Conrad Black is recognized as being one of the most renowned newspaper moguls in the world. This former media tycoon has also gained significant international attention for his recent civil and criminal tribulations with the law. The purpose of this report is to detail the history of Black’s fraud charges and the outcome at trial. This report will detail the controversial actions of Black and several of his business associates that led to numerous criminal charges. In addition, both the appeals of any convictions and Black’s overall time served in jail will be documented and examined. Lastly, Black’s ongoing struggle to publicly defend his name will be discussed.
Among many other business ventures, Black was CEO and controller of media conglomerate Hollinger International Inc., which was a large publicly held newspaper publisher. After years of control, scandal erupted between Hollinger and several of its executives, including Conrad Black, John Boultbee, Mark Kipnis, and Peter Atkinson. These senior executives were accused of corporate maleficence. Noteworthy troubles first surfaced for Black when Hollinger announced a US$200 million civil fraud lawsuit against him and an associate over pecuniary irregularities. A trial was held in 2007 where the allegations included the diversion of upward US$70 million in unauthorized payments made to the defendants. Jurors were required to determine whether the aforementioned executives were guilty of misappropriating millions from Hollinger by paying themselves spurious and excessive non-competition fees and then failing to disclose those charges. Note that non-competition fees are given by buyers of a business as compensation in return for a promise not to launch a competing business. If this was proved to have occurred, the prosecutors urged the jury to conclude that the defendants had shrewdly deprived Hollinger of their honest services.
Hollinger alleged that its past earnings were overstated by approximately US$17 million due to unauthorized payments being pocketed by the defendants. The defendants continuously contended that they did not misappropriate funds from the company. Furthermore, the defendants argued that the non-competition payments were legal, suitable, disclosed and authorized by the company. Adding to their legal troubles, the prosecutors aimed to demonstrate that the executive leaders performed tax evasion by restructuring management fees in order for their received payments to not be held taxable. By the end of 2005, criminal charges for Black totalled thirteen and included wire and mail fraud, racketeering, tax fraud, obstruction of justice, and money laundering, which was later withdrawn. If Black were to be convicted of all charges, he would face a maximum of 95 years in federal prison. The three co-defendants were each charged with numerous wire and mail frauds, and falsifying corporate tax returns.
During the 2007 trial, the state pursued two alternative theories to mail fraud; namely money-or-property fraud and honest-services fraud. Note that the jurors were not required to associate their verdict with a specific theory. Essentially, honest-services fraud occurs when an individual(s) cheats a company or corporation and/or misuses his or her position for personal gain. This statute required the proof of intent to breach a duty of loyalty. It was initially established to protect constituents from public corruption caused by the actions of elected politicians or government officials. It has later been applied in contemporary law to private cases where individuals are tried for having breached a fiduciary duty to another person (i.e., performing corporate fraud). As such, the jury in this case was asked to determine whether the defendants knowingly and recklessly misused company funds for personal gain or profit.
The trial carried on for fifteen weeks and jury deliberations lasted for two weeks. In July 2007, the jury acquitted Black on nine charges, including mail fraud, racketeering, and tax fraud. Guilty verdicts were returned for each of the defendants on three counts of mail fraud. Additionally, Black was found to be guilty of obstruction of justice. This supplementary charge was attributed to his 2005 removal of twelve to thirteen boxes of documents from a Toronto office as an attempt to hide records from the Securities Exchange Commission and law officials during their criminal investigation. Black had been barred, via an Ontario court order, from removing any documentation from this Hollinger building. In 2007, Black was sentenced to serve approximately six-and-a-half years in federal prison, forfeit US$6.1 million and pay a fine of US$125,000. Many, including the jurors, believed that Black acted in both a cunning and calculated manner, which was inconsistent with the fiduciary duty that he owed to Hollinger and its shareholders.
In late 2010, Black’s appeal for a new trial was denied on the basis that there was enough evidence presented to support his convictions. Unlike his co-defendants, Black was rejected from remaining free on bond until any subsequent appeals were heard. In mid-2008, the U.S. Court of Appeals upheld Black’s earlier convictions. A year later, the U.S. Supreme Court agreed to review Black’s fraud convictions based on the obscure definition of the honest-services fraud statute. This statute is controversial in nature and many, including Black, have recently argued that it requires a low burden of proof, is far too vague, and is mistakenly open to interpretation. As there is a need for certainty in the meaning and predictability in the application of all laws, the U.S. Supreme Court found Black’s case to be of extreme interest.
On appeal, Black, Boultbee, Kipnis, and Atkinson claimed invalidity of the honest-services fraud jury instructions and urged for a reversal of their mail-fraud convictions. They maintained that the jurors’ failure to specify which mail fraud theory they had based their decision gave grounds to appeal. Black’s legal team argued that the honest-services fraud statute was unconstitutionally vague. In addition, they felt that it was extremely difficult, if not impossible, for the state to prove that Black was mindfully aware that his actions would significantly improve his well-being yet economically deprive the company and stakeholders. Black’s lawyers argued that the controversial statute was misused by prosecutors as it was largely stretched beyond its initial context of protecting the public from political corruption. It was argued that the prosecutors had misled the jurors by instructing them to find the defendants guilty even if they had only failed to provide the intangible right of honest services. Another critic of this statute would be Jeffrey Skilling, former Enron CEO, who fought his convictions of conspiracy, insider trading, and securities fraud, as he insisted that the statute is too broadly applied to any unethical conduct. Ultimately, the U.S. Seventh Circuit Court of Appeals dismissed two of Black’s fraud counts but affirmed his conviction on one fraud count and his obstruction of justice charge. Mid-2011, Black was resentenced to three-and-a-half years and a fine of only US$125,000.
Following the criminal cases against Black, he has counteracted with civil lawsuits against those whom he feels have defamed him. Black was outraged by a damning report made by a special committee of the Hollinger board that referred to his leading of the company as a “corporate kleptocracy.” The special committee alleged that he had stolen millions in which he was not entitled. In 2004, Black filed an US$850 million defamation lawsuit against Hollinger and several of its directors. Later in 2004, Black filed a US$1.1 billion lawsuit for damages and punitive indemnities against the special committee of Hollinger, which was comprised of its CEO, several independent directors, and a former chairman of the U.S. Securities and Exchange Commission. His claims included defamation, conspiracy to injure, interference with economic relations and intimidation, intentional misrepresentation, and punitive damages. In February 2007, Black also filed an US$11 million libel lawsuit against Tom Bower, British author of Conrad & Lady Black: Dancing on the Edge, which he felt portrayed him and his wife in a false and libelous manner. Defamation is defined as the untrue statement(s) that injures a person’s reputation. As such, it would be highly unviable for Black to demonstrate that the statements made within the special committee report or aforementioned book were false and libellous seeing as he has been convicted on several counts of money-or-property fraud. Moreover, the various publications would likely support their remarks by means of the truth of statement defence.
In closing, as many would agree, the demise of Conrad Black was that of his own doing. This report demonstrates that looting a company and its shareholders is both an unethical and criminal action. As previously mentioned, Black’s original convictions included mail fraud and obstruction of justice. As evidenced in this report, when there is a great deal of uncertainty, laws and statutes may be reviewed and examined in order to determine their overall intention and purpose. A well-known fact is that laws are established and evolve over time to reflect the principles and concerns of society. The appeals in this case emphasize the obscurity of the honest-services fraud statute and the difficulty prosecutors may have in applying this law towards the private proceedings of a white-collar crime on a go-forward basis. Upon the U.S. Supreme Court’s decision to impose limits on the honest-services provision, it should be noted that future interpretations and applications of this statute will be restricted. To conclude, Black’s actions have not only transformed his life, but his appeals have also caused for a revision in the interpretation and application of the honest-services fraud statute.