Friday, November 18, 2005

Lord Black Indicted on Fraud Charges

Lord Conrad Black, the former CEO and controlling shareholder of media company Hollinger International, Inc., which has since been broken up, was charged along with three former executives of the firm with mail and wire fraud.  Two of the other defendants, Peter Atkinson and Mark Kipnis, are attorneys (Atkinson in Canada), and the third, Jack Boultbee, is a Canadian accountant.  A press release issued by the U.S. Attorney's Office for the Northern District of Illinois (here) describes the charges as follows:

[The] 11-count indictment alleges two new fraud schemes in addition to realleging a separate scheme first alleged in an indictment in August that the defendants fraudulently diverted more than $32 million from the U.S.-based Hollinger newspaper holding company through a complex series of self-dealing transactions. The first new scheme alleges that the defendants fraudulently diverted an additional $51.8 million in 2000 from Hollinger International’s multi-billion-dollar sale of assets to CanWest Global Communications Corp. Both of these schemes allege that the defendants engaged in a series of either secret or false and misleading transactions involving sales of various newspaper publishing groups in the United States and Canada. These allegedly fraudulent sales were designed to enrich the defendants by funneling payments disguised as non-competition fees, and, in the CanWest transaction, payment of a "management agreement break-up fee" either to a now-bankrupt corporate co-defendant they controlled or to themselves individually, at the expense of Hollinger’s public shareholders and corporate assets.

The second new scheme alleges that Black and one of his co-defendants fraudulently misused corporate perks, including a company jet for a vacation by Black and his wife in the South Pacific, two Park Avenue Apartments in New York City, and corporate funds to throw a lavish birthday party for Black’s wife.

In September, Black's former second-in-command, David Radler, entered a guilty plea to fraud charges and agreed to cooperate in the government's investigation of Black and Hollinger.  The charges from that scheme are also alleged in the indictment against Black and the three others. Arrest warrants have been issued for Black, Boultbee, and Atkinson, and the government stated that it would seek their extradition if they do not surrender voluntarily.  An AP story (here) quotes Black's attorney as stating that his client is innocent of the charges.  It looks like there may be another corporate fraud trial to keep our attention, in case we were getting bored. (ph)

                                                                                             

UPDATE: A copy of the indictment is available from Findlaw here. (ph)

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