Former Illinois Gov. James R. Thompson said at media mogul Conrad Black’s trial Tuesday he once took his wife for a three-day stay at a plush London hotel at the expense of the Hollinger newspaper empire.
The stay at Claridge’s Hotel was in conjunction with a meeting of the Hollinger International board, headed by Black, and ended with an elegant dinner addressed by British Prime Minister Tony Blair.
“Who paid?” asked Black defense attorney Edward Greenspan.
“Hollinger, I presume,” said the four-term Republican governor, who was a member of the media company’s board of directors for more than a decade.
Greenspan tried to paint the trip as a lavish expense for shareholders, much like the two-week vacation by Black and his wife to the Pacific island of Bora Bora that prosecutors say was a shareholder ripoff.
Greenspan suggested that bringing the whole Hollinger board to London with spouses for a stay at Claridge’s could have cost as much as $500,000, but that figure was no more than a loose estimate at best.
Black, 62, a Canadian-born millionaire who became a full-fledged British lord, is charged with swindling Hollinger International out of $84 million by selling off papers and pocketing payments from the buyers.
The payments were in exchange for promises not to return to the papers’ circulation areas and go into competition with the new owners.
Such “non-compete” payments are not unusual but federal prosecutors say Hollinger International shareholders should have received the money.
Black and co-defendants John Boultbee, Peter Y. Atkinson and Mark Kipnis say that nothing they did was illegal.
Thompson, who until recently was chairman of the big Chicago-based Winston & Strawn law firm, was returning to the courthouse where his track record as a corruption-busting prosecutor launched him to the Statehouse.
He seemed relaxed and affable on the witness stand, where both lead prosecutor Eric H. Sussman and Judge Amy J. St. Eve called him “governor.”
Thompson said that as chairman of the audit committee of Black’s big newspaper holding company he approved the sale of numerous Hollinger-owned community papers across the United States without realizing that the deals were putting money that might have gone to shareholders in Black’s pocket.
He echoed testimony from two other audit committee members who said they too were unaware that a large-scale selloff of community newspapers by Hollinger starting in 1998 was enriching the top executives.
Sussman began by focusing on Hollinger International’s sale of American Trucker magazine to Primedia Inc. in November 1998. The deal resulted in $2 million of the sale price being sent to Hollinger Inc., a small, sounds-alike, Toronto-based holding company owned largely by Black.
Thompson said that even though as chairman of the audit committee he was supposed to play a watchdog role in such sales he was not told that $2 million of the American Trucker sale price was going to the Toronto firm.
“When did you learn that the transaction sending $2 million to Hollinger Inc. had occurred?” Sussman asked.
“Much later,” said Thompson.
He said the audit committee should have been told about the payment because it was “a related-party transaction” – meaning that Black, who was the boss at both Hollingers, was effectively making a deal with himself.
In 2000, Hollinger also sold community papers to Paxton Media Group, Forum, Horizon Publishing Co. and Community Newspaper Holdings Inc. and each of the deals sent money to Hollinger executives or Hollinger Inc.
Thompson testified that the audit committee was not informed about non-compete payments to Hollinger Inc. and Hollinger executives that were part of the deals.
The biggest sale sent all but a smattering of Hollinger’s hundreds of Canadian community newspapers to CanWest Global Communications Corp. for $3.2 billion. Black and three other Hollinger International executives, F. David Radler, Boultbee and Atkinson shared in $80 billion in non-compete payments.
Prosecutors maintain that Hollinger executives lied to the board when they said that CanWest wanted such agreements with Atkinson and Boultbee.