Conrad Black’s past misdeeds in high finance are coming back to haunt him – and could even land him behind bars.
The embattled media baron, already under investigation for pocketing millions in cash payments from his company, Hollinger International, faces deeper legal problems because of a takeover scandal and fraud charges in 1982.
Back then, Black triggered a firestorm when he attempted a secret takeover of Hanna Mining Co. He got hit with Securities and Exchange Commission charges of fraud and making false statements but wriggled out of the mess by signing a consent decree agreeing never to break securities laws again.
Legal experts say that if the SEC probe finds he was involved in new violations, his case will likely be kicked over to the U.S. Attorney as a criminal matter.
“When the SEC sees someone committing violations again after signing a consent, he’s considered a recidivist, and the matter is referred over to the U.S. Attorney for criminal prosecution,” said securities lawyer Jacob Zamansky.
“His past problem really increases the likelihood of criminal charges being brought in his new case,” he said.
Even if Black’s current problems were determined by the SEC to be only civil violations, the new charges would probably become criminal matters, the lawyer said.
Black hasn’t been charged with any new violations and says he is cooperating fully with the SEC.
Black’s lawyer David Boies had no comment on the criminal aspect of the case.
Meanwhile, Black’s company yesterday issued its latest earnings, showing a loss of $7 million – but no one was able to sign forms that certify the accounts are truthful and accurate.
Normally, Black would have signed the documents, but he resigned as CEO of Hollinger a day earlier, sidestepping the responsibility.
The Sarbanes-Oxley Act requires CEOs to take personal responsibility for the accuracy of company books. With no official signature on the documents from management, the company would be in violation of SEC rules.
Black and his older brother, Montegu, quietly acquired 8.8 percent of Cleveland-based Hanna at around $35 a share in 1981 and reported at the time to the SEC that the stake was just a passive investment.
But months later in 1982, the Black brothers dropped a bomb on Hanna by offering $45 a share to buy control of the mining group through their private Norcen Energy Resources of Toronto.
Hanna staged a major publicity offensive and sued, claiming the brothers broke federal and Ohio securities laws by using fraud and stock manipulation and making false statements.
Black’s Hanna raid also triggered a crisis in Washington, D.C., where the White House already had been lashing out at aggressive Canadians who were going after several American companies in the early 1980s.
In 1982, the SEC eventually filed charges against Black, accusing him of fraud, violating tender rules and making false statements in his run at Hanna.
When Black signed the consent decree in 1982, he settled the charges without admitting wrongdoing. But he did agree to be barred from any future violations of securities laws. Violation of that agreement would be criminal contempt, legal experts said.
Blast from the past
A consent decree that Conrad Black signed with the SEC in 1982 could come back to haunt him. Details:
* The decree stemmed from investments Black made in a mining firm while heading Toronto-based Norcen Energy
* Black said his 8 percent stake was just an investment while he secretly planned a takeover – thus keeping the share price artificially low
* Under the decree, he promised not to violate the SEC’s antifraud, tender offer and shareholder reporting rules