Thursday, June 21, 2007

The Innocence of Conrad Black

Following up on my ill humour about the American Justice system, I thought I'd offer my thoughts on the Conrad Black case itself- namely, who is guilty, what the state of affairs is in the trial, and what actually happened.

First, a little background. Conrad Black and David Radler were partners who build the Hollinger empire of newpapers. At the relevant time, they held minority equity stakes in Hollinger International, a US company. Hollinger International, however, was controlled by Hollinger Inc., a Canadian company. Hollinger Inc. was controlled by Ravelston, a Canadian private company itself controlled by Black and Radler. Black & Radler ran all three companies as well as controlling them, and on an operational level, Black handled Eastern Canada and Great Britain, while Radler was in charge of the US operations and Western Canada.

Conrad Black lived the high life, and was a significant consumer of corporate perks- a corporate jet, an apartment, some of his social costs. It's fair to say that Black didn't have a strict division between his social and living expenses and his business expenses. At the same time, however, Black's life, particularly his social life was not easily divided between the personal and the business-oriented. What in fact we find are fairly reasonable divisions of costs between Black and Hollinger where there truly was a mixed personal and business purpose to the activities. Oddly, I'd have expected this element of the case to bring out some more egregious examples of billing the company. However, the prosecution didn't come up with stronger accusations, presumably because they don't exist. I strongly suspect these counts are only part of the government's indictment in order to attempt to generate a negative impression with the jury.

On to the meat of the case: non-competes. Beginning in about 2001, Hollinger International began to sell a great number of its North American papers. The first big deal was the CanWest deal, an enormous business deal. In that transaction, the buyers sought out non-competes from Black & Radler, and they were granted. Hollinger then began to sell off small American community papers, which were handled by Radler. In these transactions, non-competes were a standard term, but were not requested by the buyers. Nonetheless, the evidence suggests that these non-competes were legally permitted to be inserted by the vendor, and the Hollinger audit committee repeatedly signed off on them. In other words, the non-competes were not illegal. Just as importantly, Black was not involved in the negotiations, and there is no evidence except the word of the self-confessed liar Radler that he conspired to insert the non-competes.

Finally, Radler sold a number of papers to a company that he ran, and that Black was an investor in. The evidence shows that Black agreed to be an investor because Radler didn't have the capital to buy all the papers, and that Radler deceived Black by effectively giving himself control of the new company. There was a non-compete in this sale as well, meaning effectively that Radler & Black were paying themselves not to compete with themselves. This appears criminal to me. However, again there is no evidence aside from that of Radler to show that Black approved or even knew about this arrangement.

In conclusion, I will be outraged if Black or any of his co-accused are convicted on any counts whatsoever.


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