Two of Conrad Black's convictions were overturned when the US Supreme Court ruled that a statute entitling companies to "the right of honest services" from their executives was too vague. If all executives took such a dim view of honest services, investors would be very much poorer.
No one, including Conrad Black, would ever say he was lacking in self-regard or unenthusiastic about the finer things in life. But these are not crimes, nor even misdemeanours. However, it is unarguably dubious to have received millions of dollars which, when they find out about, makes your shareholders very cross.
Younger readers may be unaware of Black's prior history. He started out in the late 1960s as owner of a small Canadian newspaper publisher. He parlayed this into an organisation by 1985, capable of paying £30m for the Daily Telegraph when it was in a very bad state. The Telegraph was revived and Black's star continued to rise. By 2000, as chief executive of Hollinger, he was a global press mogul, often spoken of in the same breath as Rupert Murdoch. Hollinger's star began to wane along with those of all other newspaper publishers when the internet era dawned, but it came right off the rails in 2003 when a legendary US investment firm and Hollinger shareholder, Tweedy Browne, got wind of a series of non-compete payments controversially made to Conrad Black and other senior Hollinger employees. Eventually, Black was toppled, charged and jailed.
When he came to court, Conrad Black faced 11 charges of fraud. There were two other important charges, including obstruction of justice, but it was the fraud charges which interested me. I recalled that there had been little dispute about Black having received the money which was the subject of the charges. In brief, when Hollinger sold newspapers, Black and his close associates typically collected large sums from the buyers for commitments not to set up in competition with the newspaper Hollinger was selling. To me this was self-evidently preposterous. In my view, Conrad Black would not have contemplated to leave the empire he had built up in order to start a smaller venture against a business he had just sold.
A gripping 500-page report by a special committee of the company - entitled 'The Hollinger Chronicles' and still available on the internet - identified nearly $200m of "unjustifiable" payments along these lines, benefiting Black and colleagues.
Yet the jury found Black innocent of almost all the fraud charges. It seems to have done so because it believed that the payments were approved by Hollinger. Much of the trial was taken up by cross-examination of the chairman and members of Hollinger's audit committee, who said they had not approved the payments knowingly. However, they had all signed documents which described the payments. They said they had overlooked this detail when they had skimmed through the documents. The defence lawyers suggested that they were, in fact, aware of the payments but unwilling to admit complicity once the furore erupted.
The original Black trial thus turned on whether some inner element of Hollinger had approved the payments, not about the wider principle of the payments themselves.
Conrad Black later appealed the verdict and eventually gained some relief from the US Supreme Court. The two fraud charges which stuck had rested on a legal doctrine of honest services which goes back decades and was aimed at the failure to provide the same by corporate executives. Bribes and kickbacks were the main targets of this doctrine, but the US Congress had, at least, twice tried to extend the concept of honest services beyond these two obvious areas. However, the Supreme Court ruled (in fact in an Enron case) that the doctrine was too vague and it would not allow verdicts which rested on it. This is how the Black verdicts came to be quashed.
The world has moved on since Conrad Black and associates took tens of millions of dollars for agreeing not to compete against the smaller newspapers sold by Hollinger. It would be pretty improbable today for such payments to be made because most audit and remuneration committee members would be far too concerned about the consequences to their reputations.
The fact that Lord Black got away with these payments does not make them right. It only made them legal. Hopefully, the US congress will in due course revisit the doctrine of honest services and find a way to make it stick.
