Risk Management

Unraveled: Black’s Company Pleads Guilty

Toronto-based holding company Ravelston had been charged for its alleged role in a scheme that cost shareholders of Hollinger International, where ...
Stephen Taub and Dave CookMarch 6, 2007

Ravelston, Conrad Black’s Toronto-based holding company, has pleaded guilty in U.S. District court in Chicago to a single count of fraud, according to published accounts.

The company had been charged for its alleged role in a scheme that cost shareholders of Hollinger International — where Black was chairman and chief executive officer — more than $83 million, according to the Chicago Tribune.

Also charged were Black; former Hollinger executives Peter Atkinson, John Boultbee, and Mark Kipnis; and former Chicago Sun-Times publisher David Radler. Jury selection begins next week in the criminal trial of Black, Atkinson, Boultbee, and Kipnis; in September 2005, Radler pleaded guilty to one count of mail fraud and agreed to testify against the others, reported Crain’s Chicago Business.

The Crain’s publication noted that Black and Radler were the principal owners of Ravelston, which once controlled Toronto-based holding company Hollinger Inc., which in turn controlled Chicago-based publishing company Hollinger International. The publishing company owned a number of venerable newspapers throughout the world, including the Chicago Sun-Times, London’s Daily Telegraph, and the Jerusalem Post, as well as many community newspapers in the United States and Canada.

Hollinger International has since sold its largest properties other than the Sun-Times and is now named the Sun-Times Media Group.

In November 2004, the Securities and Exchange Commission filed a fraud complaint alleged that from 1999 through 2003, Black, Radler, and Hollinger Inc. illegally diverted to themselves, other corporate insiders, and Hollinger Inc. roughly $85 million of the proceeds from Hollinger International’s sale of newspaper publications through purported “non-competition” payments.

“Black and Radler abused their control of a public company and treated it as their personal piggy bank,” said Stephen Cutler, then the director of the commission’s Division of Enforcement, in a statement. “Instead of carrying out their responsibilities to protect the interest of public shareholders, the defendants cheated and defrauded these shareholders through a series of deceptive schemes and misstatements.”

Ravelston, which filed for bankruptcy and is under the control of a Canadian receiver, agreed to pay a $7 million fine. According to the Crain’s publication, the plea deal also calls for five years’ probation, possible restitution, and an agreement to cooperate with prosecutors in the upcoming trial.