An outside lawyer advised Conrad Black’s co-defendants that millions of dollars in “non-compete” payments destined for their pockets could be kept private if they wanted, according to testimony Thursday in the former media mogul’s fraud trial.
But the Hollinger International executives ignored that advice, opting to disclose the names of individuals who would receive money from the payments, according to testimony from Darren Sukonick, a lawyer from Toronto law firm Torys LLP.
That firm advised Hollinger International in the 2000 sale of Canadian big-city newspapers to CanWest Global Communication Corp., a $3.2 billion deal included that included payments from CanWest in exchange for Hollinger’s promise not to compete with the papers in areas where they circulated.
Black, 62, and two of his three co-defendants — former Hollinger chief financial officer John Boultbee and former vice president Peter Atkinson — are accused of pocketing $60 million in payments from companies that bought Hollinger International newspapers in exchange for promises not to compete with the papers in areas where they circulated.
While such payments are common in the business world, prosecutors say the money belonged to Hollinger shareholders, not executives.
Former Hollinger International President David Radler also was accused of pocketing money, but he pleaded guilty in return for a lenient jail sentence of 29 months and an agreement to testify against Black.
A third co-defendant, former Hollinger lawyer Mark Kipnis, is charged with helping to arrange the transactions.
Sukonik said he “was recommending for privacy reasons” that the payments not be disclosed in the CanWest deal.
Sukonick had testified Wednesday that non-compete payments may have lacked proper approval and may not have been properly disclosed. He suggested bonuses and other taxable payments were disguised as non-competes — which were not taxed in Canada at the time — under the advice of Torys lawyers.
But in a grueling cross-examination by the lawyer for Atkinson, Sukonick admitted he suggested several times that Hollinger pitch the idea of paying non-compete fees to company executives as a way to avoid a tax hit.
In the CanWest deal, non-compete payments that went to Black and Radler are not in dispute. But prosecutors say Atkinson and Boultbee were added later, and Black is accused of conspiring to arrange payments to the others.
In addition to his alleged involvement in the redirection of so-called ‘non-compete’ payments, Black also is accused of misusing about $20 million in company funds for personal expenses, including a vacation with his wife to the South Pacific island of Bora Bora.
Sukonick, who testified via prerecorded video, said he suggested that all the payments were to go to Black’s holding company Ravelston, “that way, CanWest need not know how much has been allocated to each individual.”
That was in response to an e-mail from Atkinson, read in court, in which the former Hollinger executive raised concerns about proper tax disclosure.
“In view of the importance of the tax issue to the recipients of the non-compete payments, these cheques to each individual and Ravelston should, I believe, be made to the individuals,” Atkinson wrote.
Sukonick testified that he didn’t see anything wrong with keeping the amounts of the personal payments from CanWest ‘for privacy’ and had believed it was Hollinger’s management that would decide how to distribute them.
Boultbee and Atkinson decided against that tactic, opting instead to have the money sent to Hollinger International, which would pass it on to the individuals. The final CanWest agreement named all the defendants and cited the non-compete payments as a closing condition.
The trial adjourned for the week Thursday afternoon, with the prosecution set to next call two more attorneys, including Paul Saunders, who was former U.S. Secretary of State Henry Kissinger’s lawyer. Kissinger was a member of the Hollinger International board.