On Eve Of Black Trial, Star Witness Radler Settles With STMG for $63.4M

By: Mark Fitzgerald

On the eve of opening statements in the criminal fraud trial of Conrad Black, the deposed newspaper mogul’s one-time lieutenant — and the government’s star witness — and three of his newspaper companies agreed to pay $63.4 million to settle charges he looted the Sun-Times Media Group (STMG) and backdated stock options.

F. David Radler, a former Chicago Sun-Times publisher and COO of the STMG when it was known as Hollinger International, will pay $21.8 million to settle civil charges he improperly took $21.8 million from the company, and that he backdated stock options, an illegal maneuver that can make them more valuable.

Radler’s North American Newspapers Ltd. will pay $23.3 million into the settlement. Horizon Publishing Co. and Bradford Publishing Co. — both of which were once controlled by Black and Radler — will pay $11.78 million and $7.15 million respectively.

The settlement, announced late Sunday by STMG, threw the trial of Black into chaos Monday morning. Opening statements had been expected to begin soon after the 9:30 CDT start of the trial in Chicago.

Hundreds of reporter, cameramen and other media workers descended on the Everett McKinley Dirksen Federal Courthouse, filling up Judge Amy J. St. Eve’s courtroom as soon as U.S. marshals opened the doors. Two “media overflow” rooms were set up with large television monitors broadcasting the courtroom action.

An hour before the scheduled start of opening statements, marshals were heard warning the teams of lawyers for Black and his three co-defendants that there were already too many lawyers for the spaces allotted. “You’re going to have to tell some of the small fish they’ve gotta go,” one marshal told the lawyers.

In court, Black’s Chicago attorney Edward Genson immediately protested that news of the settlement with STMG — combined with the announcement on Friday that Radler had reached a similar settlement on regulatory charges from the U.S. Securities and Exchange Commission by paying $27.8 million — made him “reticent” to go ahead with his opening statement.

“I’ve never seen settlement negotiations take place on a Sunday — and on the day before (a trial in which) this person is going to testify,” Genson said.

Genson said he wanted to subpoena “any number of people” to discover what was behind the settlements. He also said he was afraid the jurors, who have been instructed not to read anything about Black, may have heard the news of the Radler settlements.

There was apparently a potential juror problem that emerged when Judge St. Eve agreed to question jurors about the settlement reports individually in chambers.

Gordon A. Paris, the chairman of a special committee of STMG directors that negotiated the settlements, said in a statement: “Today, the company takes a significant step in obtaining restitution for the acts of the company’s controlling shareholders and former management.”

That special committee accused Black, Radler, and other former Hollinger International executives of running a “corporate kleptocracy” that plundered the publishing company of some $400 million. Paris is expected to be the first government witness in the trial.

Black, former Hollinger Executive Vice President Peter Y. Atkinson, former Hollinger CFO John “Jack” Boultbee, and former General Counsel Mark Kipnis have all pleaded not guilty to charges of fraud for the alleged theft of more than $80 million from Hollinger International through improper fees, contracts and payments. Black has also been charged with racketeering and obstruction of justice.

Radler pleaded guilty to a single count of wire fraud in exchange for a sentence of 29 months in prison and a fine of $250,000.

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