Trial Details Black's Lavish Living
Prosecutors: Hollinger Was Mogul's Personal 'Piggy Bank'

By Patricia Hurtado
Bloomberg News
Saturday, May 26, 2007

As chairman of Hollinger International, Conrad Black lived a lifestyle so lavish that he needed two Park Avenue apartments -- one for him and one for his servants.

His wife, Barbara Amiel Black, had five closets for her evening gowns, $500 shoes and $7,000 handbags in their London townhouse. His chauffeur had a corporate American Express card he used to shop for the couple.

In a criminal trial so far dominated by lawyers parsing the language of corporate filings, what may stick with jurors most are details prosecutors are presenting of the Blacks' personal spending and alleged abuse of company perks. The couple's lifestyle may emerge as a key theme in the remaining weeks of Black's fraud and racketeering trial in Chicago.

"Black's expense practices evidence his attitude that there was no need to distinguish between what belonged to the company and what belonged to the Blacks," said a 2004 report by former Securities and Exchange Commission chairman Richard Breeden, who was asked by Hollinger's board to investigate allegations of wrongdoing by Black and other executives. "In Hollinger's world, everything belonged to the Blacks."

Black, 62, and three co-defendants are charged with stealing $60 million from Hollinger. Prosecutors say the former chief executive treated the company as his personal "piggy bank" from 1997 to 2003.

Amiel Black, 66, a columnist for Canadian magazines, hasn't been charged with any wrongdoing. Prosecutors say Black, who married her in 1992, abused corporate perquisites by billing Hollinger for thousands of their personal expenses. Amiel Black didn't respond to calls to her lawyers seeking comment. Black declined to comment for this article.

Black's allegedly fraudulent acts peaked in late 2000, as did the couple's spending, according to court records. On Nov. 16, 2000, Hollinger completed its $2.1 billion sale of Canadian newspapers to Winnipeg-based CanWest Global Communications.

Prosecutors allege that Black helped divert $51.8 million of the sale proceeds and took $11.9 million for himself.

Five days after the asset sale to CanWest closed, the Blacks were shopping on London's New Bond Street, a half-mile-long roadway lined with exclusive stores, including Chanel, Hermes and Cartier.

On Nov. 21, 2000, the couple stopped at Graff Diamonds, a jeweler specializing in large, precious stones, where they spent $2.6 million on a 26-carat diamond ring, according to court documents. Later that day, the Blacks went to S.J. Phillips, which specializes in antique jewelry. Black spent $604,000 at Phillips on what court documents describe as an "antique pearl and diamond bow brooch."

In a 2003 article for the Canadian women's magazine Fashion Quarterly, Amiel Black wrote about her fondness for both stores and said she had acquired a taste for expensive jewelry: "I found I really liked the stuff," she wrote. She also wrote that after marrying Black, she "vaulted into circles where, for some people, jewelry is a defining attribute, rather like your intelligence or the number of residences you have."

Prosecutors say Black billed Hollinger $1.4 million from 1997 to 2003 to pay the staff of his four homes, including an 11-bedroom townhouse in London, a Toronto mansion on 12 acres, an oceanfront estate in Palm Beach, Fla., and the Manhattan apartments.

U.S. District Judge Amy St. Eve, who is overseeing the federal trial, said in September that Black's monthly expenses were "well over $200,000," including $114,000 in mortgage payments, $9,000 for landscaping and $8,000 for property taxes, while having no demonstrable income since being ousted as Hollinger's chairman in January 2004, according to court documents.

The Blacks' personal staff included chefs, butlers, maids, chauffeurs and security guards. Their chauffeur in New York had a corporate American Express card, and his purchases for the couple were covered by Hollinger, the Breeden report said.

"Black's knowledge of Mrs. Black's personal expenses will come in the form of e-mails to him from his wife, asking him to pay the expenses," prosecutors said in a court filing in February. "The government will further show that portions of Black's wife's shopping expenses were paid by International."

St. Eve ruled that such evidence is admissible because it's "evidence that defendant improperly used International's money by abusing certain perquisites."

Black, who built the Chicago-based company into the third-largest publisher of English-language newspapers, denies the charges. "If I were guilty, I would plead guilty," Black said in an interview published in March in Canada's National Post, a paper he founded and later sold. "All the charges are nonsense."

Benjamin Brafman, a criminal defense lawyer in New York, said anyone making personal charges to a company is defrauding its investors and the government because taxes aren't being paid on the reimbursements.

From 1994 to 2000, the Blacks lived rent free in a 4,500-square-foot Park Avenue apartment owned by Hollinger, according to testimony this week from Paul Healy, Hollinger's former vice president for investor relations. The Blacks had purchased a smaller ground-floor unit in the building for $499,000 in 1998.

Healy testified that Black purchased the larger unit from Hollinger while insisting that it be valued at the same $3 million price the company had paid for it six years earlier. Black paid Hollinger $2.5 million less than the property was worth, according to the Breeden report.

To pay for the residence, Black paid Hollinger $2.1 million in cash plus the ground-floor apartment he owned, which he decided had appreciated 70 percent in the two years he owned it. The Breeden report called the transaction "a rigged swap." The Blacks turned the ground-floor unit into housing for their servants and charged Hollinger more than $1.5 million to renovate the space, Healy testified.

About $8.5 million from the sale of the Park Avenue home was seized by the authorities. The money is now part of the collateral for Black's $21 million bail, along with $1 million in cash and equity in the Blacks' Palm Beach house. He sold the London residence in 2005.

The Blacks cut other deals for themselves, prosecutors say. Most of their routine living expenses were charged to Hollinger. Prosecutors intend to show e-mails from Amiel Black to her husband, asking him to pay her bills, and that he ordered Hollinger to pay many of them. In one case, she charged the company "$2,057 for a T. Anthony Ltd. leather briefcase," which prosecutors say her husband approved as a business expense, according to court documents.

Amiel Black invited a Vogue magazine photographer and writer in August 2002 to peek into her London closets, showing off separate storage rooms for day clothes, evening wear, sweaters, shirts and furs. "I have an extravagance that knows no bounds" Amiel Black told Vogue.

About two weeks after the London trip, prosecutors say, Black defrauded Hollinger by ordering the company to cover most of the cost of a surprise birthday dinner party he threw for his wife on Dec. 4, 2000.

Eighty guests gathered in the private room at La Grenouille, a French restaurant on Manhattan's Upper East Side, where they dined on "Beluga caviar, lobster ceviche and 69 bottles of fine wine," according to the Breeden report. The affair cost $62,000, and Black decided Hollinger should pay $42,870, prosecutors say.

James Cox, a securities law professor at Duke University, says that evidence of extravagant spending can be essential to helping illustrate for the jury the fraud charge against Black. "What you're really bringing in this evidence for is to sully Conrad Black," he said.