Conrad Black’s Appeal

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

The appeal Conrad Black is making from his jail cell at a federal prison in Florida is nearing a crucial stage. His appeal was rejected in June by a panel of the 7th United States Circuit Court of Appeals, but the panel’s decision conflicts with others in the circuit, and Conrad Black, who was a founding director of this newspaper, is asking the circuit to hear it en banc. The question centers on how broad is the reach of the law of what is called honest services. If Conrad Black’s conviction is allowed to stand, a precedent will be have been set that could leave thousands of executives of companies at the mercy of prosecutors with exceptionally, even unconstitutionally, broad discretion over what is and is not illegal behavior.

Conrad Black’s case began with an investigation that was summarized in a document known as the Breeden report, after Richard Breeden, a former chairman of the Securities and Exchange Commission who was brought in by Conrad Black to look into shareholder complaints. Mr. Breeden eventually accused Conrad Black and other controlling shareholders of running a “corporate kleptocracy” and transferring over a period of seven years more than $400 million to themselves or their affiliates. In the end, federal prosecutors charged him and three others with stealing $60 million.

The prosecutors froze enough of Conrad Black’s assets and sought enough bail — among the highest in American history — that the press baron was unable to retain the type of corporate defense lawyer he would have otherwise hired to handle such a case. Yet he maintained his innocence throughout and was, in a stunning victory, vindicated on nine of the 13 counts he faced. The jury found him not guilty of improperly using company funds for a birthday party for his wife. Not guilty of improperly using the company jet to fly to the South Pacific. Not guilty in the sale of his apartment in New York. Not guilty of most of the non-competes. Not guilty on tax evasion, and not guilty of racketeering.

It turned out, in other words, that for all the hellfire and brimstone from the prosecutors and Mr. Breeden, Conrad Black was cleared of running a “corporate kleptocracy.” Of the four counts on which he was convicted, one related to obstruction of justice for moving some boxes out of an office in Toronto that Hollinger Inc. had ordered Conrad Black to vacate, though no evidence was introduced that the contents were relevant or tampered with; the boxes and their contents were returned promptly to the court’s control. Andrew Frey, his appeals counsel and a deputy solicitor general under three presidents, said of the obstruction charge, “this is the weakest case I’ve seen in 45 years.”

The three counts of mail fraud on which Conrad Black was convicted involved about $3 million, most of which covered what the defense maintains were duly owed management fees. In convicting Conrad Black of fraud, the jury failed to state conclusively that it found the press magnate to have stolen any property. It never had to, because the court didn’t require it to, though one can imagine that if one is going to go to jail for six years, it would be logical for the jury to have been required to address that question in the affirmative. Under the prosecutors’ theory, with which the trial court went along, Conrad Black was alleged to have both stolen property and deprived Hollinger Inc. of his honest services. The jury had to conclude only one or the other and didn’t need to say which.

Imagine one’s own life hanging by that gossamer. What are honest services? The concept was put into the law to deal with persons who didn’t take something tangible, like a painting off the wall or money from a till, but nonetheless did something wrong. Prosecutors often use the honest services theory to charge businessmen or public officials who accept bribes, thereby depriving their employers of their honest services. In Conrad Black’s case, however, the company wasn’t deprived of anything, and it starts to look like prosecutors’ decision to toss in that charge — and the judge’s failure to instruct on the point — had the effect of radically lowering the burden of proof.

After all, the jury’s verdict may mean only that Conrad Black was convicted for receiving management fees he was owed. For tax purposes in Canada, the money was described as a non-compete fee. That was fine with Canada and cost Hollinger no more or less. The press magnate’s lawyers are arguing that Conrad Black was in effect convicted for getting, with Hollinger’s help, a nice tax break in Canada, one to which the Canadians have no objection. Or, to put it another way, prosecutors are bending the law to send Conrad Black to prison even if he didn’t take a single penny from Hollinger that he wasn’t owed and after a jury has acquitted him of tax evasion.

And who has won from this? Certainly not the shareholders. Richard Breeden’s investigation alone cost more than $25 million, a sum that is about eight times more than what is at issue in Conrad Black’s convictions. And the government’s case — which occupied federal prosecutors in Chicago for about four years now — hasn’t been cheap for taxpayers. Meanwhile, the value of shares in Conrad Black’s newspaper empire has evaporated since he was deposed from the helm of Hollinger. It’s an astonishing collapse. And newspapers from Chicago to London to Jerusalem that were built or restored to greatness by Conrad Black’s proprietorship have been sold off or reduced, as he sits in jail.

* * *

And there but for the grace of God and the United States Court of Appeals for the 7th Circuit en banc could go a lot of businessmen. Conrad Black’s lawyers are calling on the 7th Circuit to limit the use of the “honest services” law in most white collar crimes. The three judge panel that heard Conrad Black’s appeal gave short shrift to his lawyers arguments and briefs and handed down an opinion that was riddled with factual errors and failed to deal with the constitutional issue. Hence the appeal for an en banc review. If prosecutors believe that a theft of millions of dollars occurred, wouldn’t it be the American way for them to have to prove in court that the theft occurred, rather than be able to score easy convictions by using the law of “honest services” in a way that is unconstitutionally vague? Conrad Black deserves a more reasoned and thorough review — either by the full 7th Circuit or by a United States Supreme Court that can establish a consistent standard across the country.


The New York Sun

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