WASHINGTON — Former Canadian press baron Conrad Black won a significant, but incomplete legal victory Thursday when the United States Supreme Court vacated an appeals court ruling that upheld his 2007 convictions on defrauding Hollinger International Inc.
In a decision that could affect dozens of other white-collar crime cases in the United States, the high court found flaws in the controversial “honest services” statute used to prosecute Black on charges of mail fraud. His case has been remanded back to the Chicago-based 7th Circuit Court of Appeals to be reconsidered.
“He knows of the news and is quite elated by it,” Miguel Estrada, Black’s Washington-based lawyer, said in an interview. “We are coming to the end of a long and painful period.”
Estrada said he will seek bail for Black, who is serving a six-and-a-half-year sentence in a Florida prison, within the next few days.
The ruling in Black’s case came in tandem with a separate, but related, decision in the fraud case of Jeffrey Skilling, the former chief of failed energy giant Enron Corp.
The Supreme Court set aside Skilling’s own honest services conviction and placed new limits on a law prosecutors have relied on to pursue American executives accused of corporate malfeasance.
In Black’s case, the court found that instructions to the jury at his 2007 trial rested on an “improper construction” of a section in federal fraud law which makes it illegal “to deprive another of the intangible right of honest services.”
The 28-word Criminal Code provision was central to Black’s conviction on three counts of mail fraud for arranging $6.1 million U.S. in payments to himself and his associates from Hollinger International, where he was chairman and CEO.
In its ruling on Skilling, which guided its decision in Black’s case, the Supreme Court determined that the honest services provision “properly confined, criminalizes only schemes to defraud that involve bribes or kickbacks.”
The Supreme Court said in a footnote to its ruling that the fraud scheme alleged at Black’s trial did not involve bribes or kickbacks.
The high court said instructions given to the jury at Black’s trial were “indeed incorrect” and that defence lawyers had the right to raise objections on appeal, overturning the finding by the appeals court.
Black’s convictions on mail fraud still “technically” stand, said Estrada, but the Supreme Court’s determination on the limits of the honest services provision throws the jury verdict into question.
“While the jury verdict has not been technically vacated, it has been found to be in error,” Estrada said.
“The convictions should be tossed . . . It is literally impossible for the government to establish that the error (at trial) did not harm Conrad Black.”
Black had appealed to the Supreme Court jointly with John Boultbee and Mark Kipnis, his ex-colleagues at Chicago-based Hollinger International Inc.
At Black’s trial, the Supreme Court noted, the jury was told Black and his co-defendants were guilty of honest services fraud if they misused their positions for private gain and “knowingly and intentionally” breached their duties of loyalty to the company.
“We hold, in short, that, by properly objecting to the honest-services jury instructions at trial, defendants secured their right to challenge those instructions on appeal,” the Supreme Court said, in a decision written by Justice Ruth Bader Ginsburg.
“Our decision in (the Skilling ruling) makes it plain that the honest-services instructions in this case were indeed incorrect. As in (the Skilling ruling), we express no opinion on the question whether the error was ultimately harmless, but leave that matter for consideration on remand.”
The U.S. high court did not address Black’s conviction on one count of obstruction of justice in relation to his removal of 13 boxes from Hollinger’s downtown Toronto office during the criminal investigation.
Estrada said he would seek to have the obstruction conviction overturned alongside the fraud convictions. The trial jury, Estrada said, would have viewed Black’s decision to remove the boxes differently had they concluded he was not guilty of fraud.
The Supreme Court’s decision to impose limits on the honest services provision was not entirely unexpected and, indeed, many legal experts believed the Supreme Court would strike down the provision altogether rather than simply restrict its interpretation.
When the high court heard oral arguments from Black’s lawyers last December, several justices criticized the honest services law as so vague and sweeping it could theoretically ensnare millions of American workers for misbehaving on the job. Several justices peppered the U.S. prosecutor in the case with skeptical questions about the scope of anti-corruption legislation that criminalizes actions by public or private employees who scheme to violate another’s “intangible right to honest services.”
The honest services law, as written, is “vague, amorphous, open-ended and essentially not very helpful,” Estrada told the high court justices at the time. “It is basically a mess.”
Although the Supreme Court did not strike down the provision entirely, Estrada said on Thursday he was “walking on air” because the Supreme Court accepted his arguments about the flaws in the law.
Black has maintained from the beginning of his legal ordeal that he did not intend to inflict “economic harm” on Hollinger by arranging the lavish payments to himself.
At his Chicago trial, a jury found the Montreal-born businessman guilty of securing an illegal $5.5-million payment as part of a non-compete agreement signed with a wholly-owned Hollinger subsidiary that owned one California newspaper. Another deal involved a $600,000 non-compete payment related to the sale of other U.S. newspapers.
Black insisted he was entitled to millions in compensation for management services and that the non-compete agreements were merely drawn up as a way to avoid taking a massive tax hit in Canada.
Estrada, in his written brief to the Supreme Court, says the honest services clause is so far-reaching it allows overzealous prosecutors “to target anything that offends their ethical sensibilities.”
Justice Department lawyers contended Black crossed a critical line that deprived Hollinger of honest services by deceiving the Hollinger board with the non-compete agreement and breaching his loyalty to the company.
Black founded the National Post in 1998 and later acquired the former Southam newspaper chain before selling his Canadian operations to Winnipeg’s Asper family.
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