Newswise — When the Conrad Black trial gets under way in March, the argument will be similar to the case against Tyco's Dennis Kozlowski rather than the cases against Ken Lay or Bernard Ebbers, says Samuel W. Buell, J.D., associate professor of law at Washington University in St. Louis.
"This is a case about whether an executive looted his own company, not whether he committed accounting fraud," says Buell, a former Enron prosecutor.
"In a looting case, the battle is often over the testimony and credibility of the members of the board of directors."
According to Buell, the court will look at:
"¢ How much did the board know about what Black was getting personally out of the corporate transactions that are the subject of the indictment?
"¢ How much of it did the directors approve?
"¢ How far from the industry norm were these payments such that they would have raised alarm?
"¢ Crucially, what, if anything, did Black do to conceal any aspect of these payments from members of the Board or anyone else at the company?
"The charge is fraud. To be found guilty, Black must have deceived someone about some important aspect of these deals; it's not enough that the transactions might have been less than optimal for the company," Buell says.
Similar to the Tyco case, there are likely to be skirmishes over the admission of evidence of Black's lavish, perhaps even frivolous, spending of what he was able to get for himself out of the corporation.
"As the Tyco prosecutors discovered when their first trial ended in a hung jury, this kind of evidence is a double-edged sword in a 'looting' case: it can help show that the defendant indeed acted as if the corporation were his personal piggybank, as opposed to acting with the fiduciary responsibility required of a public company officer, but it also can open the prosecution to the charge that it is attempting to focus the jury's attention on peripheral, inflammatory matters because it is not confident in the strength of the core of its case," says Buell.
The Black case involves allegedly improper non-compete payments in corporate asset sales.
Buell notes that the case may turn on whether Black testifies and, if he does, how that goes for him.
"It's important to remember that this is ultimately his call, not his lawyers'," he says.
"If Black is intent on speaking his peace, his lawyers must help him do that even if they might fear that, as has happened in some other cases, an arrogant turn on the witness stand could fatally alienate the jury in an otherwise close case."
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