Black v. United States, 561 U.S. 465 (2010), is a white-collar criminal law case decided by the United States Supreme Court dealing with businessman Conrad Black's fraud trial. Along with two companion cases—Skilling v. United States and Weyhrauch v. United States—it dealt with the honest services provision, .
Probe against Hollinger Inc. In May 2003, following shareholder complaints, a special committee appointed by Hollinger International directors began an investigation of internal financial management, including compensation and fees paid directly and indirectly to Black's associates at Ravelston, a holding company. In particular, New York investment firm Tweedy, Browne, which had an 18% stake in Hollinger International, demanded the company probe what it alleged to be excessive payments to Conrad Black and David Radler, and demanded "disgorgement" of the funds paid.Olive, David "A Conrad Black Timeline" TheStar.com March 11, 2007
For example, in 2000, in an arrangement that came to be known as the "Lerner Exchange," Black acquired Chicago's Lerner Newspapers and sold it to Hollinger. The special committee's report contained allegations of impropriety which led to a criminal investigation and, ultimately, the unraveling of the Hollinger media empire.
Black attempted to sell the controlling interest in Hollinger to British businessmen David and Frederick Barclay. The Hollinger board of directors successfully sued to halt Black's proposed transaction, though subsequent events demonstrated that the Barclays' publicly disclosed offer of $18 per share was several times higher than the share price ultimately obtained for the sale of the Hollinger assets."Auto Da Fé: Conrad Black, Corporate Governance, and the End of Economic Man", Books in Canada, December 2006
In November 2003, Black resigned as chief executive of Hollinger. By January 2004 the board of directors of Hollinger obtained Black's resignation as chairman. Hollinger International filed a $200 million (USD) lawsuit against Black, David Radler and their associated companies.
Background: earlier civil matters Black was called before the U.S. Securities and Exchange Commission in December 2003 but he refused to answer questions about business dealings, citing his Fifth Amendment right against self-incrimination.CBC News "Conrad Black: Timeline"
In May 1998, American Trucker Magazine (ATM) was sold by Southam (see also Hollinger International Inc.) in a bundled transaction including a daily circulation Western Canada newspaper for $93,672,000. The purchase and sale agreement provided for the payment by the purchaser of a $2.0 million non-competition fee to the Company. The Company failed to disclose that on February 1, 1999, approximately eight months after the sale closed, the Company transferred funds equivalent to the non-competition fee to Hollinger Inc. This transaction played a part in the trial.
In February 2004, Delaware judge Leo E. Strine, Jr. barred the Barclays sale and wrote in his judgment, "Black breached his fiduciary and contractual duties persistently and seriously... I found Black evasive and unreliable. His explanations of key events and of his own motivations do not have the ring of truth".Herman, Eric "Judge stymies Black" Chicago Sun-Times, February 27, 2004 Strine, however, also wrote that "another reasonable mind might draw different conclusions" regarding these findings of fact., Hollinger International v. Black, Delaware Chancery, February 26, 2004
In August 2004, a special committee of the Board of Directors of Hollinger International Inc. made a report of investigation to the U.S. Securities and Exchange Commission and the U.S. District Court. The special committee was headed by Richard Breeden, a former SEC Chairman who was paid approximately $100,000 (USD) per week for his work.Black, C. (2011). A Matter of Principle. McCelland & Stewart. . The report, which became known as the "Breeden Report" and which cost Hollinger International over $50 million (USD), alleged that Black and associates had without proper authorization taken cash and other assets and benefits from Hollinger and had breached their fiduciary duties to Hollinger's public majority, non-controlling shareholders.
In November 2004, the SEC filed civil fraud lawsuits against Black and several others, alleging the defendants cheated and defrauded shareholders through a series of deceptive schemes and misstatements.
Criminal case One year later, eight criminal fraud charges were brought by the Chicago U. S. Attorney against Black and three former Hollinger executives. The U.S. Attorney laid four new charges against Black on 15 December 2005, alleging racketeering, obstruction of justice, money laundering, mail fraud, tax evasion and wire fraud. Under the racketeering count, the government sought forfeiture of more than $92,000,000 (USD). The obstruction count related to Black and his chauffeur removing boxes of documents from Hollinger offices in Toronto on June 9, 2005, contrary to a court order that prohibited removal. Black contested the obstruction count on the grounds that he was obeying an eviction notice,"A Head-Scratching Verdict Against Conrad Black", The Wall Street Journal, June 28, 2011 that he knew he was being filmed because he had installed the security cameras which filmed him, that he had already provided copies of every document prosecutors had asked for, and that not a single commercially relevant document in those boxes was not already possessed by prosecutors.
The criminal fraud trial of Black and three other Hollinger International executives commenced on 14 March 2007.
Verdict and sentence After twelve days of deliberation, on 13 July 2007, the jury found Black guilty of three counts of mail and wire fraud and one count of obstruction of justice and acquitted him of nine other charges, including wire fraud and racketeering. The fraud convictions related to money taken by the executives in exchange for their agreements to not compete with various Hollinger units. Prosecutors claimed these were fraudulent agreements.Harris, Andrew "Conrad Black's Guilty Verdict..." Bloomberg.com May 2, 2008 Co-accused, Peter Y. Atkinson, John A. Boultbee and Mark Kipnis, were each found guilty of mail and wire fraud (David Radler had already pleaded guilty to fraud).
On November 5, 2007, Judge Amy St. Eve denied Black's motion for a new trial. On December 10, 2007, Black was sentenced to 78 months in jail. Twelve weeks later, the Court of Appeals denied his motion to remain free on bail while appealing his convictions. Black requested to be housed in a minimum security prison camp near Miami but the Bureau of Prisons denied his request and instead ordered him to report to Coleman Federal Correctional Complex near Orlando, Florida on March 3, 2008, to begin serving his sentence. Prior to his being granted bail, Black's projected release date was in October 2013.
Reaction and consequences Black told journalists he would continue his "long war" against the charges and said "any conviction is unsatisfactory". After the verdicts, Black's Canadian lawyer Edward Greenspan said, "The heart of their case was lost." However, former federal prosecutor and SEC enforcement lawyer Jacob Frenkel called it a "stunning victory" for the government and explained how a split verdict "highlights for the appellate court that the jury was very thoughtful and thorough in its deliberations."
Investigators hired by Hollinger companies to locate assets examined more than forty bank accounts which may be, or may have been, held in the name of Black, his wife, or affiliated entities. According to court filings, Ravelston Corp. also had a subsidiary in Barbados called Argent News Inc. and another in Bermuda called Sugra Bermuda Ltd. A report by a special committee of the board of Hollinger International Inc. said Black co-owned two Barbados companies, Moffat Management Inc. and Black-Amiel Management Inc., which both received millions of dollars in payments, the former allegedly owned by Black and his co-defendants, and the latter by Black, his wife and Boultbee. In November 2007, Sun-Times Media Group (formerly Hollinger) said in a regulatory filing that it had spent $107.7 million on legal fees and indemnification costs for criminal and civil actions involving Black, Boultbee, Kipniss and Atkinson.
After the verdict, New Democratic Party of Canada Member of Parliament Charlie Angus publicly called for Black's expulsion from the Queen's Privy Council for Canada and for his removal from the Order of Canada. The Toronto Star similarly called for then-Governor General Michaëlle Jean to remove Black from the Order. Canadian Prime Minister Stephen Harper stated that Black would have to go through regular channels to attempt to regain his Canadian citizenship, that membership in the Order of Canada is the purview of the Governor General and that decisions about the Privy Council would only take place after the legal process, including appeal, had been completed.
Black's ability to re-enter Canada is uncertain unless he obtains dispensation from the Canadian government. Were he to regain residency, "Canadian citizenship can't be granted to those who are criminally inadmissible and neither the minister nor the Governor in Council (cabinet) can override that," according to an immigration department spokesperson. The loss of his Canadian citizenship also makes it impossible for Black to be transferred to a Canadian prison where he would be eligible for parole much sooner than if he were to serve time in the United States.
Appeal Black's oral arguments were heard June 5, 2008, by a three-judge panel of the United States Court of Appeals for the Seventh Circuit. Andrew Frey argued that Black and his co-defendants did not steal from Hollinger when they authorized individual non-competition payments. Frey asserted that the monies were "management fees" and that Hollinger International shareholders were not hurt by the payments. Appeals judge Richard Posner said, "The bulk of the evidence [in the Hollinger case] has to do with pretty naked fraud."Chandler, Susan: "Judges appear cool to Black appeal" , Chicago Tribune, June 6, 2008 Posner was skeptical about defense arguments that Black did not obstruct justice by removing boxes from his Toronto office, commenting, "The timing was bizarre, the removal of the documents in the middle of an investigation." Three weeks later, on June 25, 2008, the 7th Circuit Court of Appeals affirmed the convictions. and rejected all of the arguments raised by the defense. The circuit court found that "the evidence established a conventional fraud, that is, a theft of money or other property from Hollinger by misrepresentations and misleading omissions..." The panel affirmed the jury's findings stating that, "It is not as if Black had merely been using his power as controlling shareholder to elect a rubber-stamp board of directors or to approve a merger favorable to him at the expense of the minority shareholders ... He was acting in his capacity as the CEO of Hollinger when he ordered (Mark) Kipnis to draft the covenants not to compete and when he duped the audit committee and submitted a false 10-K." Black, for his part, maintained the form in question was simply improperly, and not falsely, submitted.
Prosecutor Eric Sussman replied to news of the initial appeal decision saying, "I think at some point in time Mr. Black needs to take a hard look in the mirror and ask who it is that really doesn't understand the conduct that took place in this case…You've got 16 people who have taken a look at the facts and the law in a very detailed and time-consuming way, and they have all reached the same conclusion, which is that he stole money from this company and he tried to obstruct the investigation."Bell, Douglas, "Denied: Posner's wry prose more or less sends Black to jail until 2013", Toronto Life, June 26, 2008