CHICAGO - The star witness at media mogul Conrad Black's fraud trial testified yesterday that Black had personally approved millions of dollars in payments to himself and others from the sale of community newspapers owned by the Hollinger International Inc. media empire.
F. David Radler, who was second in command of Hollinger International, directly connected Black for the first time to the planning behind what federal prosecutors describe as an $84 million looting of the company.
Radler said the diversion of funds began when Black ordered that 25 percent of all so-called "noncompete" fees paid to Hollinger International in the large-scale sell-off of community papers would be paid to a smaller, sound-alike company that he controlled, Toronto-based Hollinger Inc.
"He confirmed that was the plan," said Radler, who has admitted stealing millions of dollars from Hollinger as part of the alleged scheme and is due to get a lenient 29-month sentence as a reward for cooperating.
Before the sell-off was over, Black, Radler and two other executives were themselves getting millions of dollars in noncompete payments, Radler said. The payments were in exchange for promises not to return to the circulation areas of the newspapers to compete with the new owners.
Black, 62, is charged with bilking Hollinger International, largely through selling the community papers and receiving payments from the purchasers.
Prosecutors say all of the money, not just a portion, should have gone to Hollinger International shareholders.
Black and his codefendants, former vice president Peter Atkinson, former chief financial officer John Boultbee, and former Hollinger lawyer Mark Kipnis, say they did nothing illegal.
Boultbee and Atkinson allegedly received noncompete payments, while Kipnis is accused of helping to arrange the transactions. Black's attorneys have suggested that Radler himself is to blame for anything wrong with the transactions.
The sale of hundreds of community newspapers was at the core of a Black strategy to divest Hollinger International of numerous small-circulation papers at a large profit for the company.
The sell-off began in 1998 with the sale of Hollinger-owned American Trucker magazine and a related publication. Radler said he found out that Black had sent a $2 million noncompete payment to Hollinger Inc.
Next came a $472 million sale of U.S. newspapers to Community Newspaper Holdings Inc., which included a $50 million noncompete payment.
Radler said $12 million from that deal was sent to Hollinger Inc. in what became known as "the template" - 25 percent of the proceeds of all noncompetition agreements paid to the Canadian company on Black's orders.
He said Black told him that "Inc. was the parent company [and] as the parent it deserved a portion of the $50 million fee."
Lead prosecutor Eric H. Sussman asked Radler whether he had offered any objection to diverting the money.
"I certainly didn't say no," Radler said. He said that at a Hollinger International board meeting later that month, "to the best of my knowledge nothing was said" about noncompete payments to the Canadian company.