September 19, 2005
Will Lord Black Be the Next to Try the "Honest-but-Ignorant CEO" Defense?
An article in Saturday's Wall Street Journal (here -- a nice addition to the weekend) discusses the possible response of former Hollinger International CEO Lord Conrad Black if the government indicts him for siphoning money from the company. In August, the U.S. Attorney's Office for the Northern District of Illinois announced the indictment (press release here) of Black's long-time chief deputy, David Radler, and the Ravelston Corporation Ltd, Black's investment company that controlled Hollinger, for diverting $32 million from Hollinger. The SEC is expected to announce a settlement with Radler this week, a sure sign that he is cooperating with the government, and his intimate knowledge of Black's business operation will be the key to putting together any further charges. According to the Journal, Black's attorney's are already marshaling a defense that Radler was responsible for the negotiations related to various non-compete agreements and other transactions that resulted in the alleged diversion, while Black simply reported on the deals to the Hollinger board. Thus, the "honest-but-ignorant CEO" position comes to the forefront, one that did not work for former WorldCom CEO Bernie Ebbers, but was successful for the once (and future?) HealthSouth CEO Richard Scrushy. Look for the vilification of Radler to begin shortly, and the fight promises to be quite nasty because the two men have known each other for many years and are probably privy to all the skeletons in each's closet. (ph)
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