Conrad Black trial shifts to real estate

Testimony at Conrad Black’s trial revisited his New York real estate dealings Thursday, with defense lawyers trying to shoot holes in claims that the former media chief got a sweetheart deal that cheated investors out of a profit.

Paul Healy, who was chief of investor relations for the company that ran Black’s newspaper empire, came under intense questioning for a second day about a memo he wrote for internal use involving a swap of units in a luxury co-op building on Park Avenue in Manhattan.

Healy acknowledged under cross-examination that the memo in which he placed the value of two units at $3 million and $850,000, respectively, “could have been clearer” if it had described how much money had been sunk into the properties for remodeling.

“I wasn’t really thinking about what the value would be if nothing had been done” in the way of renovations, Healy said in response to a question from Patrick Tuite, a lawyer for Black codefendant Jack Boultbee, the former chief financial officer of Hollinger International Inc.

The real estate deal in question involved a swap of the smaller, less-expensive unit that Black owned for the larger one owned by Hollinger for $3 million, with Black ultimately paying for the difference.

Prosecutors contend that Hollinger and its investors got cheated out of the market run-up in real estate value and that Black got an inside deal, in which he placed too high a value on the smaller unit and too low a value on the larger one.

In the 2000 swap, Black valued the larger unit at the same price Hollinger had bought it for in 1994. Black bought the smaller unit in 1998 for $499,000 and Hollinger paid for its renovations.

Black’s lawyers claim that although the larger unit was worth more, their client had already put more than $2 million of his own money into it for improvements.

Black, Boultbee and two other defendants are accused of stealing $60 million from Hollinger, once one of the world’s largest newspaper publishers.

Later, prosecutor Ed Siskel asked Healy whether the $3-million price for the larger unit was too low.

“It’s my belief that if nothing had been done to that apartment, if it had been left vacant, the company’s interest in the apartment would have been worth more than $3 million,” Healy replied, adding that the appreciation would have been “significant.”

“Who received the benefit of that increase?” Siskel asked.

“Mr. Black,” Healy said.

Asked whether he had any basis for valuing the apartments as he did, Healy said “No.”

Although Black is also accused of abusing other perks and spending company money on himself and his wife, the heart of the U.S. government’s case involves millions of dollars in noncompetition payments that Black and the codefendants are charged with pilfering from Hollinger’s coffers. The company is now known as Sun-Times Media Group.

Prosecutors contend that portions of those payments were treated as tax-free bonuses by Black and the others, when they should have gone to the company for the benefit of shareholders. Such payments are made by buyers of properties to ensure that the seller will not reenter the same market as competition.