Ethics Newsline®

CHICAGO
Conrad Black, who once owned the world’s third-largest media empire, faces up to 20 years in prison after being convicted of fraud and obstruction of justice in what prosecutors charged was a scheme to cheat shareholders.

A jury in Chicago also found three former executives of Black’s media firm, Hollinger International, guilty of mail fraud, reports the Chicago Sun-Times, formerly owned by Black.

Although his passport was confiscated, Black was allowed to remain free on $21 million bail until a July 19 hearing, Reuters reported.

Prosecutors said Black illicitly funneled money to himself and other top Hollinger executives under “non-compete agreements,” and illegally billed shareholders for personal expenses, such as lavish parties, vacations, and an apartment, according to MarketWatch.

A non-compete agreement is generally drawn up by a buyer of a firm and requires the sellers not to set up competing business. Ironically, notes the Globe & Mail, Black’s gigantic empire was felled ultimately by three small-town newspapermen who balked at what they viewed as suspicious side deals hidden in the fine print of their non-compete agreements when they bought small Hollinger properties.

The trial, the latest in a five-year U.S. crackdown on corporate fraud, became emblematic of the backlash against big business in the wake of scandals such as Enron, Tyco, and WorldCom.

Also, notes the Financial Times, the case was one more indictment of the shortcomings of “showpiece” boards of directors who fail to scrutinize CEO actions until the firm is in deep trouble.

In an editorial, the Financial Times said the verdict, which also included acquittals on some charges, was a carefully wrought decision that “sent a clear message. It cannot be accused of throwing the book at Lord Black and his fellow defendants because its members harbored a populist prejudice against corporate fat-cats. They deliberated for 11 days before returning a finely judged verdict.”