Black in peril as right-hand man helps US investigation

Most ominously for the Canadian-born Lord Black of Crossharbour, David Radler, a co-founder of Chicago-based Hollinger International and a close friend for 30 years, has agreed to co-operate with prosecutors who said that their investigation into what happened at the company is not yet over.

They were the first criminal charges filed since November 2003, when allegations first arose that Lord Black and other executives had enriched themselves illicitly from Hollinger funds. Since then, the media conglomerate has virtually imploded and Lord Black and his wife, Barbara Amiel, have been cast as social pariahs.

Last week's charges targeted three defendants: Mr Radler, a former chief company lawyer, Mark Kipnis, and the company which Lord Black used to control his empire, Ravelston Corporation. Most legal observers saw no comfort for Lord Black in the fact that he was not among those charged last week. It is typical in such corporate cases for prosecutors to trawl executives slightly lower down the chain of command in hope of using them to net the biggest fish.

That strategy was used in the case of WorldCom, where a former chief financial officer helped prosecutors to win a conviction of the telephone company's former CEO, Bernard Ebbers, who earlier this year was sentenced to 35 years in prison in the biggest case of corporate fraud seen in the US.

Prosecutors might be "following the standard playbook, the same one they used at Enron and WorldCom," said John Coffee, a law professor at Columbia University, New York. Richard Breeden, a former Securities Exchange Commission chairman who advised Hollinger International in filing a civil suit against Lord Black, told Bloomberg News: "If Radler is co-operating, it's the worst possible news for Black. The evidence here is overwhelming, and in Radler they've got a very knowledgeable witness."

Richard Siklos, whose book about the former media tycoon is called Shades of Black, also sees trouble ahead. "Black is incredibly bright and he has adamantly said he is innocent, but to have his partner go against him is going to make it very difficult if it comes to some kind of court showdown," he said.

The charges arise from $32m (£18m) allegedly funnelled to executives and to holding entities of Hollinger ultimately controlled by Lord Black when the company sold off a series of publications it used to own. The money was allegedly disguised as so-called non-compete payments made by the buyers to Hollinger to ensure it did not launch rival publications.

US attorney Patrick Fitzgerald refused to comment about possible additional charges against Lord Black. "All I say is the investigation continues and charges will be laid if they're warranted," he said.