Conrad Black's legal legacy remains limited, experts say
The Canadian Press
Published Saturday, May 5, 2012 8:14AM EDT
TORONTO - Conrad Black's battle with the U.S. justice system over fraud charges attracted media coverage, but hasn't left a deep footprint in North American corporate law, legal experts say.
The man who once made waves in the global business community through his worldwide newspaper conglomerate is leaving comparative ripples in his wake as he concludes a legal saga that barely registered in the country where it largely unfolded, they said.
Black's fraud convictions and role in a significant U.S. Supreme Court decision helped send messages to the corporate world, but largely followed in the footsteps of other more high-profile white collar criminals, observers said.
Jacob Frenkel, a former U.S. federal prosecutor and current partner with Washington D.C. lawfirm Schulman Rogers, said Black's case never matched the widespread interest that prosecution of former executives of Enron Corp. generated.
"No one ever cared about his case in the United States," Frenkel said in a telephone interview."It takes the right individual and the right case for the deterrent message in a white collar prosecution to resonate. Those cases, in the U.S. were (former Enron chief executives) Ken Lay and Jeff Skilling."
When a Chicago jury found Black guilty of three counts of fraud and one count of obstruction of justice in 2007, Frenkel said the prosecution used similar arguments that had led to convictions in a spate of other higher-profile white collar crime cases.
The arguments revolved around a clause known as "honest services," which had long been a bone of contention in the U.S. legal system.
Executives were being found guilty of honest services fraud even if their transactions did not lead to their own financial gain, Frenkel said, adding the fraud was seen as depriving people of an intangible right.
"It was really depriving the shareholders of the right . . . to have their corporate executives act with integrity and without self-dealing," he said.
Black's most lasting impact on white collar prosecutions was arguably his prolonged attack on that law. Over the course of his prison term, Black mounted a series of appeals that eventually worked their way to the country's top court.
His arguments challenged the interpretation of honest services fraud that was used in his case, saying the broad reading of the law was unreasonable in his situation.
Black was ultimately successful in having two of his fraud convictions overturned in a decision that saw the Supreme Court narrow the scope of the law. All new cases relying on an honest services prosecution, Frenkel said, will now have to prove that bribes or kickbacks were involved.
Black undoubtedly played a role in focusing the legal community's attention on a vague and problematic law, Frenkel said, but argued his prolonged legal arguments may well have fallen on deaf ears if it hadn't been for Enron.
"Conrad Black was one of the greatest beneficiaries of the Jeff Skilling conviction," he said, adding that case cast more pressing questions on the honest services law. "I genuinely believe that but for the Skilling conviction, Conrad Black's appeal never would have made it through the Supreme Court."
Another striking effect of the Black case, he said, stemmed from the international media frenzy that ensued as reporters flocked to watch a Canadian blueblood and British lord face justice in a country with much stricter laws against white collar crime.
Leonard Brooks, business ethics professor at the University of Toronto, agreed.
Canada's traditionally lax approach to corporate fraud would have allowed Black to walk free if he had been prosecuted on home soil, Brooks said, adding the case served as a wakeup call to many in the country's legal community.
"Our Canadian penalties have not been forthcoming as rapidly and as severely as perhaps they should be for white collar crime," he said. "We still have a severely under-resourced court system and severely under-resourced fraud investigation function. Justice is not going to be swift in Canada going forward, but it should be."
When Black returns to Canada after fulfilling his three and a half-year prison sentence, Brooks believes he will find himself in a country that has been forced to question its fundamental corporate culture.
Black's public exposure and incarceration, he said, hammered home the importance of some basic business practices that had fallen by the wayside during his time at the helm of Hollinger, he argued.
Present-day corporate directors were reminded to treat all financial disclosures with a certain degree of skepticism, as well as to challenge cultures of entitlement that sprang up around company leaders, he said.
"The rationalizations that many business executives used to excuse some of the things they were doing, namely that everybody's doing it, is seen to be quite weak. In the new world, you need to think very carefully about whether something that was accepted in the past is going to pass muster now."