Black trial hears of 'clever' payments
A money manager told jurors on Monday (local time) that executives at Conrad Black's newspaper publishing company used "very clever but not illegal" ways to funnel money to a Canadian holding company closely controlled by Black.
Craig Holick, former manager of corporate finance for what was then Hollinger International, said the so-called non-compete payments were "ingenious" because the money could be used for purposes other than paying off Hollinger's debt.
While the bulk of the sale proceeds were used to pay off bank debts accumulated as Hollinger grew into one of the world's largest newspaper publishers, the portions of the proceeds allocated to non-compete payments were used to enrich executives, prosecutors have said.
A portion of the sale prices of newspapers are routinely allocated to non-compete arrangements that forbid the seller from coming back into the same market.
"I said they were very clever, but not illegal," said Holick, testifying in US District Court in the third week of a criminal fraud case that accuses Black and three associates of bilking the company of some $84 million.
To date, the trial has focused on non-compete payments totaling $60 million that prosecutors accuse the executives of siphoning from Hollinger International.
"I believe the non-competes were structured so as to get money moving to upstream companies and not to satisfy (bank) debts," Holick said.
Among the companies "upstream" from Hollinger International that received the non-compete payments were Toronto-based holding company Hollinger Inc.
Prosecutors have shown that Black and his associates had larger stakes in Hollinger Inc than in Hollinger International, meaning they got a larger share of any money sent to Hollinger Inc.
In one particularly large transaction involving dozens of newspapers, $9.5 million in non-compete payments were funneled directly to Black and the others, according to testimony.
Up to now, no testimony has implicated Black as being behind the alleged scheme, but his former lieutenant, David Radler, has pleaded guilty and will testify for prosecutors.
Black's lawyer has repeatedly suggested it was Radler who arranged the newspaper sales and any diversions of the proceeds were his idea.
Holick recounted a 1999 incident in which a Hollinger International executive pressed him to send a $2 million non-compete payment to Hollinger Inc from the sale of American Trucker magazine.
The executive was Todd Vogt, a close associate of Radler.
Vogt told him the money had been mistakenly misappropriated to Hollinger International instead of going to Hollinger Inc.
Defense lawyers tried to show Holick was relying on Vogt and Radler, who told Holick the payments were also to compensate time spent by senior executives arranging the newspaper sales.
Agencies
(China Daily 04/04/2007 page16)
