April 10, 2007 / 5:49 AM / 12 years ago

Witness in Black trial hammered

CHICAGO (Reuters) - Defence lawyers at the fraud trial of former media baron Conrad Black and three others produced documents on Monday that a prosecution witness agreed showed payments at the heart of the case had been publicly disclosed.

Conrad Black (L) leaves the Dirksen federal courthouse in Chicago, in this file photo from March 20, 2007. Black, who once presided over one of the world's largest media empires, is on trial to determine if he and his associates stole millions of dollars as his conglomerate crumbled. REUTERS/Joshua Lott

Fred Creasey, the former comptroller who oversaw the finances for Black’s media empire, said that company documents filed with the U.S. Securities and Exchange Commission did include millions of dollars in so-called non-compete payments to company executives.

“Shareholders were told, then, exactly how much of the proceeds of the sales of U.S. community newspapers were paid to individual officers?” defence attorney Michael Schachter asked Creasey.

“I believe so, yes,” Creasey replied, in his second day of cross examination.

Last week, Creasey testified he spent a “hectic” week in 2003 trying to document whether the boards of directors of Chicago-based Hollinger International Inc., and its Toronto parent, Hollinger Inc., had seen and approved the payments.

At issue were two sets of payments made to Black and three associates from two huge sales of Hollinger International properties — one of U.S. community newspapers and the other of Canadian papers — as Black unwound one of the world’s largest media conglomerates.

The non-compete payments were money set aside from the purchase price to satisfy a guarantee that Hollinger — or any executive who signed a non-compete agreement — would not re-enter a market where one of its newspapers had been sold.

Prosecutors contend most of the payments were illegal and that Black and his three co-defendants diverted a total of about $60 million (30 million pounds) from Hollinger International by sending payments from non-compete agreements to themselves and to entities more closely controlled by Black such as Hollinger Inc. Black then used the money to fund a lavish lifestyle, prosecutors said.

Of the C$3.2 billion (1.4 billion pounds) realised from the sale of Canadian papers to CanWest Global Communications in 2000, C$80 million was allocated to non-compete payments including C$12 million to Black and C$1.3 million each to co-defendants Jack Boultbee, his chief accountant, and Peter Atkinson, his top lawyer.

Prosecutor Julie Ruder, resuming her questioning of Creasey on Monday afternoon, sought to show how regulatory filings either mischaracterized the non-compete payments to executives as necessary to the deals or incompletely explained which executives got how much.

“Where did it say in the (regulatory filing) that Mr. Boultbee was going to receive non-compete money as a result of the CanWest deal?” she asked Creasey.

“It doesn’t,” he replied.

Regarding non-compete money paid to the executives by the U.S. subsidiary of Hollinger International after the sale of U.S. papers worth nearly $500 million was completed, Ruder asked: “Are shareholders being told that the $5.5 million was part of the sale of the United States newspaper group?”

Creasey replied they were.

“Was that accurate?” she asked. Creasey responded, “No.”

Last week, Black’s Canadian attorney, Edward Greenspan, attempted to rebut prosecution charges that Black misused one of Hollinger International’s two corporate jets, for which Creasey kept the books, by charging the cost of a flight to the South Seas island of Bora Bora to Hollinger.

He got Creasey to confirm that Black “worked all the time” and the company had set up guidelines for allocating the cost of Black’s flights to his various holding companies.

Creasey also testified that he had overcharged Black for the cost on a Canadian tax document showing Black’s tax liability for the C$565,326 benefit of using the plane.

Black has called the charges a “massive smear job” and he and the three other executives have pleaded not guilty in U.S. District Court. If convicted, the Canadian-born Black, 62, could spend years in prison and face $92 million in forfeitures.

Also charged are Boultbee, Atkinson and Mark Kipnis, who was an attorney at Hollinger International.

Another executive, David Radler, has pleaded guilty in exchange for a 29-month sentence, a $250,000 fine, and an agreement to testify against the others.

Hollinger International, since renamed Sun-Times Media Group Inc., once controlled a portfolio that included the Daily Telegraph of London and the Jerusalem Post.

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