As Black Re-Embraces Canada, Lawsuit Grinds On

By: Mark Fitzgerald

Conrad Black’s sudden desire to regain the Canadian citizenship he renounced in order to become a British lord is attracting plenty of media attention these days.

Thursday, Black was mobbed by reporters before and after his luncheon speech in Toronto at The Empire Club of Canada. As Toronto Star business reporter Rick Westhead noted in his column Friday, Black wore the Order of Canada pin he was awarded in 1990, and effusively praised Canada — while saying not a word about his impending trial in Chicago next March on federal criminal charges of fraud, racketeering and money-laundering in the alleged looting of $80 million from the newspaper publishing company he once headed, Hollinger International.

“Canada today is more important to the world than Italy,” Black said, according to the Star account. “Europe is dyspeptic with collapsed birth rates and stagnant economies. The U.S. has little disposable influence in the world, the UN is a shambles, NATO is in disarray, and the coalition of the willing is a fraud. We must not let it go to our heads, but Canada is one of the world’s great powers. We shouldn’t let that go to our heads. We should get used to it.”

Black formally applied for Canadian citizenship recently. Born in Montreal, the former newspaper magnate angrily renounced his citizenship in 2001 when then-Premier Jean Chretien used an obscure World War I-era parliamentary resolution in an attempt to block Black from accepting appointment to the British House of Lords as Lord Black of Crossharbour.

But while Black’s citizenship is getting all the attention these days, a lawsuit about Canadian citizenship that has potentially huge tax consequences for a U.S. newspaper chain is progressing virtually without notice through the Canadian judicial mill.

“We’re not backing away,” the plaintiff in that lawsuit, Ron Garth, told E&P Friday. “And of course, this is all resurfacing with Black’s situation.”

Garth, who publishes the Edmonton, Alberta, alternative Vue Weekly, last year sued the Canada Revenue Agency, alleging that the Canadian equivalent of the IRS illegally failed to issue a ruling that the Canadian newspapers once owned by Hollinger International were not Canadian-owned.

Canadian ownership is no small matter for Canadian newspapers — and it could have huge implications for those papers, their advertisers, and Hollinger International, which this summer changed its name to Sun-Times Media Group. The chain years ago sold the last of its Canadian and overseas papers to center its business on the Chicago Sun-Times, and dozens of other dailies and community papers in the greater Chicago market.

What makes Canadian ownership such a critical issue is Section 19 of the Canadian Income Tax Act. That rule provides that Canadian businesses that advertise in Canadian-owned newspapers and magazine can deduct the full cost of ads from their income taxes. There’s no such allowance for advertising in papers deemed to be foreign-owned.

Garth argues that the Hollinger papers were no longer Canadian-owned once Black — who was chairman of Hollinger until he was forced to resign in 2003 — renounced his citizenship.

To be considered Canadian, a newspaper company must have a Canadian as chairman, and Canadians must comprise three-fourths of the board of directors and control at least 75% of its stock.

The tax issue has been mentioned in financial reports of International and Sun-Times Media Group.

So far there’s not much to report on the lawsuit, Garth said Friday. Nearly everyone has been served except the Sun-Times Media Group because of the more elaborate legal procedures involved with serving a foreign entity.

“It’s one of those situations, though, where things are unfolding, and you can make more progress than we might if we were (already) doing discovery on our own,” he said.

One thing that’s unfolded since Garth’s lawsuit was filed is the suit Hollinger Inc. is bringing against Black, who was also chairman of that Toronto-based holding company that was used to control Hollinger International. Inc.’s only real asset is a block of stock that represents a 17.4% equity stake, but a 66.8% voting interest in Sun-Times Media Group.

Garth argues that one of Inc.’s central contentions — that Black schemed to strip it of its Canadian newspapers and transfer control to Chicago-based International — virtually proves his case.

“When they come out with this kind of lawsuit, it confirms, and reaffirms, our suspicions that Black was 100% involved” with ownership of the Canadian newspapers, Garth said. “It’s proved out by their suing him.”

Garth said he is pursuing the case “to put some teeth into Canadian ownership law.”

Meanwhile, Garth, who makes no secret of his disdain for Black, finds the former mogul’s current public positions interesting, to say the least. Like many on both sides of the border, Garth thinks Black’s attempts to regain Canadian citizenship have at least as much to do with hedging his bets in the event of conviction in the U.S. as for a genuine love of his birthplace. Canadian are sometimes given the option of serving their sentences in the gentler prison environs of Canada.

Black’s career-long lieutenant, the former Chicago Sun-Times Publisher F. David Radler, has agreed to testify against Black and others in a plea bargain for reduced prison time that will likely be served in his native Canada. Black and all other parties to the case have pleaded not guilty. In his most recent appearance in Chicago, Black said after a court session that “the U.S. Marines could not keep” him away from trial.

“It’s quite ironic that he would be vigorously pursuing his Canadian citizenship,” Garth said, “at same time he is claiming he has nothing to worry about.”

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