Company memo presented to Conrad Black trial

Payments totalling $9.5m (€6.9m) that prosecutors say belonged to Hollinger International shareholders went instead to media mogul Conrad Black and four other executives, a company memo showed.

Controversy over the money has been a focus of testimony at the trial in the US of former Daily Telegraph boss Black and three other men who are accused of plundering enormous sums from the newspaper conglomerate they once ran.

Two representatives of another company, Community Newspaper Holdings, testified that when they purchased a group of Hollinger papers in 2000, a Hollinger lawyer asked them just before the closing to change the wiring instructions for distributing the money and include the payments.

But they refused, saying the payments were not in the contract.

“At the end of the day, I did not feel comfortable wiring money from this closing to individuals, two of whom I did not know from Adam’s house cat,” Community Newspaper Holdings lawyer Thomas Barnes Henson told the court in Chicago.

But prosecutors yesterday introduced a November 2000 memo in which Hollinger lawyer Mark Kipnis ordered a fiscal officer of a Hollinger subsidiary, Ronald McBride, to cut cheques and send them by Federal Express.

Black and David Radler, his longtime No 2 man, were to get $4.3m each, while Hollinger executives John Boultbee and Peter Atkinson were to get $450,000 each and Kipnis himself was to get $100,000.

The money for Black, Radler, Boultbee and Atkinson was described as proceeds of agreements on their part not to compete with Community Newspaper Holdings in markets where the newspapers they bought circulated.

In his memo, Kipnis described the $100,000 dollars as a bonus for himself.

The $92m sale of a group of Hollinger newspapers to Community Newspaper Holdings Inc (CNHI) included $3m in payments for a promise from Hollinger International and Hollinger Inc, a related company, that they would not re-enter the markets where the newspapers circulated.

Such non-competition payments are normal in the newspaper industry. But prosecutors say the shareholders should have received the money and that Black used such payments as a device to drain cash out of Hollinger.

Over the last two days, Henson and former CNHI chief Michael Reed testified that they wanted such an agreement from Hollinger International.

But they said they had no interest in getting a non-competition agreement from Hollinger Inc, a Toronto holding company that Black used as a vehicle to control the larger Hollinger which was based in Chicago.

They testified that Hollinger executives wanted “Inc” included.

Prosecutors say the payments to Hollinger Inc were part of Black’s scheme to get money out of the company.

But they said Black and his fellow executives took a further step and asked CNHI to include payments to them as individuals in exchange for non-competition promises.

“Is there anything in the closing agreement that indicates these four executives would be getting $9.5m,” Assistant US Attorney Edward Siskel asked Henson. Henson answered: “No, Sir.”

“Is there anything in the non-competition agreement that indicates these four executives would be getting $9.5m,” Siskel asked.

“No, Sir,” Henson said.

Henson testified that Kipnis asked him to write the names of Black and the other Hollinger executives into the wiring instructions. But he said that he refused.

“I did not want to be put in a situation some time later in which someone would be asking me why my handwriting was on these payments,” Henson said. He said Kipnis then wrote the names and amounts on the paper.

In cross examining Henson, Kipnis’ attorney Michael Swartz portrayed his client as new to the newspaper business at the time of the deal and just learning how the industry worked. Prodded by Swartz, Henson said he realised that Kipnis was negotiating on behalf of Hollinger higher-ups.

Henson also said under cross examination by Black attorney Edward Genson that he never met Black at the time of the deal. Genson has been saying that anything wrong was the fault of Radler, who has made a deal with prosecutors and now is expected to be the government’s star witness.

Genson has been hammering at the idea that Black had left operations in western Canada and the United States to Radler while keeping eastern Canada and Britain for himself.