In the Matter of Conrad M. Black, John A. Boultbee and Peter Y
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Ontario Commission des 22nd Floor 22e étage Securities valeurs mobilières 20 Queen Street West 20, rue queen ouest Commission de l’Ontario Toronto ON M5H 3S8 Toronto ON M5H 3S8 IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, c. S.5, AS AMENDED AND IN THE MATTER OF CONRAD M. BLACK, JOHN A. BOULTBEE AND PETER Y. ATKINSON REASONS AND DECISION (Subsections 127(1) and (10)) Hearing: October 6, 8, 9, 10 and 28, 2014 Decision: February 26, 2015 Panel: Christopher Portner - Commissioner and Chair of the Panel Judith N. Robertson - Commissioner Appearances: Anna Perschy - For the Ontario Securities Commission Jed Friedman Peter F.C. Howard - For Conrad M. Black Sinziana R. Hennig John A. Boultbee - For himself TABLE OF CONTENTS I. INTRODUCTION ...................................................................................................... 1 A. BACKGROUND .................................................................................................. 1 B. THE RESPONDENTS .......................................................................................... 8 1. Black ...................................................................................................... 8 2. Boultbee ................................................................................................. 8 3. Hollinger ................................................................................................ 8 4. International ........................................................................................... 9 5. Ravelston ............................................................................................... 9 II. FINDINGS IN THE U.S. LEGAL PROCEEDINGS ................................................. 9 A. THE U.S. CRIMINAL PROCEEDING .................................................................... 9 1. Mail Fraud (Count Seven) ..................................................................... 9 2. Obstruction of Justice (Count Thirteen) .............................................. 11 3. Sentencing (Counts Seven and Thirteen) ............................................ 11 B. THE SEC PROCEEDING .................................................................................. 12 III. RELIEF SOUGHT BY THE PARTIES ................................................................... 13 A. STAFF’S POSITION .......................................................................................... 13 B. POSITIONS OF THE RESPONDENTS .................................................................. 16 1. Black .................................................................................................... 16 2. Boultbee ............................................................................................... 17 IV. THE LAW ................................................................................................................. 18 A. SUBSECTION 127(10) OF THE ACT .................................................................. 18 B. GENERAL PRINCIPLES RELATING TO THE EXERCISE BY THE COMMISSION OF ITS PUBLIC INTEREST MANDATE ......................................................................... 22 V. ANALYSIS ............................................................................................................... 24 A. RELEVANT CONSIDERATIONS ......................................................................... 24 1. Were the Respondents convicted in any jurisdiction of an offence arising from a transaction, business or course of conduct related to securities? ............................................................................................ 25 2. Did Black agree with a securities regulatory authority in any jurisdiction to be made subject to sanctions, conditions, restrictions or requirements? ...................................................................................... 28 3. Were the Respondents denied natural justice in the U.S. Legal Proceedings? ........................................................................................ 29 4. Are sanctions necessary to protect the public interest? ....................... 30 B. THE APPROPRIATE SANCTIONS IN THIS MATTER ............................................ 32 1. Considerations and Submissions of the Parties ................................... 34 2. Sanctions ............................................................................................. 41 VI. COSTS ...................................................................................................................... 42 VII. CONCLUSION ......................................................................................................... 44 i I. INTRODUCTION A. Background [1] This matter originally arose as the result of a Notice of Hearing issued by the Ontario Securities Commission (the “Commission”) to Hollinger Inc. (“Hollinger”), Conrad M. Black (“Black”), F. David Radler (“Radler”), John A. Boultbee (“Boultbee”) and Peter Y. Atkinson (“Atkinson”) on March 18, 2005 (the “Original Notice of Hearing”). [2] The Original Notice of Hearing set out the Commission’s intention to hold a hearing on May 18, 2005 to consider whether, pursuant to sections 127(1) and 127.1 of the Securities Act, R.S.O. 1990, c. S.5, as amended (the “Act”), it was in the public interest for the Commission to make orders relating to Hollinger, Black, Radler, Boultbee and Atkinson (collectively, the “Original Respondents”) as the result of the allegations made against them in the Statement of Allegations issued by the Staff of the Commission (“Staff”) on March 18, 2005 (the “Original Statement of Allegations”). [3] The Original Notice of Hearing and the Original Statement of Allegations were replaced more than eight years after they were issued by a new Notice of Hearing (the “Notice of Hearing”) and an Amended Statement of Allegations (the “Amended Statement of Allegations”) which were both dated July 12, 2013. [4] The Amended Statement of Allegations seeks an order against the respondents named therein, including Black and Boultbee, based on subsections 127(1) and 127(10) of the Act. The hearing to determine whether such an order should be made was held on October 6, 8, 9, 10 and 28, 2014. These are our reasons and decision in this matter. [5] To provide a context for our reasons and decision, we have set out in the paragraphs that immediately follow, a summary of the lengthy procedural history of this matter. [6] In very general terms, Staff alleged in the Original Statement of Allegations, among other things, that: (a) Hollinger diverted funds from Hollinger’s principal subsidiary, Hollinger International Inc. (“International”), to Hollinger in connection with several sales by International of community newspaper properties it owned in the United States of America (the “United States” or the “U.S.”); (b) Hollinger made statements in its continuous disclosure filings with the Commission that were misleading or untrue, including statements in respect of non-competition payments made to Black, Radler, Boultbee and Atkinson (collectively, the “Individual Respondents”) as well as to Ravelston Corporation Limited, a privately-held corporation controlled by Black (“Ravelston”); 1 (c) Hollinger failed to disclose the interests of Hollinger insiders in certain of the transactions referred to in paragraph (b) above, contrary to the requirements of Ontario securities laws; (d) The Original Respondents failed to adequately disclose and address the conflicts of interest on the part of the Individual Respondents in the transactions referred to paragraph (b) above; and (e) The Individual Respondents, collectively or individually, authorized, permitted or acquiesced in the alleged misconduct of Hollinger, authorized the diversion of funds characterized as non-competition payments and breached the fiduciary duties they owed to Hollinger and International. [7] On January 24, 2006, the Commission ordered that the hearing on the merits of the matter would commence in June 2007, subject to each of the Individual Respondents agreeing to execute undertakings in which they would commit to the Commission that they would refrain from certain activities. Copies of the undertakings in a form satisfactory to the Commission (collectively, the “Initial Undertakings”) were attached to the order of the Commission dated March 30, 2006 which ordered that the hearing on the merits of the matter would commence on June 1, 2007. [8] On August 17, 2006, a grand jury in Chicago returned a seventeen count indictment against Black, Boultbee and others. On January 10, 2007, the U.S. government filed a Superceding Information (the “Information”), having removed some of the allegations from the original indictment, which charged Black, Boultbee and others with having committed multiple counts, or causes of action (collectively, the “Counts”)1 relating to the sale by International of its U.S. community newspaper assets to which reference is made in paragraph [6](a) above, namely, (i) mail and wire fraud; (ii) money laundering; (iii) obstruction of justice; (iv) racketeering; and (v) criminal tax violations. [9] On April 4, 2007, the Commission ordered that the commencement of the hearing on the merits would be postponed to November 12, 2007, and in one of the recitals to the order, stated that the Individual Respondents had replaced their Initial Undertakings with amended undertakings (collectively, the “Undertakings” and, individually, an “Undertaking”), copies of which were attached to the order (Re Hollinger Inc.