Effect of Black court decision could be crucial

On the surface, today's hearing at Ontario's Court of Appeal appears to be just another in a very long string of legal battles in the saga surrounding Conrad Black and his former Hollinger empire.

The judges will decide whether Lord Black and his former colleagues, David Radler and Jack Boultbee, should be forced to answer questions from the inspector looking into the affairs of Toronto holding company Hollinger Inc.

But the implications of the appeal court decision could go much further than the narrow limits of the Hollinger case, and affect many companies and executives operating cross-border businesses.

At stake is the degree of protection against self-incrimination that witnesses are entitled to in corporate legal cases. With different rules on both sides of the Canada-U.S. border, that issue is becoming increasingly crucial as multinationals expand their operations and regulators in both countries become more aggressive in the pursuit of corporate malfeasance.

In the Hollinger case, the appeal was set in motion soon after Ontario Court Justice Colin Campbell ruled in May that Lord Black, Mr. Radler and Mr. Boultbee should be interviewed by Ernst & Young, the Hollinger inspector.

The three men had argued that any information they provided could be used against them in the United States, where criminal investigations of Hollinger's affairs were under way. Judge Campbell dismissed that view, but the three say he made errors in his judgment.

The issue revolves around the different ways the justice systems in Canada and the United States protect witnesses against self-incrimination.

In the United States, the key protection is the famous Fifth Amendment to the constitution. It gives a witness an absolute right to remain silent in the face of possible self-incrimination. "Taking the Fifth" is a well-worn cliché in movies and books, but a crucial protection for accused individuals.

In Canada, the approach is very different. Witnesses can be compelled to answer questions in a civil suit or a regulatory case, but are given immunity from the use of this evidence against them in subsequent criminal cases.

The problem, in cross-border cases, is that this Canadian testimony may become public and be used against the individual in a U.S. case, where Canadian rights are not recognized. The issue is becoming more important as the U.S. Securities and Exchange Commission gets more aggressive in monitoring corporate wrongdoing, especially since the passing of the 2002 Sarbanes-Oxley Act.

"We've seen an explosion in cross-border investigations, not only with the U.S. attorney and police, but with regulators," said Edward Greenspan, Lord Black's lawyer. More and more, he said, "the different legal systems start bumping into each other."

Consequently, the decision from the appeal court in the Hollinger case could have "enormous implications well beyond Conrad Black," Mr. Greenspan said.

In his initial ruling in the Hollinger case, Judge Campbell said the questioning of the three individuals could be done in private, and if there are any concerns over specific questions, they can come back to him for a ruling.

In its submission to the appeal court, Ernst & Young argues that Judge Campbell was correct in ordering the three men to testify because they get all the protections they require under the Charter of Rights and Freedoms. A Canadian judge can't be constrained by "American constitutional requirements," the inspector argues.

The lawyers for Lord Black, Mr. Radler and Mr. Boultbee will argue that the protections put in place by Judge Campbell are inadequate.

Now that Mr. Radler has been hit with criminal charges in the United States, and more charges are likely in the works, those argument should carry even more weight, Mr. Greenspan said.

The government filed criminal charges against Mr. Radler and Mark Kipnis, his former colleague at Hollinger International Inc., on Aug. 18, alleging they helped divert $32-million (U.S.) from Hollinger to company executives.