David Radler, the former right hand man of disgraced media tycoon Conrad Black, pleaded guilty to fraud charges yesterday in a Chicago courtroom.
The plea could prove a pivotal moment in the long-running investigation into the alleged looting of Hollinger International, the newspaper group that until last year owned the Daily Telegraph. "This is the first step in making amends for what has taken place," Mr Radler's lawyer, Anton Valukas, said after the hearing.
Mr Radler had been a business partner of Lord Black for 35 years and was the financier behind the flamboyant former press baron. But there were clear signs of a crack in the relationship last month when Mr Radler was indicted on seven fraud charges, each carrying up to five years in prison.
The US attorney general, Patrick Fitzgerald, said at the time that Mr Radler would plead guilty and had agreed to cooperate with further investigations. Federal investigators disclosed in March that they were conducting a fraud inquiry into Hollinger, Mr Radler and Lord Black.
There were reports in the US media at the weekend that Lord Black could in turn be planning to point the finger of blame firmly at Mr Radler. According to the Wall Street Journal, Lord Black has been building a defence strategy arguing that he had not been a hands-on manager and that any alleged misdeeds were down to Mr Radler.
The indictment alleges that Mr Radler and his "co-schemers" diverted more than $32m (£18m) of Hollinger funds to themselves and companies controlled by him, Lord Black and others.
The funds were largely in the form of "non-competition" payments - money that is usually paid to the seller of a business to guarantee that it doesn't immediately re-enter the market it has just exited. In this case, the money was allegedly paid to individuals, instead of to Hollinger.
Lord Black was ousted as Hollinger chief executive in November 2003 after an internal inquiry sparked by a disgruntled shareholder. The investigation eventually uncovered hundreds of millions of dollars that had allegedly been taken by Lord Black, Mr Radler and others in unapproved bonuses and non-competition fees and excessive pay. The company has since sued for the return of $425m.
A 500-page internal report accused Lord Black of running a "corporate kleptocracy" and of pursuing an "endless quest" for cash. Lord Black denies all wrongdoing and has launched countersuits against Hollinger.
Lord Black craved a British title so much he gave up his Canadian citizenship. But his reputation has been left in tatters by the financial scandal. He has been forced to sell his lavish London townhouse as well as a mansion in Palm Beach, Florida.
Lord Black and Mr Radler began their business relationship by acquiring a small newspaper in Quebec in 1969. They built an empire of more than 340 titles, including the Chicago Sun-Times, the Daily Telegraph and the Jerusalem Post. While Lord Black hobnobbed in London, Mr Radler worked behind the scenes in the company's offices in Vancouver and Chicago.
The new management at Hollinger has since broken the company up. The Telegraph was sold to the billionaire Barclay brothers in June last year for £665m.
According to the indictment, in one instance Hollinger sold newspapers to a company controlled by Mr Radler and Lord Black. It then paid Mr Radler and Lord Black's holding company Ravelston $1.2m "not to compete with themselves".
In March 2003 a Hollinger annual report disclosed details of "non-competition" payments - in one case of $53m paid into a Black-controlled firm. The auditors had insisted on the disclosures. Eight months later, Radler resigned with an agreement to pay back unauthorised fees of $7.2m. On the same day, Conrad Black quit as chief executive.
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