Black Thursday for Conrad

The embattled newspaper magnate is charged with wire and mail fraud. Can U.S. prosecutors get him down from Canada for trial?

By Diane Brady

When it comes to legal battles, Conrad Black draws no quarter. Just hours before being indicted on Nov. 17 on criminal charges, the former chairman and CEO of Chicago-based Hollinger International (HLR ), which owns the Chicago Sun-Times, filed a $1.8 million libel lawsuit against a Canadian author. This was on top of a defamation lawsuit he already had filed against Hollinger. He dropped another defamation suit against a Canadian magazine earlier this year.

Now, the 61-year-old media baron and British lord has more than just his reputation to worry about. If found guilty of eight counts of wire and mail fraud, he could face up to 40 years in prison and $2 million in fines.

In the indictment, U.S. Attorney Patrick Fitzgerald of Chicago charges that Black and three other former Hollinger execs -- John Boultbee, Peter Atkinson, and Mark Kipnis -- "fraudulently diverted" almost $84 million of shareholders' money. He is also accused of abusing Hollinger perks by, among other things, using the company jet to fly to Bora Bora for a holiday and paying for wife Barbara Amiel's $42,000 birthday out of company coffers.


  Former Hollinger President David Radler pleaded guilty to a single count of mail fraud in September, and has been cooperating with prosecutors to get a lighter 29-month sentence.

Black's lawyer, Edward Greenspan, issued a statement on Nov. 17, saying that Black "asserts his innocence without qualification with respect to each and every one of the charges set forth in the indictment. It will be shown that he has, at all times, acted within the law. He is confident that, if given a full and fair opportunity to defend himself, he will be found innocent."

The question now is whether U.S. prosecutors will be able to bring the flamboyant Canadian executive south of the border to face trial. He's residing in Toronto -- despite having renounced his Canadian citizenship four years ago, after former Canadian Prime Minister Jean Chretien tried to stop Black's appointment to Britain's House of Lords on the grounds that the law forbids Canadians from being granted foreign titles, Black simply renounced his citizenship to become Lord Black of Crossharbour, a British subject.


  Already, he has been playing U.S. and Canadian jurisdictions against each another. He has asked the Supreme Court of Canada to prevent his Toronto-based holding company, Ravelston Corp., from entering a plea of "not guilty" to a separate U.S. indictment in August. His argument, which has failed to win court support so far: American regulators have no jurisdiction over the Canadian company.

Meanwhile, in a separate investigation by Canadian regulators, Black has tried to essentially cite a Fifth Amendment right against self-incrimination -- even though there's no such thing north of the border. Canadians can compel someone to answer questions in a civil or regulatory case. But Black's lawyers have argued that the information they give in Canada could be used in the U.S. case.

Black's troubles began with shareholder protests two years ago over the alleged misappropriation of Hollinger funds by top management. Angry investors cited extravagant bonuses to executives and complained that Black was treating the public company as his private ATM to fund personal pursuits such as the $9 million purchase of Franklin Delano Roosevelt's papers and memorabilia (Black was writing a book about FDR at the time).


  Certainly, the climate that nurtured Black's alleged excesses has changed -- with less tolerance today for cozy boards, lavish payments, and autocratic management. Still, the penalties that Black ultimately faces may depend on which jurisdiction is able to bring him to court.

Ironically, a Nov. 15 Toronto party at which Black served his libel lawsuit against Canadian author Peter Newman was produced by former Livent chief Garth Drabinsky, according to Canadian press reports. The former producer of such Broadway shows as Phantom of the Opera isn't a household name among Americans. But he's well known in legal circles for having avoided 8-year-old U.S. criminal charges for alleged fraud by staying north of the border.

Faced with the threat of prison in the U.S., Black may find himself spending more time in Toronto, too.

Brady is a senior writer for BusinessWeek

Before it's here, it's on the Bloomberg Terminal.