Black Trial Hears of Payments to Hollinger Honchos

28 March 2007

CHICAGO: The fraud and racketeering trial of fallen media baron Lord Conrad Black and three former associates, heard prosecutors outline how the accused quartet allegedly diverted millions of dollars from newspaper publisher Hollinger International [H-Intl] and into their own pockets.

Buyers of hundreds of community newspapers from H-Intl (now known as Sun-Times Media Group) paid 'non-compete' fees to the latter, which in turn promised not to operate a rival title in the same market.

The government says this money should have gone to H-Intl's investors, but was instead paid into Black's holding company Hollinger Inc [H-Inc] before finding its way into the defendants' pockets. Black and his fellow accused all deny wrongdoing.

Prosecution witness Michael Reed, former ceo of Community Newspapers Holdings, told the court he bought a number of titles from H-Intl for $433.8 million (€325m; £220m), with $50 million set aside for non-compete payments.

Reed testified some of that money was earmarked not for H-Intl, but for H-Inc. The jury also heard about a further $92.08m deal which included $3m set aside for non-compete fees. A quarter of that went to H-Inc, he said, although he never asked for non-compete agreements with anyone other than H-Intl.

Reed was asked who insisted on inserting the H-Inc agreement into the deal. He named former Hollinger counsel Mark Kipnis, one of Black's co-defendants. Kipnis is accused by prosecutors of drawing up the deal that diverted the money to his boss.

At the last minute, claimed Reed, Hollinger executives gave his company instructions on how to wire $4.5m to Black, plus a similar sum to David Radler - who is to appear as a witness for the prosecution later - and lesser amounts to John Boultbee and Peter Atkinson, the other two co-defendants.

Reed told the court he refused to agree the transaction because: "It did not seem like the right thing to do." There was no provision for individual payments to the Hollinger executives in the contract.

Despite this refusal, the deal was closed and, prosecutors allege, the money was transferred by other means.

Black's defense lawyer Ed Genson suggested the fact that Reed had not asked for the non-compete agreements from the executives individually did not make them any less valid.

The trial continues.

Data sourced from New York Times; additional content by WARC staff