Conrad Black jury hears angry shareholders

CHICAGO, May 22 (Reuters) Jurors at Conrad Black's fraud trial heard a tape today of angry shareholders questioning millions of dollars in payments Black and other executives had received, and they were read a memo in which the former media baron excoriated his company's investors as idiots.

The show-and-tell testimony in the trial's 10th week came during the questioning of government witness Paul Healy, former head of investor relations at Hollinger International Inc., the US firm through which Black controlled what was once one of the world's largest newspaper publishing companies.

Healy testified that Peter Atkinson, one of Black's three co-defendants and former general counsel of Hollinger International, told him that non-competition payments from one major deal had been ''inaccurately'' described to Hollinger shareholders.

The payments he referred to came in 2000 when most of the Canadian newspapers owned by Hollinger were sold to CanWest Global Communications Corp. for 3.2 billion dollar. Prosecutors claim Black and the others cheated Hollinger and its shareholders out of 60 million dollar by using the non-compete payments from that deal and other media property sales as improper tax-free bonuses.

Such a payment is put forward by a buyer to gain a guarantee that the seller does not reenter the same market as new competition.

Healy said he forwarded an e-mail to Black one week before a May 2002 shareholders meeting at the Metropolitan Club in New York from investment house Tweedy, Browne Co. LLC.

The e-mail complained about management fees paid to a company closely controlled by Black and about the non-compete payments going to executives in past years. Tweedy Browne wanted to know why Hollinger management was being rewarded when, it said, the previous year's loss on the sale of Canadian assets was 280 million dollar.

Healy said Black responded in an e-mail to Healy that the complaint was ''nonsense'' but ''a lot of shareholders are holding hands on this ... the facts are with us ... much as I'd like to blow their asses off ... we're still trying to sell stock.'' In a second e-mail titled ''epidemic of shareholder idiocy,'' Black told Healy: ''I'm assembling materials to rebut these ridiculous charges ... (I can) defang this issue''.

The jury then heard an audiotape from the ensuing 2002 shareholders meeting, where Tweedy Browne managing director Christopher Browne was in attendance.

'CONTENTIOUS' MEETING In response to increasingly strident questions from Tweedy Browne and other institutional investors, Black was heard saying the payments are ''comparatively modest'' and that investors had his ''moral assurance ... not to be exploitive.'' One shareholder told Black: ''You're not investment bankers. The corporation owns you lock, stock and barrel. You shouldn't be getting these fees!'' ''I don't want to get unctuous here or self-righteous,'' Black responded at one point during the tape of the meeting. He then suggested that any shareholder who thinks something ''unethical'' is going on ''shouldn't be here''.

Christopher Browne urged Black to try for ''greater transparency'' and wondered why the Canadian-born Black, who renounced his citizenship when he became a member of Britain's house of Lords, even needed non-compete payments, since Canadian law would have prevented him from buying another media property in a market where he sold.

Prosecutor Ed Siskel probed Healy on the tone of the meeting.

''Mr. Healy, is it fair to say this was a contentious shareholder's meeting?'' he asked.

''Yes it was,'' Healy replied.

Healy said that after the meeting he and Black went to lunch with potential investors that asked about Black's corporate perks, such as his company plane.

Healy said Black replied, somewhat flippantly, ''I could have a 747 if I want.'' Black, 62, is charged with racketeering, fraud, money laundering and obstruction of justice. If convicted, he faces up to 101 years in prison, millions in fines and 92 million dollar in forfeitures.

His three co-defendants face lesser charges and potential penalties.

REUTERS KK PM0040