A corporate insider has testified that media mogul Conrad Black lived rent-free for years in a luxury apartment on New York’s Park Avenue owned by the Hollinger International newspaper empire.
When the grumbling among shareholders about excessive perks at the big media holding company became too insistent, Black bought the apartment in a deal the government maintains was a scam, jurors in Chicago were told.
“I told [Black] that shareholders expressed concern about certain perquisites, specifically the apartment in New York,” said Paul Healy, who was Hollinger International’s director of investor relations.
Black, 62, the former Hollinger International chairman and Daily Telegraph owner, is charged with racketeering and fraud. The government says he and three co-defendants swindled the newspaper company out of millions of dollars.
At the heart of the charges are huge payments purchasers of Hollinger community papers made to Black, his fellow executives and two Canadian companies he controlled.
Prosecutors say the money belonged to Hollinger shareholders and not in the pockets of the company’s executives.
But Black is also charged with swindling Hollinger International by taking the corporate jet on a two-week vacation with his wife to the island of Bora Bora in French Polynesia and by failing to pay fair market value for the Park Avenue apartment in a deal prosecutors call fraudulent.
Black’s lawyers maintain he did nothing illegal.
Healy testified that Hollinger International bought the apartment in 1994 as a residence for Black and his wife when they were in New York.
The purchase price was 3 million dollars.
“Did they pay any rent on the apartment?” federal prosecutor Edward Siskel asked Healy.
“No,” the investor relations director answered.
Almost immediately there was grumbling about the deal, Healy said.
“Shareholders thought that the purchase of a 3 million dollar apartment by a company that had limited cash flow was excessive,” Healy testified.
Moreover, Hollinger was pumping thousands of dollars into maintenance and other costs of the cooperative apartment, Healy testified.
Jurors were shown an agreement signed by Black under which the media baron had an option to buy the apartment at fair market value – what it would bring on the open New York market whenever such a sale took place.
Healy testified that in November 2000 when Black made an 18 million dollar (£9.1 million) killing on the sale of many small community newspapers across Canada, he urged the Hollinger chairman to buy the apartment and quell the complaints.
Healy said Black agreed. But Healy said he was surprised, however, by Black’s response.
“The deal is at cost,” he quoted Black as saying. In other words, Black was intending to buy the apartment not for the going rate in the New York real estate market but for the amount Hollinger had paid.
As the deal was structured, Black paid Hollinger more than two million dollars in cash for the apartment and made up the rest of the money by throwing in a first floor apartment that had been occupied by Black family servants.
Healy testified that at the urging of Black co-defendant John Boultbee, a former Hollinger vice president, he wrote a memo explaining that consultations with New York property agents supported the three million dollar price tag on the apartment. He said there were no consultations.
“Was that a mistake or intentional?” Siskel asked.
“It was an intentional mistake,” Healy cracked, drawing a ripple of laughter. He said he was told “that was the amount of money that Mr. Black was willing to pay and that was how it was going to be structured”.
“Was an appraisal of either property done?” Siskel asked.
“No,” Healy said. He said he was so grateful that the apartment that so irked shareholders was finally being taken off the Hollinger books that he went along with orders from Boultbee to write the memo.