By Andrew Stern and James Kelleher

CHICAGO (Reuters) - The man who was Conrad Black's trusted business partner for 30 years testified on Tuesday how the two men diverted millions of dollars to themselves.

David Radler, who has pleaded guilty to a single count of fraud and faces 29 months in prison, provided details in the former media baron's fraud trial of a $472 million (236 million pounds) sale of U.S. newspapers in 1998.

Radler said the sale included $50 million in non-compete fees, part of which was siphoned off by Black and other defendants in the case.

"Mr. Black told me that Inc. deserved some of the non-compete monies that were being allocated," Radler testified, referring to Hollinger Inc., Black's closely-controlled Toronto-based holding company.

Hollinger Inc. was the largest shareholder in Chicago-based media giant Hollinger International Inc., which was led by Black with Radler as his deputy.

"He said Inc. was the parent and, as the parent, it deserved a portion of the $50 million fee. He said it was deserving," Radler said. "I listened. I certainly didn't say no," he added.

Radler said it was later determined that the Canadian company would get $12 million, or roughly one fourth of the fee.

Black and three co-defendants are accused of using the non-compete payments to give themselves tax-free bonuses. Such payments were set aside from the proceeds after sale prices were determined, and were designed to give the buyer a guarantee that the seller would not re-enter the same market.