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Conrad Black, Free on Bail, Will Face Judge who Sentenced Him in Chicago

Ex-Hollinger International Inc. chairman Conrad Black, free on bail after more than two years at a Florida prison, must return to Chicago tomorrow to face the judge who handed down his sentence.

U.S. District Judge Amy J. St. Eve, who in 2007 ordered Black to serve 6 1/2 years in prison, is scheduled to instruct him on the limits of his bail. Yesterday, she ordered him released after he posted a $2 million bond with the help of a friend.

After that order, Black, 65, left the low-security Coleman Federal Correctional Institution where he had been confined since March 2008, said prison spokesman Gary Miller. Black, who is appealing mail fraud and obstruction of justice convictions related to sales of Hollinger’s assets, won’t be permitted to leave the U.S. unless St. Eve changes the terms of his release.

“His home is in Canada,” Miguel A. Estrada, an attorney for Black, told the judge at yesterday’s bail hearing, seeking greater freedom for his client. St. Eve said she would consider that request after seeing a financial statement for Black and hearing from a pretrial services officer.

Black’s Canadian assets are tied up by a court order, Estrada told the judge.

Reconsider Fraud

A federal appeals court granted Black’s petition for bail this week, following a June 24 U.S. Supreme Court decision narrowing the scope of a law relied upon by prosecutors in their case against him. The justices told the lower court to reconsider Black’s fraud conviction.

Roger Hertog, a former vice chairman of Alliance Bernstein Holding LP and chairman of the New York Historical Society, guaranteed Black’s bail. Hertog attended yesterday’s hearing and declined to comment after it.

Peter White, a longtime Black friend and a former Hollinger executive who has stayed in touch with him by e-mail, said he will probably spend his first days of freedom with his wife, Barbara, who divides her time between Florida and Toronto.

Black will stop at a Palm Beach, Florida, house he once owned to pick up clothes and perhaps stay a night or two before going to Chicago, Estrada said. Black, whose passport expired, will need a letter from the prison allowing him to board a flight to Chicago, according to his lawyers.

Restricted Travel

Before trial, St. Eve restricted Black’s travel to the regions surrounding the federal courthouse in Chicago and his Palm Beach mansion. He was barred from traveling to his native Canada while on bail.

St. Eve, inquiring about the status of the Florida property yesterday, was told by Estrada that Black has retained a “contract interest” in the house and can re-acquire title if he pays an outstanding lien by September.

Black, writing in an April column for Canada’s National Post newspaper, denied that his home had been foreclosed on and sold. Toronto’s Globe and Mail newspaper in March reported the property was conveyed to a Connecticut investment firm, Blackfield Holdings LLC.

Property Sold

Local property records show the house at 1930 South Ocean Blvd. was sold in February for $11.6 million. Palm Beach real estate agent Linda Gary, reported by Toronto’s Globe and Mail to be handling the sale, didn’t return calls seeking comment.

The house is on the market, Estrada told the judge.

The amount of Black’s new bond was agreed to by both sides, Assistant U.S. Attorney Julie Porter told St. Eve yesterday.

Black and three associates were found guilty of stealing $6.1 million from Hollinger International as they engineered sales of its assets. Black was sentenced to 6 1/2 years on the obstruction of justice charge and received a five-year concurrent sentence for fraud.

The Supreme Court, siding with Black and former Enron Corp. Chief Executive Officer Jeffrey Skilling in separate rulings on June 24, said a law that makes it a crime to “deprive another of the intangible right to honest services” may be used only in cases involving bribery or kickbacks. Black faced no such allegations in his prosecution, the justices said.

Obstruction of Justice

The Supreme Court didn’t deal with Black’s crime of obstructing justice.

Black led Hollinger, then the world’s third-largest publisher of English language newspapers, as its CEO from 1995 to 2003, and served as its chairman from November 2003 to January 2004. The Chicago-based company is now known as the Sun- Times Media Group Inc.

Black sold most of the newspaper assets to Canwest Global Communications Corp. in 2000 for C$3.2 billion ($3 billion), having boasted that he convinced Canwest then Chairman Israel “Izzy” Asper to overpay.

The U.S. Internal Revenue Service claims Black owes the U.S. government almost $71 million in unpaid taxes and penalties, according to court records.

Tax Case

The IRS said Black failed to pay taxes on his personal use of Hollinger jets, corporate money he spent on papers by President Franklin D. Roosevelt and his private secretary, and Hollinger’s 2000 purchase of a $5.9 million New York apartment for his use. Black wrote a biography of Roosevelt.

Black has asked the U.S. Tax Court to throw out the assessment, which covers payments due for 1998 to 2003. He said in a petition that the IRS relied on “sloppy and careless” findings, from an investigation that led to his conviction, when authorities compiled estimates of his income and unpaid taxes.

Black said he wasn’t required to file tax returns because he wasn’t a U.S. resident, court records show.

The IRS suit against Black was filed April in federal Tax Court in Washington.

A status hearing on remaining U.S. Securities and Exchange Commission allegations in its case against Black, which was on hold while criminal proceedings advanced, is set for Dec. 16, according to a July 19 court filing.

SEC Lawsuit

The SEC, which sued Black in 2004 claiming he and former Hollinger President David Radler stole $85 million from the company, won a partial judgment in 2008 that Black broke the law by making false statements about Hollinger’s dealings.

Separately, Radler settled with the SEC in 2007 and Black’s bankrupt holding company Hollinger Inc. settled with the SEC in 2008. Sun-Times Media agreed in 2007 to pay investors $30 million to settle U.S. and Canadian securities fraud cases.

The trial court case is U.S. v. Black, 05-cr-00727, U.S. District Court, Northern District of Illinois (Chicago). The appellate case is U.S. v. Black, 07-4080, U.S. Court of Appeals for the Seventh Circuit (Chicago).

To contact the reporters on this story: Andrew M. Harris in Chicago at aharris16@bloomberg.net; Linda Sandler in New York at lsandler@bloomberg.net.

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