The man who was Conrad Black's trusted business partner for 30 years testified yesterday how the two men diverted millions of dollars to themselves.
David Radler, who has pleaded guilty to a single count of fraud and faces 29 months in prison, provided details in the former media baron's fraud trial of a $472 million sale of US newspapers in 1998.
Mr Radler said the sale included $50 million in non-compete fees, part of which was siphoned off by Mr Black and other defendants in the case.
"Mr Black told me that Inc. deserved some of the non-compete monies that were being allocated," Radler testified, referring to Hollinger Inc., Mr Black's closely-controlled Toronto-based holding company.
Hollinger Inc. was the largest shareholder in Chicago-based media giant Hollinger International Inc., which was led by Mr Black with Mr Radler as his deputy.
"He said Inc. was the parent and, as the parent, it deserved a portion of the $50 million fee. He said it was deserving," Mr Radler said.
"I listened. I certainly didn't say no," he added.
Mr Radler said it was later determined that the Canadian company would get $12 million, or roughly one fourth of the fee.
Mr Black and three co-defendants are accused of using the non-compete payments to give themselves tax-free bonuses. Such payments were set aside from the proceeds after sale prices were determined, and were designed to give the buyer a guarantee that the seller would not re-enter the same market.
Prosecutors say Hollinger International should have received all the proceeds and was cheated out of $60 million. The 25 per cent allocation of non-compete payments to Hollinger Inc. in the 1998 sale became the "template" for future transactions, Mr Radler said, and the executives also inserted themselves into non-compete arrangements to receive payments individually.
Mr Black is charged with racketeering, fraud, money laundering and obstruction of justice and faces up to 101 years in prison and millions in fines and restitution.
Mr Radler recalled being told by former top company executive Peter Atkinson, a defendant, that Mr Radler had to sign a non-compete agreement as part of the $3 billion sale of Hollinger International's Canadian newspapers in 2000. "I was kind of stunned," Mr Radler said, because the agreement effectively barred Mr Radler from the industry in Canada.
"I told him I did not want to sign one without getting compensation" and asked for C$25 million, ultimately settling for C$19 million.