Conrad Black's attorneys face tough grilling

A defense attorney for Conrad Black faced tough questioning from a three-judge appellate court panel reviewing the former media tycoon’s fraud conviction today, with one judge calling a payment arrangement a “sham.”

Black and three other former Hollinger International executives were convicted last summer of defrauding the newspaper company of millions of dollars. The case focused on bogus “non-compete” payments to the defendants in connection with U.S. newspaper sales. Hollinger International is now called Sun-Times Media Group.

U.S. Appellate Court Judge Richard A. Posner, an internationally known legal scholar, peppered Black defense lawyer Andrew Frey with questions about how the defense described an arrangement by which Black and two other defendants received $5.5 million.

“You’re saying it’s management fees recharacterized as non-competition fees for Canadian tax purposes,” Posner said. “It can’t be both.” He said Frey was essentially saying the arrangement was a “sham.”

The payment to Black and former Hollinger International executives John Boultbee, Peter Atkinson and former Chicago Sun-Times publisher David Radler was for agreeing not to compete with a subsidiary of Hollinger — in other words, an agreement not to compete with themselves. The subsidiary then owned just one small paper in California.

Black, 63, who is serving a 6 1/2-year prison sentence in Florida, also was convicted of obstruction of justice for removing 13 boxes of documents from his Toronto offices while the case was being investigated. Frey said the prosecution did not show Black intended to destroy or conceal any documents.

“This is the weakest case I’ve seen in 45 years of law practice,” Frey said.

Posner called Black’s timing for removing the documents “bizarre.” The prosecution argued that Black knew his actions as CEO of Hollinger were being investigated at the time he removed the boxes.

Defense attorneys also disputed the fairness of instructions U.S. District Judge Amy St. Eve made to the jury.

After court, Frey joked that while he would have felt better about the arguments if the judge had come off the bench and given him a hug, Frey thought the defense had “very strong issues.”

“They were doing their job of being skeptical,” Frey said of the panel, which included appellate judges Michael S. Kanne and Diane S. Sykes.

Eric Sussman, who had led the government’s prosecution of Black before going into private practice, said it it seemed “pretty obvious” that the panel viewed the case as the jury had.

“I remain confident that they will agree with the jury and Judge St. Eve, that these convictions will be upheld,” said Sussman.

The decision could come in a month to six weeks.