Investors don’t need protection from Conrad Black, lawyer argues

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The Ontario Securities Commission should throw out its case against Conrad Black because investors in Ontario do not need to be protected from the former media mogul, his lawyer said Thursday.

Lawyer Peter Howard appeared before an OSC hearing panel to seek a dismissal in the regulator's case against his client, arguing a hearing is "unnecessary" and even an abuse of legal process against Mr. Black. He described the 69-year-old Mr. Black as the main victim in the failure of newspaper company Hollinger Inc.

Mr. Howard said most of the allegations levelled against Mr. Black following a U.S. criminal trial were overturned on appeal, and said the remaining convictions were "minor," so do not suggest Mr. Black's participation in the market presents a danger to Ontario investors.

The OSC is seeking to have Mr. Black banned from working in the financial industry or serving as a director or officer of a public company following his U.S. convictions and his settlement agreement last year with the U.S. Securities and Exchange Commission. Mr. Black, however, has filed a motion with the OSC for a stay in his case, which means he is seeking to have it thrown out before it goes to a hearing.

Mr. Howard said Mr. Black is willing to keep in place indefinitely a voluntary, temporary agreement he signed with the OSC in 2006 promising not to serve as a director or officer of a public company while his case was ongoing. He said Mr. Black is not willing, however, to reach a formal settlement to complete the case because that would require him to admit to wrongdoing at Hollinger, which he will never do.

"Mr. Black is not ever going to agree that he did something wrong and a consent order would require him to do that," Mr. Howard said. "He's spent the last 10 years proving that if nothing else, he will defend himself to the last breath and dollar."

Mr. Black did not attend the OSC hearing on Thursday.

Mr. Howard said if the OSC does not stay the case against his client, then he wants the hearing panel to explain whether it would allow Mr. Black to present his side of the story of what happened at Hollinger, or whether the panel will base its decision solely on the fact he was convicted of fraud and obstruction of justice in the United States.

The OSC revived its long-dormant case against Mr. Black and other Hollinger executives last July with a new statement of allegations in the case that said commission staff will not re-argue the details of the Hollinger fraud case but will instead rely on the fact he has been convicted of fraud in the United States to seek an order banning him from participating in the markets in Ontario as a matter of protecting the "public interest."

The commission has frequently taken the route of relying on convictions in other jurisdictions as the basis for an OSC order without redoing the original trial.

But Mr. Howard said the route is unfair in his client' s case because there is strong evidence to show his U.S. convictions for fraud and obstruction of justice were unfair and important evidence was not considered in his 2007 trial.

Mr. Howard said the OSC should not simply "rubber stamp" the U.S. case and use it as the basis for a Canadian ban without giving Mr. Black the right to a full hearing on the evidence, which would require a six-week hearing, he said. He said the case challenges the OSC's practice of simply reciprocating orders from other jurisdictions.

Mr. Howard said there were "victims and villains" in the Hollinger saga and Mr. Black is one of the victims as the controlling shareholder of Hollinger Inc. who lost most of his wealth when he was ousted and the company was put into bankruptcy protection and liquidated.

"It's not a role the normal perception of him accommodates very well because of his vocabulary and he speaks all the time, but the objective facts are that he is the main victim here," Mr. Howard said.

OSC staff were scheduled to present their oral arguments later in the day on Thursday. But in earlier written submissions, OSC lawyer Johanna Superina argued it is not possible to leave a temporary undertaking – like the one Mr. Black signed in 2006 – in place permanently. Ms. Superina said it is not an abuse of process to seek to complete a case rather than yield to Mr. Black's request "to discontinue the proceedings on his own terms."

She said the remaining U.S. convictions were proven through a trial and "eight appeals," and give the OSC clear grounds to seek to ban Mr. Black from participating in Ontario's markets.

Mr. Black served 37 months in U.S. prison for fraud and obstruction of justice related to a scheme to divert company money by paying themselves "non-competition" payments from the sale of Hollinger newspapers. He was released in 2012 and returned to Canada.

In a decision last August, the U.S. Securities and Exchange Commission banned Mr. Black from acting as a director of a U.S. company and ordered him to pay $4.1-million in restitution to settle a case involving Mr. Black's activities as former chief executive officer of media company Hollinger Inc. The SEC ordered the settlement money to be paid to Chicago Newspaper Liquidation Corp., which is a U.S. successor company to Hollinger.

The SEC ban does not apply to Mr. Black's activities in Canada, where the OSC is seeking to impose similar conditions.

In July, 2013, the OSC announced it would revive its long-dormant case against Mr. Black, which had been on hold since 2005 pending the resolution of his criminal matters.

The OSC has already reached settlements with former Hollinger executives David Radler and Peter Atkinson, who both agreed not to work as a registrant in the financial industry or as a director or employee of a public company.

A similar OSC case against from Hollinger executive John Boultbee is ongoing.