Maggie's Farm

I was confused by the charges, too, until I started following the trial which was heavily covered in our local Chicago news and talk programming. Here is my understanding of what Black was found guilty of doing. You'd never know it from Black's comments on the case.

According to prosecutors, Black and friends fraudulently arranged the payment of personal non-compete fees in the millions of dollars on the sale of several Hollinger owned papers in regional markets. Here’s how it worked, according to what I heard and read in reports and discussion of the trial.

The publicly-owned Hollinger company sold off some publications in markets they wanted to get out of. According to trial testimony from buyers, after the deals were worked out, non-competes were written into the deals, specifically directing 75% of fees to Hollinger and 25% of the non-compete fees to companies privately held by Black and several of his associates. Importantly, these privately held companies were not otherwise part of the sales and were selling nothing other than non-compete agreements that weren’t sought by the buyers. According to prosecutors, Black and associates simply piggybacked these unnecessary deals for personal payments inside of deals that were between the publicly owned Hollinger and the buyers.

The real problem was that these private non-compete fees sought by Black and associates weren’t added to the top of the sale price. The buyers testified that they had no expectations of non-compete agreements. They testified that they knew that Hollinger had no interest in returning to these markets, but that as long as Black and friends wanted to add all of these non-competes at no cost to the buyer, why reject them? I recall that one of the buyers chuckled when he explained this (I assume because the motive was obvious). Black and friends had no interest in simply giving the buyers something they hadn’t sought for nothing. Essentially, Black and friends sold personal non-compete agreements to buyers who hadn’t sought them while Hollinger shareholders paid these non-compete fees out of proceeds from the sale. The result was that millions that should have gone to Hollinger shareholders ended up in the private coffers of Black and friends. On top of that, Hollinger was locked into unnecessary non-competes that cost the company money while enriching Black and his friends As they say, if it walks like a duck and quacks like a duck...

Whatever the background of factional corporate infighting, civil suits were brought by Hollinger shareholders when these personal deals came to light. Board members testified that they were not informed that these personal non-competes benefiting Black and friends were written into the sales and that those charged with explaining the relevant issues in the deal were actually part of the scheme. They were emphatic that they would have had a problem with these private agreements had they been informed.

Apparently, testimony from witnesses and evidence presented by the prosecutors convinced the jury and the judge in the criminal trial that Black was guilty beyond a reasonable doubt.

Patina,

I think the fraud related convictions rested on a few things. While a non-compete is usually desirable, the buyer normally seeks it, not the seller. In this case the buyer neither sought nor required the non-compete to do the deal. Instead, the non-compete was introduced by those representing Hollinger in the transaction -- a senseless decision unless you look at the private motives of the players who were not acting in Hollinger’s interests as they were legally obliged. Compounding this, there was evidence of fraud to cover up the insertion of the non-competes presented at the trial. For example, Jim Thompson, former Republican Governor of Illinois, CEO of Winston and Strawn and head of the Hollinger audit committee testified that the non-compete information was withheld from the audit committee. After the trial, he commented in an interview that Black was only convicted on those non-compete contracts in which the audit committee was "deceived."