Saturday, May 5, 2007

What Has the Government Proven Against Lord Black?

From all reports, the trial of Lord Conrad Black and three other former executives of Hollinger International has turned into a tug-of-war over how incompetent the company's audit committee really was.  The government called all three members, former Ambassador Richard Burt, economist Marie-Josee Kravis, and former Illinois Governor and U.S. Attorney Jim Thompson.  Each testified for the government that they never approved the payment of non-compete fees directly to Black and other Hollinger executives, and on cross-examination each in turn admitted to not reading or remembering statements in various documents discussing the payments for the non-competes.  It is hard to tell from media reports whether these were sprung on the witnesses on cross or just hammered home by the defense lawyers after prosecutors raised the issue first, but it certainly looks like all the government has proven conclusively to this point is that the audit committee members didn't do a very good job.  That said, corporate management should not engage in disclosure by connecting the dots, and insisting that scattered tidbits of information prove the audit committee was aware of what was going on may not wash.  The government's theory may be that this was a game of Three-Card Monte, in which the money went one way and the disclosure was less than pellucid. 

Getting Governor Thompson to admit on cross-examination he only "skimmed" documents does not make for a very strong prosecution case, however, which means that the testimony of former Black lieutenant David Radler becomes even more important.  If prosecutors want to prove a fast shuffle, they will need the dealer to convince the jury that the four defendants were in on the game by trying to disclose as little as possible to Hollinger's board.  Radler is set to begin testifying on May 7, and look for the fireworks to begin once the cross-examination starts.  It looks more and more like this witness will make or break the prosecution.  An AP story (here) discusses Governor Thompson's testimony. (ph)

Fraud, Prosecutions, Securities | Permalink

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The audit committee's admission that they missed reading documents - missed it 11 times each - was hammered on ad nauseum by the defense. I agree on the importance of Radler's testimony - sure to be explosive. I am a freelance reporter covering the trial since day one and have a blog at

Posted by: Susan Berger | May 5, 2007 6:26:58 AM

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