Business Analysis: The net closes in on Conrad Black as close ally agrees to aid investigation

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The Independent Online

Mr Radler and Lord Black of Crossharbour had maintained their innocence throughout the scandal that engulfed their Hollinger International media empire, dismissing allegations of "racketeering" and "corporate kleptocracy". But last month, federal prosecutors in Chicago announced with glee that Mr Radler, 63, had decided to co-operate with their criminal investigation into allegations that he, Lord Black and their associates siphoned off millions of dollars from Hollinger. Mr Radler was then charged with seven counts of fraud, charges that carry a maximum jail sentence of 35 years. According to the federal prosecutor Patrick J Fitzgerald, Mr Radler will plead guilty to these charges at a hearing in mid-September.

Throughout the Hollinger scandal, which exploded in late 2003 and led to the company having to sell its prize asset, The Daily Telegraph, it has always been hard to believe that the bombastic and intelligent Lord Black would ever actually end up behind bars. That he would be forced swap his seat in the House of Lords for a bunk in a US prison cell. This possibility has now suddenly come several steps closer, with Mr Radler assisting the authorities to identify any evidence there may be against Lord Black.

"Obviously, Mr Radler co-operating is a good development for us ... insiders at the company were stealing money," Mr Fitzgerald said at a press conference called to trumpet the Radler charges. He did not, however, comment directly on Lord Black.

Lord Black, 61, seems to admit that charges will now almost inevitably be levied against him. It emerged yesterday that in a court filing for a separate civil case brought against former top executives of Hollinger, including Lord Black, his wife Barbara Amiel, and Mr Radler, the defendants say the criminal allegations will probably encompass more people.

So far, those charged by state prosecutors are Mr Radler, a former company lawyer Mark Kipnis (who is pleading not guilty), and a corporate entity Ravelston, which was allegedly used to take the improper payments. The court filing by the former Hollinger executives in the other case concedes that "additional defendants now appear vastly closer to facing similar - if not more severe - [criminal] charges".

The deal that has been cut with Mr Radler follows a classic pattern in prosecuting fraud, whereby more junior company officers are offered leniency in return for assistance in trying to bring in the bigger fish. In this case, Lord Black was the public face of the company and he used that position to become a society figure on both sides of Atlantic.

Robert Mintz, a former federal prosecutor who now works at the firm of McCarter & English in Newark, New Jersey, said state authorities need to get someone on board who can explain the exact meaning of apparently incriminating company documents.

"The way these cases are built is gaining the co-operation of some mid- to high-level insiders, so that prosecutors can truly understand the intricacies of complex transactions... The Government strikes deals with insiders before going after the person who is the ultimate target," Mr Mintz said.

A spokesman for Lord Black declined to comment. Few doubt that he will continue to protest his innocence. If indeed the state is preparing to go after Lord Black, a similar strategy was followed in successful prosecutions in the Enron and the WorldCom scandals. In the WorldCom case, for instance, Scott Sullivan, the former chief financial officer, testified against chief executive Bernie Ebbers. A few weeks ago, Ebbers was sentenced to 25 years in prison, while Sullivan got five years.

Some believe that a considerable amount of resentment built up in Mr Radler over the years. So as well as saving his own skin, he might take some pleasure in bringing down Lord Black.

Mr Radler was the numbers man, who worked in the background, while Lord Black hogged the limelight and pontificated on world affairs. It was Lord Black who enjoyed the lifestyle of a media mogul, while Mr Radler was said to have been bemused by the grandees that Lord Black got to serve on the Hollinger board - Henry Kissinger and Richard Perle among them.

Richard Siklos, Lord Black's biographer, said: "While Mr Black hobnobbed with dignitaries like Margaret Thatcher, Mr Radler rarely mingled with Chicago's civic leaders."

It was Mr Radler who was sent in to brutally cut costs at Hollinger newspapers - a task that saw him nicknamed "Ratler" in some of the company's newsrooms. It was Mr Radler who bought and ran the cash cows of the Hollinger empire, the small local newspapers in the US and Canada that enjoyed virtual monopolies in their areas. And some have speculated that while Lord Black is pretty much broke, Mr Radler, having not led the same extravagant lifestyle, has more to lose in monetary terms.

Mr Radler went into business with Conrad Black in 1969, when the pair bought The Record, a newspaper in Sherbrooke, east of Montreal. From there grew a media empire that spanned 500 titles on three continents, with headquarters in New York.

The charges now brought against Mr Radler relate to an arrangement whereby when Hollinger sold one of its papers to another company, it would sign a "non-compete" agreement to stop it starting up another title in the area. But instead of the money going to Hollinger and so benefiting all shareholders, it was paid to Ravelston, a private company owned by Lord Black and Mr Radler, which was also the ultimate owner of their controlling stake in Hollinger.

In a letter from Lord Black to Mr Radler released last year as part of a Hollinger investigation, the peer describes the non-compete payments as "the splendid conveyance from which you and I profited so well".

According to the indictment against Mr Radler, he took part in a scheme that saw $32m (£18m) diverted from the company in this way. As far as allegations of embezzlement go, the $32m pales in comparison with the $400m-plus that Hollinger is seeking from Lord Black and other former directors. Several other lawsuits have been filed against them. But the charges brought in Chicago against Mr Radler will be the ones that must really worry Lord Black, as these are allegations that, if proved, would probably mean jail.

Mr Mintz estimates that while a 35-year term for such charges is unlikely, they could lead to a sentence of 10 years or more. Having sold his mansions in London and Florida, Lord Black is believed to be holed up in his native Canada. He is likely to be wondering whether nearly four decades of friendship and partnership with Mr Radler are going to mean much.