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United States v. Black

February 7, 2007

UNITED STATES OF AMERICA, PLAINTIFF,
v.
CONRAD M. BLACK, JOHN A. BOULTBEE, PETER Y. ATKINSON, MARK S. KIPNIS, AND THE RAVELSTON CORPORATION LIMITED, DEFENDANTS.



The opinion of the court was delivered by: Amy J. St. Eve, District Court Judge

MEMORANDUM OPINION AND ORDER

The government has moved to introduce "intricately related" and "other act" evidence under Fed. R. Evid. 404(b) ("Rule 404(b)"). In particular, the government seeks to introduce the following alleged "acts:" 1) Defendant Black's attempt to remove the independent Board of Directors and stop the investigation by the Special Committee; 2) Defendant Black's continued attempts to prevent the government from receiving the 13 boxes of documents at issue in Count Fourteen; 3) Defendant Blacks's and Radler's $50,000 payment to Defendant Kipnis as a bonus for the CanWest transaction; 4) Defendant Black's 1982 Securities & Exchange Act ("SEC") violation; 5) Defendant Black's anonymous response to an internet posting; 6) Defendant Black's purchases of certain memorabilia with International's money; 7) Defendant Black's personal dinners at Le Cirque; 8) Defendant Black's abuse of International's charitable giving; 9) Defendant Black's wife's personal shopping expenses paid for by International; 10) Defendant Black's insider trading; and 11) Defendant Black's false statements to the Court. For the reasons stated below, the Court grants the government's motion in part and denies it in part.

BACKGROUND

On August 17, 2006, a grand jury returned a seventeen-count third superseding indictment (the "Indictment") naming four individual Defendants -- Conrad M. Black, John A. Boultbee, Peter Y. Atkinson, Mark S. Kipnis -- and a corporate Defendant, the Ravleston Corporation Limited (collectively, "Defendants"). The Indictment charges that Defendants committed the following offenses: 1) mail and wire fraud, in violation of 18 U.S.C. §§1341, 1343, including the deprivation of the intangible right to honest services, in violation of 18 U.S.C. §1346; 2) money laundering, in violation of 18 U.S.C. §1957; 3) obstruction of justice, in violation of 18 U.S.C. §1512(c)(1); 4) racketeering, in violation of 18 U.S.C. §1962(c); and 5) criminal tax violations, in violation of 26 U.S.C. §7206(2). On January 10, 2007, the government filed a Superseding Information (the "Information") that included identical substantive charges, with some redactions pursuant to the Court's prior orders.

Counts One through Nine charge mail and wire fraud schemes, including the deprivation of the intangible right to honest services.*fn1 These counts allege that Defendants defrauded Hollinger International, Inc. ("International")*fn2 through an elaborate scheme involving non-competition agreements. Namely, in May of 1998 and continuing through 2001, International embarked on a business plan to sell off nearly all of its United States community newspaper assets. In connection with the sale of each of these assets, International executed a non- competition agreement in which it promised not to acquire or establish a newspaper within a certain geographic distance from the newspapers it sold for a certain period of time after the sale at issue. According to the Information, Defendants abused this process to benefit themselves at the expense of International's shareholders by inserting themselves and Hollinger Inc. ("Inc.")*fn3 as recipients of non-competition fees that should have, and otherwise would have, been paid exclusively to International.

Counts Ten through Twelve charge Defendants Black and Boultbee with three separate counts of wire fraud in connection with a scheme to defraud International and its shareholders by abusing certain perquisites, including International's corporate residence in New York City, International's corporate jet, and International's reimbursement of Black's business-related entertainment expenses.

Count Thirteen charges Defendant Black with money laundering, in violation of 18 U.S.C. § 1957. Count Fourteen charges Defendant Black with obstruction of justice in connection with his alleged removal of 13 boxes of documents from his office at 10 Toronto Street. Finally, Count Fifteen charges Defendant Black with a RICO violation. It alleges that Defendants Black, Radler, Boultbee, Atkinson, Kipnis and Ravelston constituted an "association-in-fact" enterprise, and that Defendant Black conducted and participated in the conduct of the affairs of this enterprise through a pattern of racketeering activity.

The government seeks to admit eleven separate acts primarily against Defendant Black as inextricably intertwined with these charges and/or pursuant to Rule 404(b).

LEGAL STANDARD

"Generally, evidence of other bad acts is not admissible to show a defendant's propensity to commit a crime, nor to show that he or she acted in conformity with that propensity on the occasion in question." United States v. James, 464 F.3d 699, 709 (7th Cir. 2006); Fed. R. Evid. 404(b) ("[e]vidence of other crimes, wrongs, or acts is not admissible to prove the character of a person in order to show action in conformity therewith"). Put another way, Rule 404(b) "forbids the use of evidence of a defendant's history of illegal or unethical acts to prove that he is a person of bad character and likely therefore to have committed the crime of which he is accused in the present case, or perhaps some other, undetected crime for which he should be punished." United States v. Paladino, 401 F.3d 471, 474-75 (7th Cir. 2005). "[E]vidence may, however, be admitted under Rule 404(b) to establish proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident." James, 464 F.3d at 709. See also United States v. Leahy, 464 F.3d 773, 797 (7th Cir. 2006). In determining whether evidence is admissible pursuant to 404(b), the Seventh Circuit has adopted a four-part standard, assessing whether:

(1) the evidence is directed toward establishing a matter in issue other than the defendant's propensity to commit the crime charged,

(2) the evidence shows that the other act is similar enough and close enough in time to be relevant to the matter in issue,

(3) the evidence is sufficient to support a jury finding that the defendant committed the similar act, and (4) the probative value of the evidence is not substantially outweighed by the danger of unfair prejudice.

United States v. Kreiser, 15 F.3d 635, 640 (7th Cir. 1994); Leahy, 464 F.3d at 797.

Further, "[i]f the evidence of other crimes or bad acts provides direct or inextricably intertwined evidence (often referred to as intricately related evidence) of the acts charged, it is not subject to the constraints of Rule 404(b)." James, 464 F.3d at 709; United States v. Lane, 323 F.3d 568, 579 (7th Cir. 2003) ("[C]ases applying the 'intricately related' doctrine have recognized that evidence concerning the chronological unfolding of events that led to an indictment, or other circumstances surrounding the crime, is not evidence of 'other acts' within the meaning of Rule 404(b)."). "Under the 'intricately related evidence' doctrine, the admissibility of uncharged conduct turns on whether the evidence is properly admitted to provide the jury with a complete story of the crime on trial, whether its absence would create a chronological or conceptual void in the story of the crime, or whether it is so blended or connected that it incidentally involves, explains the circumstances surrounding, or tends to prove any element of the charged crime." James, 464 F.3d at 709. "Although inextricably related evidence does not have to satisfy 404(b), it still must satisfy the balancing test of Rule 403." Lane, 323 F.3d at 579; United States v. Hale, 448 F.3d 971, 985 (7th Cir. 2006).

With these principles in mind, the Court will address each category of evidence the government seeks to introduce pursuant to Rule 404(b) or as "intricately related" evidence.

ANALYSIS

I. Alleged Efforts to Remove International's Board of Directors and Stop the Special Committee's Investigation

The government seeks to introduce evidence that, in January 2004, Defendant Black -- who remained Chairman of International -- took certain steps to interfere with the Special Committee's investigation and to render International's Board of Directors powerless. Among other things, the government intends to introduce evidence that Defendant Black attempted: 1) to eliminate a Corporate Review Committee approved by International's Board; 2) to require unanimous consent by the Board for certain corporate actions; 3) to change the composition of the Board of Directors; 4) to abrogate certain powers given to the Special Committee that was investigating the non-compete payments; and 5) to require 24 hours notice to International's Board of Directors (including Defendant Black and his wife) of any Special Committee meeting. The government argues that these actions are inextricably intertwined with the allegations in the Information because they demonstrate Defendant Black's attempt to cover up his ...


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