CHICAGO: The trial of Lord Conrad Black and three ex-ssociates was last week regaled with the saga of how the former chairman/ceo of Hollinger International [H-Intl] swapped his luxury New York apartment with a larger adjacent unit owned by the company.
Former H-Intl head of investor relations Paul Healy told the court that the larger apartment was acquired by the company in 1994 for $3 million then extensively remodelled. The smaller was bought by Black personally in 1998 for $499,000 but renovated at H-Intl's expense
In 2000, ownership of the two properties was switched with Black paying the difference between the respective purchase prices - $2.501m.
But the transaction took no account of the massive increase in Park Avenue property values over the intervening six years. Was the price paid by Black too low, asked prosecutor Ed Siskel?
Healy: "It's my belief that if nothing had been done to that apartment, if it had been left vacant, the company's interest in the apartment would have been worth more than $3 million." The increase in value over the period would have been "significant."
Siskel: "Who received the benefit of that increase?"
Healy: "Mr Black."
Prosecutors have accused His Lordship and co-defendants of swindling shareholders out of millions of dollars. They allege the deal on the apartment was another example of his disregard for investors.
But under cross-examination by defense lawyer Patrick Tuite, Healy conceded the counsellor's argument that "it seemed logical" to factor into the purchase price the cash Black had personally spent on refurbishing the smaller property.
For the benefit of the jury, Tuite rammed home his point: "He'd [Black] be paying twice if he had to pay the increased value."
Healy had previously said he knew the fair-market value of the apartment was more than $3m, but agreed to draft a memo that stated otherwise because he just wanted to get the condo "off the books" in a bid to quieten investors' grumbles.
The witness also conceded that the memo could have explained that the price Black paid for the company-owned appartment included the $3m cost plus the $2m spent on renovations. This would have have clarified why the apartment seemed so cheap.
Black is charged with racketeering, tax evasion, obstruction of justice and fraud, which include accusations that he abused company perks such as the apartment, a company-paid surprise birthday party for his wife and a trip to Bora Bora on a company-leased jet.
He faces up to 101 years in prison and millions of dollars in fines if found guilty. The three other erstwhile executives face lesser charges. All deny wrongdoing.
Data sourced from latimes.com; additional content by WARC staff