May 31 decision of Justice Colin Campbell in Catalyst Fund General Partner 1
Inc. v. Hollinger Inc. requires Black, Radler, and John Boultbee, the principal
officers and directors of Hollinger Inc., to answer questions under oath posed
by Peter Griffin of Lenczner Slaght Royce Griffin of
, counsel to Ernst & Young
(E&Y), the court-appointed inspector of Hollinger Inc.
directors appealed. At press time, the hearing was set for Sept. 6 in the Court
in what amounts to a remarkable irony, it seems that Radler will now be telling
the Court of Appeal that he doesn't want to be examined because it will
undermine the integrity of the prosecution's investigation.
U.S. attorney doesn't want
Radler testifying anywhere before the main event," says Don Jack of Lerner's Toronto office, counsel
and Boultbee, of course, are sticking to their original argument.
first instance, Campbell
ruled against the directors. Implicit in his reasoning was the fact that none
of the directors had at the time been charged with a criminal offence in Canada or the United States. Campbell described the directors' reticence
to co-operate as "an affront not only to the public shareholders they were
bound to serve, but also to this court."
to Jack, Radler's imminent indictment and plea strengthens his client's case.
be asking the court to hear new evidence, and I believe the court will do so
because we had no way of knowing when charges would actually be laid before Campbell ruled," Jack
told Law Times.
maintains that the indictment of other directors is "beyond peradventure,"
since they appear as unnamed co-conspirators in the indictment.
cross-border dilemma arises because of Canadian legislation designed to help U.S.
investigators gather information from outside their borders. U.S. prosecutors and the Securities and Exchange
Commission (SEC) can now resort to the Mutual Legal Assistance in Criminal
Matters Act (MLAC) to gather evidence in Canada for use in legal proceedings
south of the border.
statute allows U.S.
prosecutors to route requests to gather evidence through the U.S. Department of
Justice's office of international affairs. The department, after clearing the
request, forwards it to the Canadian minister of Justice.
the minister approves the
request, the U.S. Justice Department hires Canadian lawyers to apply for an
order before a judge of the province in which the evidence or some of
evidence is located.
application for such an order is ex parte. The judge hearing the application
may make an order if he has reasonable grounds to believe that an offence has
been committed and that relevant evidence is available in Canada.
other words, there is no explicit requirement for a Canadian judge to consider
whether a U.S.
court will honour any protective order against self-incrimination that attaches
to the evidence. And that's a problem because the United
States and Canada treat the right against self-incrimination
both nations have raised the right to a constitutional principle, the
differences in their rules can be a trap for the unwary.
the United States, a person
can refuse to answer a question under oath on the ground that he might
incriminate himself," said Michael Code of Toronto's Sack Goldblatt Mitchell, Radler's
counsel. "But in Canada,
a witness must answer the incriminating question. And although Canadian courts
will grant immunity against the use of the self-incriminating evidence against
the witness, American courts don't recognize that immunity."
has raised the issue squarely.
case's origins date to August 2003, when a special committee investigating
fraud at Hollinger International and led by former SEC chair Richard Breeden,
accused Black, Boultbee, and Radler of presiding over a "corporate
kleptocracy," where "ethical corruption was a defining characteristic of the
Breeden report alleges the three men and others received $88 million in "sham
non-compete payments" from Hollinger International, engaged in "textbook money
laundering" with the proceeds of the payments, and "affirmatively
misrepresented" their compensation plans to the audit committee.
December 2003, Black responded to a subpoena from the SEC by invoking the Fifth
Amendment and declining to testify. Eleven months later, the SEC filed a
securities fraud complaint in Chicago.
complaint alleged that Black and Radler fraudulently diverted cash and assets
from International. About the same time, the U.S.
attorney's office in Chicago
commenced a criminal investigation dealing with the allegations in the Breeden
Catalyst, a shareholder in Hollinger Inc., had in October 2004 persuaded
Ontario Superior Court Justice Colin Campbell to order an inspection involving
various transactions at the parent company. These included the sale of three
corporate jets; management fees paid to Black's personal holding company;
non-competition payments received by Hollinger Inc. amounting to $16.5 million;
and real estate transactions at Inc.'s subsidiary Domgroup Ltd.
Campbell's order appointed E&Y to investigate whether
anyone benefited improperly from "related party" transactions between the
company and Black, Radler, or Boultbee. It also authorized E&Y to examine
witnesses under oath if that was necessary to its investigation.
believed that it was, and in early January 2005, Griffin sought an order to examine the three
men under oath.
opposition, the directors relied on the evidence of Barry Bohrer, a partner in
the New York
firm of Morvillo Abramowitz Grand Iason & Silberberg. Bohrer, testifying as
an expert on U.S. law,
concluded it was "highly unlikely" that a protective immunity order would
shield incriminating testimony from disclosure in the United States.
puts it more plainly: "Once the cat's out of the bag, it's going to scamper
across the border and that will be a big problem for our clients."