financial officer of Hollinger International; Peter Atkinson, an executive vice president of Hollinger International; and Mark Kipnis, a former vice president of Hollinger International. Ravelston was also charged; its principal asset was its controlling interest in Hollinger Inc.

Lord Black's Toronto lawyer, Edward Greenspan, issued a statement saying, "Conrad Black asserts his innocence without qualification."

A lawyer for Mr. Boultbee, Donald Jack, said his client would "vigorously defend the charges against him and is confident of the outcome."

Lawyers for the other two did not return calls seeking comment.

In August, indictments charged the former Hollinger International president and publisher, F. David Radler, and Mr. Kipnis with a scheme to divert more than $32 million from the American-based newspaper holding company through a complex series of unauthorized payments. Mr. Kipnis pleaded not guilty, but Mr. Radler, a longtime close associate of Lord Black, agreed to cooperate with the authorities.

The charges related to the noncompetition payments were laid out in 2004 by a special committee established by the board and led by Richard C. Breeden, a former chairman of the Securities and Exchange Commission. Those payments were the subjects of a subsequent suit by the S.E.C.; that suit is pending.

Yesterday, Mr. Breeden said that "this indictment is focused on a limited number of transactions, and will enable prosecutors to focus a trial on a manageable set of issues."

Despite Lord Black's determination to fight the charges, Mr. Breeden was optimistic about the government's case.

"He can fight it," he said of Lord Black, "but the facts are there. His is a situation, unlike others, where there is a mass of evidence concerning what took place."

Mr. Boultbee faces a maximum penalty of 40 years and fines of $2 million. Mr. Kipnis is risking up to 45 years and $2.25 million in fines. Mr. Atkinson faces up to 30 years and fines up to $1.5 million. And Ravelston could face fines of $3.5 million.

The indictment contends that all four cheated public shareholders in the United States and Canada, as well as Canadian tax authorities.

AMP Section Name:Media & Entertainment
  • 185 Corruption

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