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U.S. Supreme Court

Supreme Court to Hear Conrad Black Appeal on Honest Services Fraud

Posted May 18, 2009 12:05 PM CDT
By Debra Cassens Weiss

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The U.S. Supreme Court has agreed to hear an appeal by convicted media baron Conrad Black that challenges the reach of the law barring honest services fraud.

At issue is whether a scheme to deprive a private entity of honest services requires proof it suffered identifiable economic harm, according to the petition for certiorari (PDF posted by SCOTUSblog). Absent limitations on the honest services theory, the law could be broken by every breach of contract or misstatement, the petition asserts.

Black is appealing his conviction for diverting $6.1 million from Hollinger International, a crime that brought him a 6 ½ year prison sentence. He and two other former executives who obtained cert—chief financial officer John Boultbee and corporate counsel Mark Kipnis—were convicted of three counts of mail fraud based on allegations they improperly schemed to transfer $5.5 million from a Hollinger subsidiary under sham noncompete agreements, according to the petition for certiorari. Kipnis was convicted of fraud for helping arrange the illegal payments to executives, according to earlier reports of his conviction.

The mail fraud theory alleged a scheme to defraud either by stealing corporate money or by depriving the company of honest services, according to the petition for certiorari.

“The second theory permitted convictions even if the jurors believed that the money was rightly petitioners’ and that they therefore inflicted no pecuniary or other economic injury on their employer--so long as the jurors believed that petitioners did not honor Delaware’s business corporation law in structuring the payments and, as a result, obtained a lawful tax ‘benefit’ in Canada,” the cert petition says.

The jury found guilt on a general verdict form that did not distinguish between the two theories. A second issue in the case is whether the defendants forfeited their right to challenge the government’s theory by opposing the government’s bid for a special verdict form.

The cert petition says Black’s management resulted in hundreds of millions of dollars in profits for Hollinger shareholders.

The case is Black v. United States. Bloomberg, Dow Jones (sub. req.), Reuters and the Associated Press also have stories on the cert grant.

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