Legal File: Nine days later: who’s winning?

Anyone reading the press reports of the evidence at the Conrad Black trial could be forgiven for not knowing who is winning. Both sides are proving facts that they correctly feel support their side. But both sides cannot be right.

The prosecution says the accused took millions of dollars as non-compete payments. The defence responds that non-compete agreements are common in this type of transaction. The prosecution responds that the purchasers never requested non-compete agreements from the accused—but then the purchasers agree with the defence that they had no objection to them, did not really care that they were included, and yes, they signed the agreements.

The prosecution says the millions the accused received should never have gone to them, but should have gone to Hollinger International and its shareholders, but the defence points out that all the deals were properly documented, the payments were spelled out in black and white in the agreements, and were known to the various lawyers and auditors who raised no objection and approved the deals. The prosecution says the accused inserted themselves into the transactions to obtain their ill-gotten millions, while the defence points out that it was David Radler, the prosecution’s star witness, who negotiated the agreements, including the non-compete clauses. The purchasers, they say, never even met Conrad Black.

Every one of the above statements may be true. So who is winning?

Such a non-compete clause is fine if the purchaser wants it, but if the purchaser doesn’t, why would the seller unnecessarily give up part of the sale price to someone else? This is a crucial issue: if the insertion of the accused into the clause is required, then the vendor is getting something for giving up a share of the purchase price: namely, the sale deal that it wants. The prosecution claims that there was no need to insert Lord B. and the co-accused into the deal.

That is why the prosecution is attempting to prove the purchasers did not ask for the accused to be inserted into the non-compete clause. The defence is attempting to show that the purchasers did not object to the clauses. But this is beside the point. The purchaser only cares about the amount of the purchase price, not who is getting it.

Then there is the related issue of knowledge. If the crime lies in getting money by the insertion into the purchase agreement of an unnecessary non-compete clause, it is also the prosecution’s objective to prove the board of directors was misled by the accused to falsely believe their inclusion in the non-compete clause was necessary for the deal to be made—that is, that the purchaser wanted them inserted. The case against Lord Black and his co-accused seems to involve the allegation that any board approval was based on a false understanding of the facts regarding the necessity for the impugned non-compete clause.

Thus we see that the defence’s argument that the clause and its beneficiaries was plain for all the directors to see is actually an irrelevant one: unless the directors also knew that the purchasers were not insisting on the clause, that it was not necessary for the deal to be made, the clause represents a gratuitous sharing of Hollinger International’s money. But if the defence can go on to show the directors had accurate knowledge of the non-compete clause and its provenance, then a jury might well be reluctant to find fraud against the accused out of a sense of unfairness, since the board of directors was equally knowledgeable and responsible.

Some of the cross-examination has been directed to showing that since Radler alone negotiated and arranged the transactions, the other recipients would have believed the non-compete clause in issue was in fact demanded by the purchaser, and so their inclusion was perfectly justified and necessary. Black would be as innocent as his board.